Reversals Flashcards
Can a reversal be defined as going from one type of market behavior to another type of market behavior?
Yes, a Trading Range to a Bull Trend is a BO for the TR; going from one type of market behavior to another. Every change of direction or behavior is a reversal
The market is constantly trying to reverse, when do reversal attempts occur?
The market attempts to reverse every few bars; every tail on every bar is a reversal
What is a Minor Trend Reversal?
a reversal with minimal bars; usually a Bear / Bull Flag
What is a Major Trend Reversal?
Has several Bars in the Reversal, taking out previous Minor LHs (for Bull MTR)
What do Minor Reversals usually lead to?
Minor Reversals usually lead to a TR, not opposite trend. Sometimes that TR contains a major reversal. In a Bear Trend or TR some bulls will buy for a scalp & some will swing part of the position (and vice versa in a Bull Trend
What is noise in the markets?
Minor Reversals in the market are considered noise. However, get used to calling it Minor Reversals, not noise.
Assume every reversal is minor until what occurs?
Until the market is strong enough to BO above bear TL and last 10 or more bars. Once bear trend resumes, traders expect the next reversal attempt might be strong enough to succeed.
What do almost all Reversals begin with?
Almost all Reversals begin with BOs even though sometimes the BOs are not as obvious, sometimes they’re small BOs
Remember every Bull Trend Bar is a BO and it is a Buy Climax & every Bear Trend Bar is a BO and it is a Sell Climax
Remember every Bull Trend Bar is a BO and it is a Buy Climax & every Bear Trend Bar is a BO and it is a Sell Climax
Since every trend is in a channel, the reversal BO of that channel, how should I trade it?
Trade it like a BO
Whenever there is a BO or Reversal what do traders agree upon in the markets?
The traders are that the price is wrong and it has to move quickly to a fair price. Trade BOs and Reversals the same
For a Bear Trend in a Bear Channel to Reverse and become a Bull Trend what has to occur?
To Reverse to a Bull Trend, the market needs to BO above Bear channel and then have a series of HLs. Once there is a BO above the Bear Channel traders will look to see if the market tries to resume down, fail & reverse up.
Can a Reversal be clear after a single Bar?
Yes a single bar can be enough to convince a Trader that a Reversal is taking place
Can a Reversal take 20 or more Bars before the Reversal is clear?
Yes it can take 20 or more bars sometimes, becoming an Endless PB before the market has clearly reversed (think of an Endless PB as a TR as the market sentiment loses influence making the probability for a trend resumption or reversal 50/50)
What is the advantage of entering a Trade on the first reversal?
They have the biggest reward and very small risk, however they often have low probability
Is it ever too late to enter a Reversal Entry?
No, it is never too late to enter a reversal entry. Still there are still many types of entries that are just as good after the reversal occurs
When the potential reward is much bigger than the risk, it more than offsets the probability.
When the potential reward is much bigger than the risk, it more than offsets the probability.
Markets have inertia and most Resistance will Fail in a Bull Trend; the Rally continues to break above Resistance. HOWEVER, ALL BULL Trends finally End at Resistance so it is important to keep looking for resistance and watching how the market behaves at resistance
Markets have inertia and most Resistance will Fail in a Bull Trend; the Rally continues to break above Resistance. HOWEVER, ALL BULL Trends finally End at Resistance so it is important to keep looking for resistance and watching how the market behaves at resistance
If I do no get into a trade at the first early reversal entry, have I missed the trade opportunity?
NO, I have not. There are several entry opportunities that present themselves in the market for me to get into a trade after an MTR occurs
In a bull trend channel that has HHs & HLs, what has to occur to reverse to a Bear Trend?
The market needs to BO below Bull Channel and then a series of LHs and LLs need to occur
Markets have inertia and most Support will Fail in a Bear Trend; the Selloff continues to break below Support. HOWEVER, ALL BEAR Trends finally End at Support so it is important to keep looking for support and watching how the market behaves at support
Markets have inertia and most Support will Fail in a Bear Trend; the Selloff continues to break below Support. HOWEVER, ALL BEAR Trends finally End at Support so it is important to keep looking for support and watching how the market behaves at support
Anytime there is a Reversal attempt in a Bull Trend and that Reversal attempt fails and the trend continues, what pattern would that reversal attempt be?
Failed Reversal attempt Bull Flag
There are several things needed for a Bull Trend to end, what are they?
First is we need a Break Below the bottom of the TL/Channel and we need the PB to fall below a Major Higher Low. Once it breaks below a Major HL the Bull trend is no longer in effect; the market is either in a TR or a Bear Trend
Some traders love buying Reversals, when you’re in a strong trend and you Buy Reversals against the trend it should be for a small scalp
Some traders love buying Reversals, when you’re in a strong trend and you Buy Reversals against the trend it should be for a small scalp
Bigger Reward Trades almost always come with Lower Probability; about 40% but much bigger reward more than offsets low probability
Bigger Reward Trades almost always come with Lower Probability; about 40% but much bigger reward more than offsets low probability
If I want to trade a Reversal that has a higher probability; what should I wait for?
