Trend Reversal

[glebecki]

Hello.
Given an uptrend of higher highs and higher lows, how is a reversal in the uptrend defined?

And given a downtrend of lower highs and lower lows, how is a reversal in the downtrend defined?

I mean what criteria do you use to mark a trend reversal?

Thanks,

--george

 

[tomorton]

You might be surprised but there is more than one way of doing this. But whatever method is applied you should be careful that you don't automatically think of the end of a trend as a reversal of the trend direction from up to down or down to up. Prices often range sideways without real trend for long periods.

Also, the point at which you or I might say the trend has ended is not just a question of TA, it is also possible our opinions will differ because we have different acceptances of risk or how soon we would act on the chart pattern.

Anyway, a simple method is outlined here better than I can -
YouTube - Trading Reversal patterns

 

[Splitlink]

I don't use definitions, unless they are my own. If you swear by them then, IMO, you are taking an inflexible attitude to the trade. I've used so many definitions and been disappointed that I use my own rules.

I use a pullback . If it doesn't work, it's a continuation of the existing trend and I get stopped. The lower the time frame you use the less risk you will be taking but, also, the more chance you have of being wrong.

Tomorton's chart is perfect as it is presented on this thread. You have to take it, or not, just like that. The rest of the video I have not seen but, IMO, what comes afterwards is too late.

Split

 

[glebecki]

You might be surprised but there is more than one way of doing this. But whatever method is applied you should be careful that you don't automatically think of the end of a trend as a reversal of the trend direction from up to down or down to up. Prices often range sideways without real trend for long periods.

Also, the point at which you or I might say the trend has ended is not just a question of TA, it is also possible our opinions will differ because we have different acceptances of risk or how soon we would act on the chart pattern.

Anyway, a simple method is outlined here better than I can -
YouTube - Trading Reversal patterns

What a terrific lesson! Thank you, Tomorton. I listened carefully to Phil Newton. His British accent made me guess that he was saying 'bias change' but I am not sure.
With appreciation, --george

 

[glebecki]

I don't use definitions, unless they are my own. If you swear by them then, IMO, you are taking an inflexible attitude to the trade. I've used so many definitions and been disappointed that I use my own rules.

I use a pullback . If it doesn't work, it's a continuation of the existing trend and I get stopped. The lower the time frame you use the less risk you will be taking but, also, the more chance you have of being wrong.

Tomorton's chart is perfect as it is presented on this thread. You have to take it, or not, just like that. The rest of the video I have not seen but, IMO, what comes afterwards is too late.

Split

Thank you, Split. Very helpful thoughts on my question and Tomorton's response.
Do you look for any clue to convince yourself that it's a pullback and not a continuation?

--george

 

[Splitlink]

Thank you, Split. Very helpful thoughts on my question and Tomorton's response.
Do you look for any clue to convince yourself that it's a pullback and not a continuation?

--george

Is the latest top getting overstretched? This is personal opinion. Perhaps, you use a channel system that indicates this. As far as the pullback is concerned, what you may not see on a 5 minute chart may be apparent on a 3 minute.

This may not be, strictly, the way that one should think, but a lot depends on how much I am prepared to risk which, in turn, depends on what my previous losses/gains have been.

Remember that S&R lines cannot be mathematical. They are zones and the point where one decides which way to go can be wrong by very many points, even though the eventual result may go in your favour. That is why I am not a lover of trading on daily, or even hourly, charts. Getting it wrong can de a disaster, but you have to stick it out until the pattern is over.

This, however, depends entirely on the character and pain level that one can accept.

 

[tomorton]

Yes George, he says bias change, and avoids callng it a reversal: that would suggest an uptrend immediately becomes a downtrend, which is often not what happens.

Phil has a distinctive Liverpool accent, otherwise known as Scouse: Liverpudlian people can be known as Scousers.

 

[timsk]

Phil has a distinctive Liverpool accent, otherwise known as Scouse: Liverpudlian people can be known as Scousers.

. . . and a few other things besides - not all of them entirely complimentary! But not in Phil's case, as he's a class bloke as well as being a long standing and respected member of T2W who posts under the name 'Newtron Bomb'. Anyone who enjoyed / benefited from the video in Tom's post might find this thread of interest too:
http://www.trade2win.com/boards/for...55-phil-newtons-range-break-out-strategy.html
Enjoy,
Tim.

