The 2 bar reversal

[TinGull]

	Quote:	Soultrader
	Tin, On your chart here, what is your criteria regarding entries? Im a little mixed up with what constitutes a confirmation signal. If the first bar is on low supply volume and the second bar pierces the upper 2/3rd range, this would indicate a long signal.... so basically the third bar is not necessary for a setup? If so, what makes a no follow through on the third bar a indication of further sell-off? Wouldnt there be cases where the third bar may be enclosed within the range of the second bar but then price lifts? Im trying to figure out when you would cut your position loose, because from my observation in these situations I find it hard to tell and prefer price to let it do its thing or stop me out under the low of the first bar.

Price *should* do it's thing by going higher immediately on a 2bar reversal. My entry criteria for entering a long would be the close of that blue bar. Then, when you see no more volume on the next bar, you can then assume that the effort made in the blue bar is having no results. When there's no results from the effort made, the path of least resistance is the opposite direction of the trade you'd be currently in. Of course, sometimes it can just play out and end up heading in the direction you want it to. But, more times than not the price will head immediately in the direction you want.

[Soultrader]

Interesting... its pretty much the same technique I use on these setups. But in quiet markets is times I tend to get burnt. I recall MrPaul mentioning a WHILE back that his edge lies in liquid markets. How true this is... low volume markets tend to be unpredictable when applying VSA strategies here on the Nikkei.

Im going to need to study this price behavior closer to filter out some of times when price tends to drift lower. Top of my head tells me to look at tape and the thinning of bid/ask but perhaps some type of momentum indicator or perhaps a correlation with a few heavy weight stocks / sectors might do the trick.

[TinGull]

[TinGull]

wanted to post a nice 2 bar reversal this morning at the open...

[alfawoong]

Hi Tim, excellent posts on the reversal bars... Good thing about these tight reversal signals are that they are easier to manage in terms of tight stop loss and good potential for reversal trades... Meaning - potential leading to a trend play with good reward given the small stop loss...!!

[TinGull]

Absolutely! That's the biggest benefit of these reversals. Just always have to keep in mind the market may want to "test" below the bar before the reversal so seek out possible sellers/buyers (opposite of whichever reversal direction) but if that happens on low volume, all the better

[Reaver]

	Quote:	alfawoong
	Hi Tim, excellent posts on the reversal bars... Good thing about these tight reversal signals are that they are easier to manage in terms of tight stop loss and good potential for reversal trades... Meaning - potential leading to a trend play with good reward given the small stop loss...!!

LOL yeah thanks Tim!

naah just kidding couldn't resist, thanks for the info man.