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When the market has turned, you will know it. Assume it has not, generally speaking.
If the market is actually going in one direction pretty clearly, then you already have your answer -- look to go with that direction. "First sign of a reversal" is obviously subjective, but this will pull in early faders, who are likely to be wrong.
Thinking about, or looking for, reversals, is not a high probability approach. I have lost more money in my life than I care to admit or think about, running this fool's errand. It's much more nuanced than that, unfortunately, but if you actually can identify who is in control, that is, who has the upper hand, who is committing actual capital, then look to be on their side. Make the non-dominant side PROVE to you they're serious before you join them. In the absence of any other information, this rule alone makes the question largely irrelevant -- seek to be a buyer in a market moving higher, and a seller in a market moving lower, with a good risk/reward.
However, for specifics: for me personally, I use the momentum of orders, the "energy" of the book, time of day, other markets, and TICK. Sometimes it's as clear as crystal, and your job at that time is to go in, big. Others, it's not clear, and your job is to either get in very small or not at all.
Does the pullback in an uptrend bring in more selling? Then hold off on buying. Are buyers active even during the pullback? Then be ready to buy. Is there a quick washout that stalls? Definitely be ready to buy. Is the washout at a place where you would have placed your stop if you had gotten long previously? Get in.
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.
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.
One thing ONLY: Multi Timeframe Analysis. You need to be aware of the overall market context and were you are with respect to the curve on the given time frame (the one you trading or looking at).
Green is not always Green and Red is not always Red. Keep an open mind and trade what market tells you, regardless of what you think it should do. Always Multi Timeframe.
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.
Some good tips and ideas I read on this post!!
One can never really know until it is all said and done but two tools I like to use are:
Bollinger bands and FIB extensions. Both are shown in the image attached. Use the middle BBand as the pull back level. As far as FIB extensions, it will give you some possible levels based on measuring the last move.
PM with any questions about Cannon Trading (800) 454-9572 (310) 859-9572. Trading commodity futures, forex and options involves substantial risk of loss. The recommendations contained in this post are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performance is not necessarily indicative of future results.
Nothing is ever fool-proof obviously, and not sure if it hasn't already been said, but I look for a close below swing high bar's low and vice versa close above swing low bar's high for trend change.
Trend reversal is confirmed once when price makes a new high by breaking the previous high.
Meanings is : in down trend prices will make LL,LH,LL,LH and when prices makes a new high by closing above the previous LH, we can safely say that trend has changed.
You mentioned a "given trend" in your question with no reference to a specific instrument or the time frame you're looking at.
I think the answer to your question depends on a number of things;
1) what do you consider a trend?
2) what do you consider a reversal?
3) what do you consider a pullback?
4) is your definition of "the first sign" valid?
5) what do you need to see to change your opinion as to whether the move you're seeing is a pullback vs a reversal?
6) is your definition of a reversal valid if you look at a longer time frame?
Sorry to be asking so many questions, I know they aren't an answer to your question, I'm just curious to see how you would define these things to begin with.
Let's start with an instrument?
(I noticed you mentioned NQ with tight stops in a later post, sorry I used ES and ZB in my examples)
R.I.P. John Bottomley (Botts), 1956-2022.
Please visit this thread for more information.
There is no one size fits all answer to this question. My experience is that this will be best determined by what lens you view the market from i.e, auction, technical analysis, news, etc. The common factor will be that reversals will show significantly more volume than pullbacks while pullbacks will stay within recent reference areas, i.e. recent high or low, trend line, but reversals will very likely violate such levels etc.
Once again, this should all be viewed from the context of your primary method for analysing or interpreting price movement (price action).
