7. Reversals Flashcards
How do train your eye to see reversals in the chart?
You don’t, you are learning to spot the development of reversals
What is always present at the point of reversals?
Notable volume, both red and green candles
Why do the high volume peaks exist?
Because 95% of traders think they are in control of the market at that point, i.e. at a high the buyers think they are in control and price will go higher
When price rises, who is in control?
The seller. It is the seller that is permitting the sale at that price.
The reverse obviously is also true.
When the market maker buys your longs back, he will win if you are losing. What other gain is he making at the same time?
He is covering his shorts when he buys back your long.
When a big green candle spikes followed directly by a similar size red candle, what just happened?
An immediate exchange of money went from retail trader to the market maker.
This is the most raw form of how the money is exchanged
What are the volitility bands good for showing?
When big candles turn up that are actally weak moves, just to cause excitment in the market. If it were a strong move then the volatility bands would be breached (they often are not)
The retrace in the middle of the M happens why?
To induce the retail trader to “buy the dip” - it’s a trap
(similar principle for Ws)
What are market makers doing, the single thing they do all the time?
Setting traps.
With regards to MM behaviour, what do you continually need to be thinking?
What is the market maker trying to make the retail trader think?
If you can intuitively know what they are trying to project you’re on the right path
When do Doji candles represent indecision?
They don’t. There is no indecision in the marketplace. They know exactly what they are doing.
When does supply and demand come into your thinking?
It doesn’t. Trades don’t fail because of supply/demand zones. Market maker is always in control.
4 things to keep in mind for identifying trends and potential reversals
- Determine the cycle - understand what the market maker is likely to do next
- Pay attention to what the candlesticks are doing
- Look at the moving averages - are they spread?
- Confirm the market maker’s inentions
