馃攳
Reversal Trading Strategy SECRETs that Paid Courses won't tell you... - Forex Day Trading - YouTube
Channel: TRADING RUSH
[0]
Does reversal trading strategy actually work?
What is the best way to spot reversals? Trading
[6]
reversals can be a difficult task and many
traders will recommend trading the trend instead.
[11]
On the Trading Rush channel where we tested
many different trading strategies 100 times
[16]
to find their win rates, I tested strategies
as a trend following strategy and I used the
[21]
200 period moving average to do that. If you
haven't watched them, go watch now, and subscribe
[27]
to the Trading Rush channel, because we test
many strategies and trading聽indicators on
[32]
this channel聽to find their win rates and
you don't want to miss that.聽But sometimes
[37]
trading against the trend can be more profitable
if price makes a big move in the opposite
[41]
direction.聽
[43]
But as you already know, predicting a reversal
point on a trading chart is almost impossible,
[49]
because if there is a catalyst moving the
market, price can move in one direction for
[53]
a long period of time.
[55]
For example, let's say price is in an uptrend,
it makes higher swing highs and higher swing
[60]
lows. Now, if the price starts to go sideways,
some traders will look for reversal patterns
[66]
like the double top pattern. Double top patterns
can be really effective when used correctly,
[72]
but in this example where the market is in
a strong uptrend, how do you know the double
[76]
top pattern is formed at the end of the trend?
There is a good chance the price can go sideways,
[82]
or give a small pullback instead of a reversal
and can continue to move in the upward direction.
[88]
Because of this,聽new traders are usually聽recommended
to聽trade聽with the trend.
[93]
Since trend is your friend, instead of trading
against your friend, what if I told you, that
[97]
you can call yourself a reversal trader while
trading the trend at the same time? Because,
[102]
that's what many professional traders do,
especially the one selling the courses. Don't
[107]
get me wrong, there are reversal traders who
trade actual reversals and make profits. But
[113]
then there are traders who will trade reversals
and trend at the same time. This is one of
[118]
the most effective ways to catch the big move
in trading. For聽example, let's say bill the
[123]
first wants to make money as a reversal trader.
He finds a stock or forex pair where market
[129]
is in an uptrend. Similarly, there is bill
the second, who also wants to trade the reversal.
[135]
He finds a different pair that is also trending
upwards. At first glance, both of these charts
[142]
look very similar to each other. Lets say,
when the market goes sideways, a double top
[148]
pattern is formed. Since double top pattern
is a reversal pattern, both bill the first
[153]
and bill the second take a short position.
[156]
Now remember, both of these charts were in
an uptrend, so when the double top pattern
[161]
occurred, on the first chart,聽instead of
price making a big move down and starting
[165]
a new downtrend, price reacted to the trend
line and moving average supports, and simply
[170]
went in the upward direction and continued
its uptrend. On the other hand, price on the
[175]
second chart actually gave a reversal and
made a big downward move. On the first chart,
[181]
bill the first made a loss. But on the second
chart, even though the charts looked very
[186]
similar at the first glance, bill the second
made a big profit.
[191]
In this example, to understand why one reversal
worked and other one didn't, we will have
[196]
to switch to a higher timeframe.聽
[198]
If we look at first chart where bill the first
lost money, you can see that the price is
[202]
in a strong uptrend on the higher timeframe.
Furthermore, it has just touched a support
[207]
area and has enough room to move higher.
[211]
On the other hand, if we look at bill the
second's chart on the聽higher timeframe, you
[215]
will noticed that unlike the first chart,
this chart is in a strong downtrend. Not only
[220]
that, but it recently touched a strong resistance
area.
[224]
On the first chart, even though there was
a double top reversal pattern, the price was
[228]
in a strong uptrend on the higher timeframe
which decrease the probability of giving a
[233]
reversal on entry timeframe. In other words,
bill the first lost his trade.
[238]
Now on the second chart, even though we had
similar price action, the price did make a
[243]
big move down and the reversal worked, because
this reversal on the higher timeframe was
[248]
actually a small pullback reversal in a strong
downtrend. And since this pullback reversal聽was
[254]
near a strong聽resistance area, the price
made a big move down. In other words, bill
[259]
the聽second made money with the reversal,聽because
he analyzed the market a little bit better
[264]
by using multi-timeframe analysis.
[267]
There are many people who will sell you a
reversal course but you will probably聽never
[271]
make money, because in reality when they show
you their reversal trades, the trades are
[276]
actually trend following setups聽on higher
timeframes. They won't tell you this because
[281]
they want you to keep paying them money while
you keep figuring out why your reversal trades
[285]
don't work.
[286]
There are trading setups that actually work
without any multiple timeframe analysis. For
[292]
example, let's say there is a company whose聽stock
has fallen due to some events. The company
[297]
has聽a good reputation and its聽stock was
trading at 500 dollars at one point. Due to
[302]
some event that made the company employees
stuck at home, the company made a loss, and
[306]
the stock price is now near the 100 dollars
mark.
[310]
Now 100$ on a stock is a psychological number.
Numbers with multiple zeroes at the end usually
[316]
work as a psychological support and resistance
levels. Since this company had a good reputation
[322]
and will probably make money when the employees
come back to work, people will be interested
[327]
in buying at the 100$ support level. Since
we know this support level has a higher chance
[332]
of working, we can look for reversal trading
opportunities near the 100$ mark. Even if
[338]
the price doesn't immediately make big move
in the opposite direction, there is a high聽chance
[343]
that there will be a small push up,聽since
many traders will be interested near this
[347]
level, as the 100 dollars mark聽will be clearly
visible on all timeframes.
[353]
There are many聽other popular reversal patterns
like the channel and the trend breakout. But
[358]
like I have said in my previous videos, just
because a price breaks a tiny line you drew,
[363]
doesn't mean the price is going to make a
big move in the opposite direction. Price
[367]
can simply move in the sideways direction,
and most of the time, it does.
[373]
Reversals are part of trading, and there is
a saying that goes something like "price can't
[378]
go in one direction forever, it has to reverse
at one point". Well yes, but actually no.
[384]
It doesn't matter if the price can go infinitely
in one direction or not,聽to trade reversals,
[390]
what matters is how accurately you can predict
a聽reversal point in a trend. In reality,
[395]
most retail traders can't predict the accurate
timing of a trend reversal, and even if they
[401]
could, many probably won't be able to聽tell
if it's a reversal or just a small pullback.
[406]
When you see a聽reversal pattern such as a
double top or double bottom, it is a good
[411]
idea to exit your open positions, instead
of predicting the new big move with a new
[416]
position.
[417]
So,聽when trading聽reversals, it is a good
idea to do multiple timeframe analysis to
[422]
get the big picture. Otherwise, there is a
chance the you will end up trading against
[427]
a strong trend of the higher timeframe. Furthermore,
since trend is your friend and since trend
[432]
is where most money is made, it is a good
idea to trade the reversal of a pullback,
[438]
instead of trading the reversal of the entire
trend. This way, you will have a higher chance
[443]
of making money in trading.聽
[445]
That's all. Now you know more about reversal
trading. Like the video if you liked it, subscribe
[451]
and ring the notification bell to see more
trading videos. Check out other videos on
[456]
the Trading Rush channel to see more videos
like these. You should check out the 5 steps
[462]
trading strategy that can help you make more
money as a day聽trader. And thanks for supporting
[467]
the Trading Rush channel on Patreon. You are
awesome!
Most Recent Videos:
You can go back to the homepage right here: Homepage