Wait for a BO; this gives me a higher probability, after the BO the probability is often 60%. However, the risk is greater as the stop is further away.
Whenever there is a Reversal will it eventually have a PB? If so what kind of pattern does it create?
Yes the Reversal will eventually have a PB and it creates a
Cup and Handle pattern.
a Beginner Loves Reversals, they only see small risk. they ignore low probability see reversals everywhere ignoring the strength and trading with the trend. They do not wait for trend line breaks or for selling pressure in this Bull Premise.
a Beginner Loves Reversals, they only see small risk. they ignore low probability see reversals everywhere ignoring the strength and trading with the trend. They do not wait for trend line breaks or for selling pressure in this Bull Premise.
Why do beginners lose so much money when they are trying to reduce risk?
It is because they are fighting the trend, structuring trades with bad math. They pretend probability does not matter, BUT IT DOES!
What does a beginner trader only worry about?
They only worry about RISK, therefore they only look for Reversals. They think traders need to take lots of trades constantly entering on anything similar too a reversal
a Beginner only sees risk, Ignores probability
a Beginner only sees risk, Ignores probability
Whenever a beginner trader takes a low probability trade, a trader needs a big win to offset the frequent small losses. Since the beginner has lost so much that when they are in profit the scalp making it impossible for them to make money.
Whenever a beginner trader takes a low probability trade, a trader needs a big win to offset the frequent small losses. Since the beginner has lost so much that when they are in profit the scalp making it impossible for them to make money.
If I am looking for scalps; short scalping in a Small PB Tight Bull Channel is NOT a high probability event
If I am looking for scalps; short scalping in a Small PB Tight Bull Channel is NOT a high probability event
an Expert Trader sees the same reversal as the beginners but what are they doing (in a Tight Bull Channel)?
Skilled traders see the reversals and expect them to fail and to lead to a Bull flags Trend Resumption up. The buys Scalp for Rallies or swing trader the channel
What do Bottoms need on a Trend line break to Reverse the Trend or lead to a TR?
Bottoms need BUYING PRESSURE on the TL break, that can be 2 or 3 very big bull bars with closes on highs or 10 smaller bars closing on their highs
Remember the Market Cycle - a Bear Trend usually transitions into a TR before I can get a Bull Trend, whilst in the TR the Bulls can create enough Buying Pressure so eventually, there will be a successful Trend Reversal (MTR) and a Bull Trend
Remember the Market Cycle - a Bear Trend usually transitions into a TR before I can get a Bull Trend, whilst in the TR the Bulls can create enough Buying Pressure so eventually, there will be a successful Trend Reversal (MTR) and a Bull Trend
If a Reversal lacks Pressure, is the Reversal Major or Minor and Why?
If a Reversal lacks Pressure it is Minor because its not enough to reverse the price down. It is more likely the minor reversal could push price sideways (TR) before a potential move down
What are some signs of selling pressure?
a significant break below the bull TL; after the bull trend resumes up traders look for a failure in the neighborhood of the old high and then an MTR
Where is the Nested Pattern usually contained within the bigger pattern?
The Nested Pattern is usually in the Final Leg of the bigger Pattern. A smaller wedge pattern within a Bigger wedge pattern; they have a higher chance of a successful reversal
Does a Nested Pattern have a higher probability of profit?
Yes they do! a Nested Pattern means a small pattern in final leg of a bigger similar pattern.
When the market is in a TR do most reversals result with legs within the TR.
TRUE or FALSE?
TRUE, the end result is a Big TR not an opposite Trend
a Trend is usually followed by a TR. Usually, a Bear Trend is not Followed by a Bull Trend / & a Bull Trend is not followed by a Bear Trend
a Trend is usually followed by a TR. Usually, a Bear Trend is not Followed by a Bull Trend / & a Bull Trend is not followed by a Bear Trend
60% of MTR results in small winners and losers that balance out one another
60% of MTR results in small winners and losers that balance out one another
What is the Minimum Reversal Objective?
The minimum reversal objective for a reversal (just like a BO or climax) is TBTL (Ten Bars Two Legs) in opposite direction [Two Legs sideways to up]
What do ALL Trend Reversals begin with?
They begin with a BO of a Channel (TL)
After the channel BO what should I look for?
Look for opposite Channel
All Trend Reversals are what?
All Trend Reversals are either a DT or DB
After the 2nd Leg should I take Partial Profits?
Yes take partial profits to reduce risk as I do not want to risk being in a 2nd Leg Trap
If the top is a HH, usually followed by an LH MTR; Bears expect 2 Legs Down
If the top is a HH, usually followed by an LH MTR; Bears expect 2 Legs Down
What are some different types of TRs?
