Tuesday, February 14, 2012

When reversal bars dont trigger

Shallow sloped, wide channels fool even the best traders into thinking a reversal is just around the corner. There are some ways to guess if a reversal would fail and one of them is that a reversal bar with a strong close refuses to trigger. Today for example, b9, b18,b45 refused to trigger despite having strong closes. This usually means that sellers are selling the close of the strong bar instead of buying it. It also shows lack of confidence on the buyers side and you should look for continuation trades in the original direction.

An overshoot of the TCL and a strong signal such as the oio at b73 is an essential requirement to take a reversal trade with any hope of success.


  1. Hi cadaver,

    when did you viewed this day as a bear channel? Its due to b18 LL and b29 LH? I thought that is TR day and b41 and b55 is just selling in the middle of TR.

    Could you mention in your posts stop that you are using? e.g. if I sell below b4 should be stop above b4 and b5 or b2 and b3? I know you are using 2 points and 1,5 points stop most of time, but sometimes e.g. in your video with two attempts to close gaps you used 6t stop.

    Could you mention in your posts some trades you consider and did not took?

    Could you tell me why did you took trade above b4 1rev (5/3/2011) without any support or its due to possible attempt to close the gap?

    Thank you very much for your reply.

    1. Thats correct. A LL and a 2L LH is the sign of a bear move. I wasnt sure it would be a channel but it was very likely to be some kind of bear move.

      1.5 is the same as 6t. Occasionally, I use 2pts but that is only for 1Rev, 1PB and when there is overlap but you want to take the trade (for example ioi setup) or tiny bars.

      The answer to your question is: You should not be selling below b4, since its a bull doji. You should wait for a bear bar such as b5 and sell once it triggers. Often when its overlapped like b5, I let it trigger and pullback a couple of ticks and then short a couple of ticks above the low of the bar. This allows me to manage with a 6t stop.

      We may need some other place to discuss trades in-depth (such as a chat site) since I want to keep blog posts short and interesting.

      5/3 b4 was a 1PB and I took it because b1 was a strong signal bar and b2 was a strong entry bar. Yes, it failed but 1PB is one of those trades that when it works, it works very well so it was worth the risk:reward.

    2. I thought that selling below b4 is gap close failure: b2 first attempt and b3-b4 second attempt which fails.

      Could you tell me which communication form do you prefer?

    3. It is a failure to close the gap twice structurally but the bar pattern is fH2. fH2 is a more generic pattern that occurs in various situations. Gap failure is a opening range specific setup.

  2. Cad,

    why did you take the fH2 on b5 and how did you infer its two legs?

    thanks for anwering my question yesterday,

    1. b1 triggered, gave a second buy signal on b3, which also triggered and failed, making it a fH2