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How Useful is Knowledge of Key Reversal Times?
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How Useful is Knowledge of Key Reversal Times?

  #1 (permalink)
Trading Apprentice
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How Useful is Knowledge of Key Reversal Times?

I found a listing of key reversal times during the day and I was wondering just how useful knowledge of these intervals is. Perhaps it is because I have only been trading for 5.5 months so far but I can't seem to apply this knowledge to my trading (stock options).

9:50 – 10:10, 10:25 – 10:35, 11:15 – 11:30, 13:30 – 13:45, 14:15 – 14:30, 15:00 – 15:15, 15:30 – 15:40 EST.

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  #3 (permalink)
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I prefer to work out my own based on my method reversal times, but it's never an exact science.

It's basically news time, so if after 1 of the times you jump on a good uptrend, it could / should continue up until the next news time, where it'll go flat into then do what ever the news suggests really.

Also, market opening / close / lunch times.

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GreedIncarnate View Post
I found a listing of

What gives you confidence that there is any accuracy at all in what you found? Based on what you posted, it's not even what you could call data. It does not define "reversal," class of products being considered, time period/regime of the sample, or anything useful at all. Use others' research (or in most cases, lack of research) at your own peril. Since you have only been at this 6 months, here's some unsolicited advice: always do your own homework, and never (ever, ever) trust anyone else's data/calls/opinions on what a market is going to do. Learn from others--yes; act on what others say without doing your due diligence--never.

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  #5 (permalink)
Trading Apprentice
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Thank you both for replying as this was something I couldn't seem to clarify myself.

I understand that the only person I should trust my money with is myself and I am taking steps to learn and not to copy. Maybe I should have phrased my question differently as these answers are not going in the direction as I had expected, my fault. Setting the times given aside, I would like to know how I could apply any information on key "reversal" periods to my trading. My dilemma is that I am not sure how to apply this kind of information rather than the specific information itself.

From what Turveyd has written, my guess is to find my own intervals and to use them to figure out when would be a wise time to take profits (or at least partial profits) or when to enter a trade. My biggest problem here would be that as an inexperienced trader, I find it hard to differentiate a pullback from signs of an actual reversal. Would either of you have any tips as to what I could do?

Also, @Turveyd, I am not familiar with how the whole news thing works. Should I be tuning into a live financial news feed as I trade?

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Of course there are some anchor times in every instrument.

I would suggest to combine your observation with every weekday.
This is what I found the most helpful.
Note exactly as surplus if there are news, Fed announcements,
holiday in sight and so on. Even the last of the month is important.
All these TIMES are very sensitive to these "side-effects".
Just refine your findings and test them all out live - most likely
more than 12 months. Sorry to mention this. But THAT counts!

GFIs1

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  #7 (permalink)
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GreedIncarnate View Post
Setting the times given aside, I would like to know how I could apply any information on key "reversal" periods to my trading. My dilemma is that I am not sure how to apply this kind of information rather than the specific information itself.

Think of yourself as an archaeologist. When you do your own digging, the very act of going through the process of uncovering things will give you clues and inspire ideas that you would not have had, had someone simply handed you some artifacts that they dug up.

So when you observe a market in real time and observe its tendencies and behavior, and when you look back historically and uncover things, you allow information to flow to you that you can only get by doing it yourself, and contained in that flow will be the answer to your question: how to apply it.

To help give you a starting point, consider breaking the day up into 3 parts (times Eastern): open to European close (9:30-11:30), lunch time (11:30-2:00), and afternoon trade to close (2:00-4:00). Lunch time is an estimate so it's not exact. Note the range and volume during these times of the day.

I'll just mention this in closing: what you're talking about is a single data point. There are any number of data points you can use in determining when to take a trade (or when not to). It's good to know when a market has a tendency to heat up and cool down and change directions, but what's happening today, right now, is always the most important. Shorting a strong tape solely because your research has told you it has a tendency to slow down at 11:30 is probably not the best idea. Cognitive biases are tricky (see the anchoring effect).



GreedIncarnate View Post
I find it hard to differentiate a pullback from signs of an actual reversal. Would either of you have any tips as to what I could do?

Too broad a subject. I rely heavily on volume but many don't. Again, you have to work through it and find what speaks to you. It's frustrating when you want tips but you will have a light bulb moment when you realize that tips don't do you any good really, until you can actually receive them and fit them into a framework that is already in place. You haven't yet built the framework, it sounds like (Can you explain your basic philosophy on how markets work, and how to trade them, in a few sentences? If not, the framework isn't there).

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GreedIncarnate View Post

Also, @Turveyd, I am not familiar with how the whole news thing works. Should I be tuning into a live financial news feed as I trade?


I say NO, be aware when big news is, stay out over it's time cause it will blow through your SL and cost you dear.

Don't read the news either, you'll form a bias but your not an economist so odds are your bias will be wrong and against what the market will do, so just trade the reaction and don't argue with the markets.

Simples!!

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GreedIncarnate View Post
.

From what Turveyd has written, my guess is to find my own intervals and to use them to figure out when would be a wise time to take profits (or at least partial profits) or when to enter a trade. My biggest problem here would be that as an inexperienced trader, I find it hard to differentiate a pullback from signs of an actual reversal. Would either of you have any tips as to what I could do?

?


There is a tool I use for that above issue, found it to work very well, basically go with the direction cause most of the time it'll work out, but set your SL and take your losses when it doesn't, worrying about it to much will result in not taking any trades which guarantees not making any pips!!

Once, in monitor the trade, if it stalls out quickly and looks to be reversing, take the small profit / loss and run, be safe, try not to use your SL more than you have to, 10pips saved is just as good as 10pips made, well kinda!


* otherwise, there is sadly absolutely no way to tell, worked on it for years and this is my conclusion

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  #10 (permalink)
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GreedIncarnate View Post
I find it hard to differentiate a pullback from signs of an actual reversal. Would either of you have any tips as to what I could do?

Good question but not too easy to answer.

I think is it hard for all traders to distinguish a pullback from a reversal.

If you chose a specific instrument you may noticed certain things about its trading patterns.
Perhaps you may find that it retraces after so many points or so many minutes and that a reversal happens after a different number of points or minutes, most commonly.

As an example you might find that the ES will have a retracement (of more than 1.5 points) after traveling 6-7 points and a reversal after traveling 12pts. But this will be subject to price levels.

If the 3 day moving average of the range is 11.88 and it has moved 15.5pts it has moved more than the average range and so if it starts to fall then you might expect the move for that day is completed and it is starting a reversal. If the price level, (1971.75) is a key S/R level then that would be an additional piece of information supporting a reversal. (You would look a longer term chart to find this out (e.g two weeks).

Sometimes you will see large volume at a reversal and not as large volume at a retracement.

Time also matters. A very rapid ascent also means that a turn is likely (except under some extreme conditions) and if the move has only been 6.5 points then and the volume is not too high then it may be a retracement and not a reversal.

Time left in the day can be important. It would be unlikely for the ES to reverse the full 15.5 pts when it is later in the day (as in the chart below).

Perhaps if you specialize in one instrument you may be able to find recurring patterns, as a hunter knows the habits of his prey and that a deer's habits are different than a bear's.


(I did start a thread on the question when I first came to futures.io (formerly BMT) but it was shot down.)

I hope it helps!

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Keep your mind in the future, in the now.
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