How do you deal with reversal days? | Forex Factory

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How do you deal with reversal days?

  • #1
  • First Post: Oct 10, 2014 8:39am Oct 10, 2014 8:39am
Hi all,

hereīs a case thatīs been bothering me for a while.

See the attached chart. Take a look at the price areas where a drew the triangles. Letīs just say that the Daily trend (in which direction I want to trade) is up for the first triangle and down for the 2nd. Can some people agree with me on that? We need some sort of common ground here, just for the purpose of this question.

So, we know the overall Daily trend, However, how do you deal with those seesions within a trend that a clearly moving in the opposite direction? Makes sense? In other words, for example the trend is up but sentiment has been down for the last few sessions or vice versa.

To be fair I did not drop down into lower TF, so ok Iīm aware of that, but still is there a way to filter those?



Attached Image (click to enlarge)
Click to Enlarge Name: GBPUSDDaily.png Size: 45 KB
  • #2
  • Oct 10, 2014 9:27am Oct 10, 2014 9:27am
These retracements you are showing are the best time to look for an entry in the overall direction.

The deal when you are in these areas is to understand if the price is retracing or changing direction.
MT4/MT5 EAs/Indicators/Alerts coder
  • #3
  • Oct 10, 2014 9:40am Oct 10, 2014 9:40am
Quoting FerruFx
These retracements you are showing are the best time to look for an entry in the overall direction. The deal when you are in these areas is to understand if the price is retracing or changing direction.

Understood. But is that not an argument then to not drop down to lower timeframes (as widely advocated) but to choose one, decide which direction to trade and also take entries on that very same TF?
  • #4
  • Oct 10, 2014 9:50am Oct 10, 2014 9:50am
Quote
Understood. But is that not an argument then to not drop down to lower timeframes (as widely advocated) but to choose one, decide which direction to trade and also take entries on that very same TF?

Hi Christian,

For me, I would never just blindly drop down a timeframe and trade momentum, etc. in that direction. It is important to learn to read the price action and understand support/resistance levels to know if there is a good chance the trend is resuming. In both triangles there are very clear signals of when the trend may be resuming (in this case both worked out, of course there are occasionally false signals), so I wouldn't trade until I see those signals, and that is when I personally would (and did, in the most recent case) reenter the trend. Hope this helps.
  • #5
  • Oct 10, 2014 10:14am Oct 10, 2014 10:14am
Trend is a subjective word, where you see a daily trend, it is just that. On another timeframe the "Trend" could be different depending
upon how you define your trend.
It is how early you spot the trend, that is the question and to take advantage.
It never gets easier, you just get better
  • #6
  • Oct 10, 2014 10:31am Oct 10, 2014 10:31am
Quoting Shabs19
Trend is a subjective word, where you see a daily trend, it is just that. On another timeframe the "Trend" could be different depending upon how you define your trend.
Yes a trend in a lower TF is sometimes only a retracement of the higher TF.

You should look at the Alien's thread where he explains very clearly how to trades these multi timeframes "waves".
MT4/MT5 EAs/Indicators/Alerts coder
  • #7
  • Oct 10, 2014 10:59am Oct 10, 2014 10:59am
Here is my opinion.

In the first case, the overall trend was up.
So if you look before that, you can see there was a resistance zone between 1.6230 and 1.6260.
Price went down there twice before going up again, so the tests of these zone's might be a good place to enter the marking following the overall trend.

The second one is a little bit harder, the uptrend was broken, so lets say you had a short trade and you where looking for either a good exit point or maybe another option to enter a short trade again.
If you look at the weekly chart, you see a resistance zone from 1.6200 to 1.5900.

This was a zone where last time price went there, there was a range for a few weeks (300 pip range).
So i would have exited at 1.6200 because this price could become a new resistance zone as it was previous a support zone.

For now i see no reason to enter the market on GBP/USD. Unless you follow the range, so sell at the top of the range and buy at the bottom.
Depending on the fundamentals i think we will see a range between 1.6200 and 1.5900 for the next few weeks.