 

[glebecki]

Is the latest top getting overstretched? This is personal opinion. Perhaps, you use a channel system that indicates this. As far as the pullback is concerned, what you may not see on a 5 minute chart may be apparent on a 3 minute.

This may not be, strictly, the way that one should think, but a lot depends on how much I am prepared to risk which, in turn, depends on what my previous losses/gains have been.

Remember that S&R lines cannot be mathematical. They are zones and the point where one decides which way to go can be wrong by very many points, even though the eventual result may go in your favour. That is why I am not a lover of trading on daily, or even hourly, charts. Getting it wrong can de a disaster, but you have to stick it out until the pattern is over.

This, however, depends entirely on the character and pain level that one can accept.

Thank you, Split, for the thoughful response. Your 5min-3min comment is well taken as well as long term chart disasters. --george

 

[glebecki]

Yes George, he says bias change, and avoids callng it a reversal: that would suggest an uptrend immediately becomes a downtrend, which is often not what happens.

Phil has a distinctive Liverpool accent, otherwise known as Scouse: Liverpudlian people can be known as Scousers.

Thank you, Tomorton. I appreciate learning the nuance between reversal and bias change. I was a language teacher so your accent on Scouse is especially interesting.

--george

 

[Splitlink]

Thank you, Split, for the thoughful response. Your 5min-3min comment is well taken as well as long term chart disasters. --george

I don't want to deride those who do trade on a daily chart. there are many veterans on here, who do so. However, they accept the risk , even though the risk on a daily bar can be considerable. Nevertheless, when they are right, the profit can run into hundreds of points. This depends, as I said before, on their pain level. I don't like that level. Horses for courses.

You must decide, for yourself, what you like.

 

[glebecki]

. . . and a few other things besides - not all of them entirely complimentary! But not in Phil's case, as he's a class bloke as well as being a long standing and respected member of T2W who posts under the name 'Newtron Bomb'. Anyone who enjoyed / benefited from the video in Tom's post might find this thread of interest too:
http://www.trade2win.com/boards/for...55-phil-newtons-range-break-out-strategy.html
Enjoy,
Tim.

Thank you, Tim, for directing me to Phil Newton and for the quote regarding comedians and traders.
--george

 

[tenbobtrader]

http://www.trade2win.com/boards/jokes-humour/6856-joke-day.html

 

[glebecki]

http://www.trade2win.com/boards/jokes-humour/6856-joke-day.html

Thanks, tenbobtrader. I liked the "Long of hope, short of disaster" comment.

--george

 

[joe4422]

I think the important that to ask your self during each pullback or retracement taking place is, has price moved too far too fast, or has there been a fundamental change in the perceived value? That can be a hard one to determine, but what I personally find to be the best indicator. Volume and market profile can you help you to determine that.

A simple way in a strong trend is also to make sure that the pullback/ retracement isn't more than 62% from the beigining of the last pullback to the top that the preceding continuation made. Does that make sense? I'll try to pop in a video later.

 

[glebecki]

I think the important that to ask your self during each pullback or retracement taking place is, has price moved too far too fast, or has there been a fundamental change in the perceived value? That can be a hard one to determine, but what I personally find to be the best indicator. Volume and market profile can you help you to determine that.

A simple way in a strong trend is also to make sure that the pullback/ retracement isn't more than 62% from the beigining of the last pullback to the top that the preceding continuation made. Does that make sense? I'll try to pop in a video later.

Thanks, joe4422. I need to learn about volume's role in a trend reversal. Yes, I have heard about pullback's exceeding 62%. What do you use to determine 'market profile?' --george

 

[tenbobtrader]

Thanks, joe4422. I need to learn about volume's role in a trend reversal. Yes, I have heard about pullback's exceeding 62%. What do you use to determine 'market profile?' --george

some basic stuff ~

 

[glebecki]

some basic stuff ~

I took a quick look at "Market Profile Basics" and am very interested. It requires some intense study. Do you use it? Is Stockcharts.com's overlay Price by Volume a substitute for Market Profile?

Thanks, --george