Is It a Reversal or a Pullback?

baro-san · Jan 21, 2016

Eddiemorra said:
I guess what happened in the last 5 minutes is the best way to guess what will happen in the next 5. Expect more of the same

That's like saying that if yesterday was sunny, you should expect today to be sunny. If, at least, you use the current season as context, you increase the odds to not get soaked.

schizo · Jan 21, 2016

baro-san said:
I'm sorry to break it to you: that's nonsense. You're just trying to sound interesting, or you're trolling. The right direction is the dominant direction on the time frame you're trading. If you trade with the dominant you'll make money, if you trade the retrace you won't. The 5 minutes can be one bar, a successions of bars, or a segment in one bar on your trading time frame.

To differentiate between reversal and pullback look at relative volume, price range and slope.

When did I say this was about trading the counter-trend? It ain't!

It's all about trading WITH the trend UNTIL it reverses. In order to do that, you need to differentiate between a pullback and a reversal.

baro-san · Jan 21, 2016

schizo said:
I don't understand why context is required to understand what a reversal or a pullback is.

To me, the more pressing concern is knowing the difference between a pullback and a reversal (eg. when does a pullback become a reversal?)

All reversals start with a pullback (decreasing volume, lower price range and slope) then they get momentum (increasing volume, wider range, steeper slope), after crossing the old trend's supporting trendline.

moonmist · Jan 21, 2016

schizo said:
(eg. when does a pullback become a reversal?)

IMHO:

This question is similar to:

When does a trend change from up to down, and vice versa ?

Unfortunately, there is no accurate indicator with zero lag that can quantify trend, or express the strength of a trend in terms of a number.

Hence, I guess we need to rely on our knowledge, experience and intuition.

baro-san · Jan 21, 2016

schizo said:
When did I say this was about trading the counter-trend? It ain't!

It's all about trading WITH the trend UNTIL it reverses. In order to do that, you need to differentiate between a pullback and a reversal.

My reply was to nobody's post.

kut2k2 · Jan 21, 2016

schizo said:
When did I say this was about trading the counter-trend? It ain't!

It's all about trading WITH the trend UNTIL it reverses. In order to do that, you need to differentiate between a pullback and a reversal.

Fortunately for indicatorists, that ain't the case. I don't give a crap about pullbacks until they make the trend disappear. Then I'm out and waiting for the next trend, which may be a reversal or a continuation. Doesn't matter. All that matters is trend or no trend. Trade the trend. Which includes: don't trade the non-trend. With the right indicators, it can be done. With the wrong indicator or with PA .... good luck.

schizo · Jan 21, 2016

kut2k2 said:
Fortunately for indicatorists, that ain't the case. I don't give a crap about pullbacks until they make the trend disappear. Then I'm out and waiting for the next trend, which may be a reversal or a continuation. Doesn't matter. All that matters is trend or no trend. Trade the trend. Which includes: don't trade the non-trend. With the right indicators, it can be done. With the wrong indicator or with PA .... good luck.

In that case, you and I have nothing to disagree about. You sensed the trend has ended and got off the boat. I sensed the trend has reversed and unloaded my position. Also it doesn't matter what you use to detect the reversal, whether via indicators or plain PA. It's the process.

Crashed · Jan 21, 2016

From what I know, if the trader is seasoned and draws good trendlines, its easy to know what stage you're in. However I'm not completely there yet.

Chubbly · Jan 21, 2016

schizo said:
Damn, got out too soon!

OddTrader said:
OK, good! Take your time!

Ok, I will tell you in couple weeks if it is a pull back or reversal

lawrence-lugar · Jan 21, 2016

schizo said:
You're merely regurgitating the platitudes written in Investing 101 textbooks. You need to think out of the box in order to leap to the next level.

BTW my proposition was never meant for the noobs, but for those who have the basics down well.

I like to think/give trading advice on a more philosophical level -- rather than giving exact details on what to do, because only you can make that judgement call...no one else for you.

As for me not thinking outside the box, and being a noob...you sure like to jump the gun and run your mouth -- I bet I easily beat you in % returns. :finger: