This document outlines a 4-step reversal trading strategy:
1. Identify dynamic support/resistance levels on the weekly chart to see the big picture trend.
2. Look for price action patterns like long wicks or momentum loss candles at these levels on lower timeframes to confirm reactions.
3. Ensure the daily and weekly charts show confluent bullish or bearish biases before moving to the 4-hour chart.
4. Use the 4-hour chart to time an entry on a breakout in the direction of the larger trends, with a protective stop loss.
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This document outlines a 4-step reversal trading strategy:
1. Identify dynamic support/resistance levels on the weekly chart to see the big picture trend.
2. Look for price action patterns like long wicks or momentum loss candles at these levels on lower timeframes to confirm reactions.
3. Ensure the daily and weekly charts show confluent bullish or bearish biases before moving to the 4-hour chart.
4. Use the 4-hour chart to time an entry on a breakout in the direction of the larger trends, with a protective stop loss.
This document outlines a 4-step reversal trading strategy:
1. Identify dynamic support/resistance levels on the weekly chart to see the big picture trend.
2. Look for price action patterns like long wicks or momentum loss candles at these levels on lower timeframes to confirm reactions.
3. Ensure the daily and weekly charts show confluent bullish or bearish biases before moving to the 4-hour chart.
4. Use the 4-hour chart to time an entry on a breakout in the direction of the larger trends, with a protective stop loss.
This document outlines a 4-step reversal trading strategy:
1. Identify dynamic support/resistance levels on the weekly chart to see the big picture trend.
2. Look for price action patterns like long wicks or momentum loss candles at these levels on lower timeframes to confirm reactions.
3. Ensure the daily and weekly charts show confluent bullish or bearish biases before moving to the 4-hour chart.
4. Use the 4-hour chart to time an entry on a breakout in the direction of the larger trends, with a protective stop loss.
The passage discusses an advanced reversal trading strategy that involves identifying dynamic support and resistance levels on weekly charts and then looking for price reactions and entry signals on lower time frames.
Dynamic levels from the past could provide support or resistance again in the future, so it is important to identify them as areas where buyers or sellers may enter the market once price reaches those levels again.
Price action patterns like long wicks, multiple candle rejections, momentum loss candles, and other patterns and shapes at dynamic levels can indicate that buyers and sellers are actively reacting to those levels.
ADVANCED
REVERSAL STRATEGY
WYSETRADE ADVANCED REVERSAL STRATEGY
STEP 1 - IDENTIFY A LEVEL OF DYNAMIC
SUPPORT OR RESISTANCE ON THE WEEKLY TIME FRAME:
We start on the weekly time frame so that
we know what is going on, on the big picture. Without looking at the weekly time frame you can get caught on the wrong side of the dominant trend.
Why do we need to identify key levels of
dynamic support or resistance? Because if price reacted to these levels in the past, there is a possibility that price can react to these levels again in the future so we need to have them drawn in as a reminder once price gets to these levels again.
After we identify and draw in our dynamic
level of support or resistance, then we move to step 2. ADVANCED REVERSAL STRATEGY
STEP 2 - LOOK FOR PRICE ACTION PATTERNS:
Once price gets to a dynamic level of support
or resistance we need to look for key price action patterns to tell us that piece is “actually reacting” to the level.
Without price action patterns occurring at a
dynamic level of support or resistance, this means price is disregarding the level and buyers and sellers are not taking action at the level and we do not move onto the next step without price action.
Price action patterns we like to see: long wick
candles, multiple candle rejections, momentum loss candles, patterns & shapes.
Once we have identified a key price action
pattern at a dynamic level of support or resistance then we move onto step 3. ADVANCED REVERSAL STRATEGY
STEP 3 - TIME FRAME CONFLUENCE:
We want our directional bias on the weekly to
be the same as the daily (bullish bias or bearish bias).
The reason for this is because if you have a
short bias on the weekly, but the daily is showing bullish momentum, you have conflicting data and can get caught on the wrong side of a trade.
We first establish our bias through looking for
price action on the weekly that is either bullish or bearish, and once we have that, then we jump to the daily to see if we have a matching directional bias.
Once we have confluent and matching
directional biases on the weekly and daily, then we need to further confirm the direction through the 4h time frame as the daily time frame is 24 hours worth of data per candle and we want to look deeper into the immediate trend to see a more detailed representation. ADVANCED REVERSAL STRATEGY
STEP 4 - INTRADAY CONFIRMATION & ENTRY:
The 4h time frame is the key to understanding
the immediate trend as it shows you exactly how price is moving at that particular moment.
We then look for a breakout in the direction
of our daily and weekly bias and enter with a stop loss behind some form of protection, such as an intraday level of support or resistance or behind a trend line, because price can swing before it moves in our desired direction and you don’t want to choke the trade and have your stop loss hit before it moves in your favour.