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Pull back vs Trend reversal


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Pull back vs Trend reversal

  #41 (permalink)
 billr 
San Antonio, Texas USA
 
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Hello Sadago,

I'm a little late, but my two cents is you really can't know whether its a pullback or reversal. So I would suggest taking that into account and trading accordingly:
1. determine what you think might be your best way to identify the reversal using the tools of your choice. I would suggest considering volume profile as one tool to help narrow the likely locations of turns vs. pullbacks;
2. count on each trade giving you a 50/50 chance of working and manage your risk accordingly. Try a trade management strategy that will make money on good pullbacks and not just reversals. This is where information and risk come into play. The more information you have to be sure you are seeing a reversal, the further away you are from the price level (aka stop) where you know you are wrong. So you can enter early with a small stop and opportunity to scale out some profits even in a pullback, or get more information and take the trade later with more stop risk with hopefully fewer false signals.

Hope this makes sense.
Good luck.

PS: In my opinion, price action combined with volume profile is a pretty good way to anticipate good support and resistance levels.

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  #42 (permalink)
 
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 forgiven 
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it depends on a number of factors , some on how you look at markets . what time frame your looking at the pull back in , what time frame your placing and your trade in , the over all market conditions in the time frames your trading in . what i look for is a 5 wave motive pattern to start the new trend. then an ABC corrective wave for the pull back. .

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  #43 (permalink)
handspin
boston ma
 
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volume helps pinpoint turns

imagine the pit noise
when price hits a certain level

tick helps too

imagine stops being run
extremes of fear and greed

even better, wait for consensus

picking tops and bottoms is hard
maybe even emotionally scarring


forgot to add, bollingers seem to help here

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  #44 (permalink)
 hhl3rd 
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I was taught that in general a reversal bar alone doesn't reverse a trend and not to waste a lot of time on speculation but look for earlier and later market structure for confirmation and entry. Where the reversal bar happens can be used as an exit and likely should be. If the market moves on it will likely come back to it once before really moving away.
In a really strong trend it is very unlikely a single bar will reverse the trend but I look at the amount of range expansion in what will later be seen as the reversal bar and usually get out if in. I'm looking for a blowoff or washout bar which I define by the bar extending beyond a local swing trendline. It forms a big V bottom or A top... very popular lately.

The time size of the bar makes a huge difference as does the context of swing counts , loss of momentum , proven S/R and confluences of proven and theoretical S/R. Proven means bounced along and respected and theoretical means works a lot but may only work once for this trade like a 0.382 retracement in an uptrend. For this post I've attached a 4min bar of the 1st half of today's ES. The Gann angle 1x1 is 0.25 per bar. Timestamps are Chicago time USA (Central Daylight Time currently.)

The 5:04am bar apparently stops a slight uptrend of higher highs and lows on the spot. The high hit the Full Gann Line
and Gann angle from the prior swing high which is sufficient to signal a reversal bounce downward. The volume associated
with this bar is the highest on the chart up until that time and thus qualifies as Wyckoff Stopping Volume. Stopping Volume , if it occurs , is like the silver bullet of 1 bar analysis trend reversal at least in a historical perspective.
It is rare , not supposed to happen and then only in legend …. but at the 6:32am bar hitting the next lower Full Gann line confluence with the 4x1 Gann line down from the prior swing low it happens again. The opening of the day session brings in enough arb trading that it gets relegated back to myth and legend...almost.

The 8:40am bar hits a timeline , several humanistic lines like the prior day's close , low , the VWAP and the Red emav which was respected earlier in the session at 4:44 and 7:12 generating the highest volume on the chart so far and starting a nice initial thrust upward. The proven Full Gann line at the session high stopped the upmove. A resting entry order at the Full Gann line and a 6 tick stop was not stopped out. Missed by 1 tick. Some people actually take this entry where the reversal bar will form before it forms. I don't unless its a really flat day but was taught to and have seen it done over and over.

The 9:40 am bar with low on the Red ema , VWAP and 0.382 retracement tagging the 7:48 to 8:20am ledge highs breakout point is especially recognizable as a reversal due to the still upsloping emavs the retracement and the tag of the breakout principle. It is very contextual but I traded part of the resulting upleg. The Full Gann line broke on the
3rd attempt. Price ran up into the next higher timeline forming a single reversal bar which capped the market for several hours.

Idea of a price boundary: If there is a price boundary that is not going to be broken this time around then it is reasonable to expect a reversal bar forming on that boundary to end the trend and perhaps start another back the way it came from. That allows me to say that price trajectories have a large random walk component but boundaries do not.
There are several other geometrical (line forms) studies and projections that work well but didn't happen to be on the chart such as Median lines and Trident projections. The works of Bryce Gilmore especially for daily and longer timeframes depicting an interlock of wave spans of time and price at the final end of the move where the reversal bar occurs have had the ability to allow one to recognize that bar as the final end. (Bryce used to live in Melbourne AU)

Christos Papadimitriou gave a talk at U of Washington Computer Science Dept. where he showed that for a six membered tree search length multiples of 1.00 , 0.5 and 0.618 are optimal once a single search has succeeded.
This also applies to how far price needs to move to clear volume... given markets exist to facilitate trade and a 6 membered tree is the same as the 6 paths between 4 agents , such as large specs , small specs, commercials and marker makers. The Full Gann lines are spoke numbers on the square of nine spiral chart which are expressions of parabolic containment (boundaries) of a random walk from Bachelier's model made famous by Black and Scholes and
now evolved into stochastic calculus for finance majors.

Ray Tomes has shown that overlaying , adding , a whole lot of random spikes resulted in stacks separated in musical intervals of octaves. The median line set or pitchfork taught by Andrews and invented by the MIT math department grad students expresses musical doubling and halving like the bifurcations of chaos theory. Andrews had a PhD in thermodynamics from MIT and a degree from Harvard as well. For the reversal bar forming on a median line there is a 42% chance it goes on trough , the reversal bar is immediately reversed and exceeded , there is a 42% chance it reverses in to a trend in the opposite direction and there is a 16% probability price bounces along the median line in the same general direction of the trend into it. Once price heads towards the median line from below there is an 80% chance it reaches it. So if price overshoots the next one enough there is an 80% chance it goes on to the next and so on. Andrews didn't use more than 4 stacks (8 crossings). It is important to realize that price can be brought down to lower timeframes. Your boundary price on the hourly or daily chart is also the price on the 1 minute chart to expect the reversal. If not the exact price , the +/- zone for it and pick something working that session on the 1min or 4 min chart for exact price. What was shown in the chart works well on normal range normal volatility days but lines will be blown through on big range expansion days but often tested from the other side before moving on so a reversal bar on the return after breakthrough is reliable.

These studies may be too much trouble or too non automated to keep up but I think they can answer what your reversal bar needs to rest on to reverse the trend or not and it would be remiss of me to not to at least give you the chart I'm looking at. I trade a 1min chart or 224 UniRenko with 4min as a context chart.


I did not say this...I am not here.

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  #45 (permalink)
sadago
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Aurac View Post
1) I agree with Bob but that is not an interesting answer.
2) There is a hidden insinuation in the question.
If you are asking this question because you think there is an answer then it's exactly analogous to finding the holy grail trading system.
The answer, which is slightly more interesting than Bob's is you need to find a methodology that suits your personality.
Hopefully by seeing the various responses catered for on this thread you will be able to find one that you can adapt and make your own.
The answer as in the more sophisticated aspects of trading is not in the technical details but in the psychology of the operator.

Bitter pill ??!!

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  #46 (permalink)
sadago
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knightraider View Post


Since you trade AUDUSD see example above chart. From the chart you will noticed how the reversal happen range with volatility with time. Large swing as compare with a trending move.

Yes, at the moment i am pretty much moving in this direction, using trendlines alone along with Volume. Learning about DOM, haven’t yet understood it fully.

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  #47 (permalink)
 knightraider 
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sadago View Post
Yes, at the moment i am pretty much moving in this direction, using trendlines alone along with Volume. Learning about DOM, haven’t yet understood it fully.

Yes stacking the odd for high probability trade as you learn to trade and find out what style that suit you especially finding the right time frame and method - breakout or pullback trader.



I have done a general analysis in daily time frame for AUDUSD. Basically we agreed that we are in a down trend. Take noticed recently form a range, the range form a 3 swings already. I wont look at that as a reversal yet because the price and volatility does not tell us that. Instead I will see in lower time frame give us the opportunity to short again. The price chart also have many support became resistant confluence. Since you mentioned about scalping use H1 for trend and 5 or 15min for entry.

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  #48 (permalink)
 knightraider 
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PipBandit View Post
Hi, If i understand your chart correctly when Time exceeds the Volatility, or size of past Volatility, you're now in reversed trend territory, is that correct?

Thank you for this, I learned something new if I understand correctly.

All are relative based on your chart.

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  #49 (permalink)
 
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 TraderMich 
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sadago View Post
Hello friends,

In a given trend, when the first sign of reversal is seen(exhaustion/ signal bar), how do you determine or form a view that - it is a reversal vs just a pull back.


cheers!!

It is a bit hard to answer this question as it to some extent is a very broad question. However my basic rule is: A trend is a trend is a trend - So an up-trend in intact as low as the low in the pullback are not broken and reverse in an down trend.

I would trade the first 1-3 pull back(s) depending on how strong/vital the trend appears, this is a subjective evaluation.

I would not keep "pulling the handle" by taking too many pull back trades as largen correction will eventually appear.

I trade on 1 min. charts and trades 11 markets, this means I will have many daily trading opportunities during the hours where the markets are most active.

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  #50 (permalink)
 
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 bobc 
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https://nexusfi.com/attachments/278191d1571906271


Determine who is stronger.... the buyers or the sellers
Look where the bar closed

And as Brooke says , its all shades of grey

bobc

PS I can post the balance of the bar analysis if requested

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