Off course this all depends on you're system and if you are a long or short term trader.
  • #8
  • Oct 10, 2014 10:59am Oct 10, 2014 10:59am
Thanks to all ypur replies. I canīt really argue with any of them. I donī t really wnne get into what people understand as trend.

Everyone is different, I thought its quite clear, if in your opinion Iīm talking nonsene, do tell me. Iīll try and put it this way.

If I go to the market on a daily basis then I need some sort of indication of whether I should look for buys or sells? Agreed?

So I want to trade the Daily trend and find entries intraday. Even though the overall trend is up (regardless of how we define trend) there are those sessions which sometimes move 180degre against the overall trend. So, Iīd be looking for buys because the overall trend is up but sentiment, at least for a few sessions is bearish. On a daily basis thatīs important?

Can we sort of filter them out? I guess we canīt sort out the first push.
  • #9
  • Oct 10, 2014 11:11am Oct 10, 2014 11:11am
Hi Christianfx, let's see if I understand, you want to trade daily chart and your concern is the whipsaws along the trend?
  • #10
  • Oct 10, 2014 11:17am Oct 10, 2014 11:17am
Quoting FxCba
Hi Christianfx, let's see if I understand, you want to trade daily chart and your concern is the whipsaws along the trend?

Sort of yeah, if you want to call it a whipsaw. Maybe "outlier" seesions within a trend can be used also.
  • #11
  • Oct 10, 2014 11:45am Oct 10, 2014 11:45am
Quoting Christianfx
Can we sort of filter them out? I guess we canīt sort out the first push.
Well, I think you can "expect" them and the first push is the confirmation of our expectation.
  • #12
  • Edited 8:53am Oct 11, 2014 4:31am | Edited 8:53am
Quoting Christianfx
Thanks to all ypur replies. I canīt really argue with any of them. I donī t really wnne get into what people understand as trend. Everyone is different, I thought its quite clear, if in your opinion Iīm talking nonsene, do tell me. Iīll try and put it this way. If I go to the market on a daily basis then I need some sort of indication of whether I should look for buys or sells? Agreed? So I want to trade the Daily trend and find entries intraday. Even though the overall trend is up (regardless of how we define trend) there are those sessions...
The trend is very well defined by the Dow theory and needs no further explanation or hesitation, its simple and clear HH and HL for an up trend and vice versa for a down trend, otherwise there is no trend and the Markets are in range, nothing less and nothing more .

Best,
B.R.
Master Your Setup, Master Your self. (NQoos)
  • #13
  • Oct 11, 2014 5:23am Oct 11, 2014 5:23am
Quoting bassramy
{quote} The trend is very well defined by the Dow theory and needs no further explanation or hesitation, its simple and clear HH and HL for an up trend and vice versa otherwise the Markets are in range, nothing less and nothing more . Best, B.R.
I agree completely with bassramy. One of the worst things you can do is overcomplicate rules around trends. Lower lows and lower highs are a down-trend, just set some rules around that. You want to be able to ask and answer "What is the current trend?" very quickly in order to have confidence in your setups.

If they aren't working, analyse why.
  • #14
  • Oct 11, 2014 6:43am Oct 11, 2014 6:43am
I know yeah, itīs not really wht I mean, thanks though.
  • #15
  • Oct 11, 2014 6:44am Oct 11, 2014 6:44am
Reversal days it also not what I mean. Title has been changed, I thought I explained it.
  • #16
  • Oct 11, 2014 10:43am Oct 11, 2014 10:43am
it all comes down to TREND! . if you are trading trend then you will be waiting for reversals greedy because you will just add more to your positions to make more money
  • #17
  • Last Post: Oct 16, 2014 11:13am Oct 16, 2014 11:13am
Look at longer term charts, preferably dailies and weeklies. You'll find that a lot of reversals are actually happening within a bigger move. Or if they are not and there is no support/resistance to the left of the price (I.e. making all time highs or lows) then wait until you see an area that looks like Support/Resistance. Hint-this may be a place to open a position.
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