How do you spot reversals?

[asop]

Just started trading 3 months ago. Can you guys share some of your methods on spotting reversals? Thanks

[Bfbusa]

Hello Asop,

This is something that can only come with experience. There are three things that I look for.

First is you should know where your Stock/Future contract support and resistance levels are located. Also, day or previous days hi/lo are, and pivot points.( for pivot point education check out the video section of this website).

Second, when price approaches any of these above levels start to watch how volume behaves. Look at the tape. I am in the process of learning tape reading but it already has placed me in profitable trades and also kept me from placing what would have been losing trades. ( The video section has a great videos with tape reading made by SoulTrader, Traderlaboratory's founder ).

Third, I like to look for certain candlestick and/or technical patterns that appear intraday. The falling wedge pattern and the candle stick hammer when appear at the day Hi/Lo or swing Hi/Lo are very powerful patterns with a high probability of profitability. If you don't know what they are, read books.

Now when two or all three or these conditions are present at a particular price level, a reversal may be in progress.

Hope this helps.
Good Trading

[MrPaul]

	Quote:	asop
	Just started trading 3 months ago. Can you guys share some of your methods on spotting reversals? Thanks

asop,

reversals on what time frame?

[torero]

	Quote:	MrPaul
	asop, reversals on what time frame?

You just gave the biggest clue to finding the reversal. Reversal in one timeframe is not in another. For me, if the market has been making higher highs and higher lows, then start breaking the last low and make lower highs and lower higher, a reversal is taking place. But I always make sure this is seen in a higher timeframe as well or at least wait for it to prove itself before committing my money on it.

[asop]

I use 5 minute charts for day trading. Torero, do you combine any candlestick patterns?

[torero]

Candlesticks or not, I mainly look at the high and low of each bar and determine if it's broken the last bar high/low or last pivot of groups of bars. I don't use candlesticks individually because I used trade with it without success. I found that price action and trends cannot be determined in a single candlestick or a few candlesticks. I use a group of bars (candlesticks or not), 5-10 MINIMUM. Reading price action can be used with and without candlesticks and using it can determine condition of the market and how these bars relate to each other based on higher highs/lows and lower highs/lows principle.

[walterw]

asop, maybe for a newbie it can be easier to trade continuations of a good solid established trend... reversals demand the 6th sense that you will have after a couple thousand screen time hours... as it happens with most of us.. now continuations are much easier to spot and can give some nice good buck to pay data service... and go to the supermarket.... on the meanwhile you can start learning reversals... its a complete different story... cheers Walter.

[vladv]

I am a newbie in forex trading,too( only 3 months with use of real money) and I currently try to trade only strong good solid established trends ,upwards or downwards it's no importance to me,the reversals are scarring me off right now! :P

[malvado xetra]

dear guy,

I combine 60 min candlesticks with volume bars. A reversal candle must be going with a big volume bar. I mean for big, the biggest of the day, approximately. this combination must be done in support o resistance areas. once you have this pattern you enter your order about the 50% of the tile. But, you have to be carefull that highs and lows are higher in a tick graphic if you are bull or, highs and lows are getting lower in a tick graphic if you are a bear. otherwise, you can be getting in against the market trend of the day. if you combine all this with a high depth of orders in the order book the at the possition you want to enter; it is quite probable that your move will be succesfull. set your stop loss a little bit further of the end of the tile and always bellow or above of the resistance/support

if you want a I sent a graphic to you, let me know

best regards

[walterw]

malvado : your icon doesnt inspire me at all.... yes a chart will make more clear your explanation...