Is It a Reversal or a Pullback?

[Stewie]

So, have we a reversal or a pullback?

You show the entire day, so its obvious what happened. If you look at what I posted, there are several instances where price did in fact make a lower low (ie. dipped below the previous low), but then came back up again and made new highs. So at first it looked like a reversal, and then that reversal failed and the original trend continued.

The secret is you will never know. All you can do is place a trade in an area that gives you a statistical probability that over time, you will make more money on trades that work than on trades that don't work. Where those trades are placed is where the hard work comes into play.

When you talk about specific examples, like your chart, now you really need to get into context. This may be a nice trend, which you know in hindsight, but if you had previous resistance levels that you were aware of, taking shorts would make sense. At the same time, if you knew that we just broke out of some sort of resistance, then it would make sense to think we are trending now and you could buy each of those pullbacks.

The secret for today was knowing that the high for yesterday was 1883, and once we hit this level and couldn't drop below, it made sense to think of a reversal there. So although as price was dropping down to this level throughout the morning and you could be thinking of going short on each pullback, once we hit this level, being on the lookout for a reversal trade is where the money was.

 

[Chubbly]

i see the trend as up. I hold trades over a period of months-years

 

[J_Smith]

You show the entire day, so its obvious what happened. If you look at what I posted, there are several instances where price did in fact make a lower low (ie. dipped below the previous low), but then came back up again and made new highs. So at first it looked like a reversal, and then that reversal failed and the original trend continued.

The secret is you will never know. All you can do is place a trade in an area that gives you a statistical probability that over time, you will make more money on trades that work than on trades that don't work. Where those trades are placed is where the hard work comes into play.

When you talk about specific examples, like your chart, now you really need to get into context. This may be a nice trend, which you know in hindsight, but if you had previous resistance levels that you were aware of, taking shorts would make sense. At the same time, if you knew that we just broke out of some sort of resistance, then it would make sense to think we are trending now and you could buy each of those pullbacks.

The secret for today was knowing that the high for yesterday was 1883, and once we hit this level and couldn't drop below, it made sense to think of a reversal there. So although as price was dropping down to this level throughout the morning and you could be thinking of going short on each pullback, once we hit this level, being on the lookout for a reversal trade is where the money was.

Are you not contradicting yourself?

What about next Monday?

Does this secret work every day?

How do you get a statistical probability for an area?

J_S

 

[J_Smith]

i see the trend as up. I hold trades over a period of months-years

So are you now long or short, in what instrument/s, and at what level/s.

What is your current %return for this strategy, or your current drawdown, and do you have a get out area if you are losing money, or making money?

J_S

 

[Stewie]

Are you not contradicting yourself?

I suppose in a way, but this is where the art in trading comes in. Its true that you will never know, and many times a previous day low can easily blow through, but as price is approaching an important level that I have prepared, the last thing I would do it look for shorts if I'm expecting some sort of reaction to this level.

What about next Monday?

I will make sure to know what my previous day levels were, as well other important areas on the chart that stick out for me where price turned overnight.

Does this secret work every day?

Every day price will stop going up somewhere and turn down, and likewise, it will stop dropping and turn up. If you can figure out why it does this, then you can be prepared for it next time. The bitch about it is that it is never exactly the same, but this doesn't mean you can't make money on when it happens sometimes, and lose a little bit when it doesn't happen.

How do you get a statistical probability for an area?

Either through math, or lots of screen time.

 

[J_Smith]

I suppose in a way, but this is where the art in trading comes in. Its true that you will never know, and many times a previous day low can easily blow through, but as price is approaching an important level that I have prepared, the last thing I would do it look for shorts if I'm expecting some sort of reaction to this level.


I will make sure to know what my previous day levels were, as well other important areas on the chart that stick out for me where price turned overnight.


Every day price will stop going up somewhere and turn down, and likewise, it will stop dropping and turn up. If you can figure out why it does this, then you can be prepared for it next time. The bitch about it is that it is never exactly the same, but this doesn't mean you can't make money on when it happens sometimes, and lose a little bit when it doesn't happen.


Either through math, or lots of screen time.

What is the art in trading?

How do you determine what previous levels are better than others?

How do you best figure out when price might stop and turn?

How do you use maths to work out the statistical probability for an area, and the odds of a continuation, range, or reversal? How do you use screen time to determine same?

J_S

 

[Stewie]

How do you use screen time to determine same?

Most of these answers will actually come from screen time. What this mean is that you have to stare at it long enough until something jumps out. Kind of like those puzzles where you have to look for what is different between two sets of almost identical pictures. After a while, you develop a system to perhaps blocking out sections and scanning both quickly.

The fact of the matter is that there is never really one answer. I can tell you that I always have the previous day highs and lows on my chart, and you can come back with a million charts where it meant nothing the next day and you would be absolutely right.

How do you best figure out when price might stop and turn?

The best way, the easiest, but hardly conclusive is simply where it has stopped and turned before. It won't always work, but be on the lookout.

 

[schizo]

What is the art in trading?

How do you determine what previous levels are better than others?

How do you best figure out when price might stop and turn?

How do you use maths to work out the statistical probability for an area, and the odds of a continuation, range, or reversal? How do you use screen time to determine same?

J_S

J_S, I thought you were the king of riddles. And now you're asking ME for concrete details?

 

[schizo]

This thread was created to get the creative juice flowing. My intention wasn't to freely give out my edge nor solicit the same handout from others. How you define a reversal or a pullback is solely left to your own discretion. I'm not here to "systematize" what a reversal or a pullback is.

 

[schizo]

View attachment 161000

The chart below illustrates just one of many that I would consider, it's very generalized so don't hold me accountable. But the overarching point is not to correctly know/predict where the reversal or PB ends but how the two are interrelated, so to speak.