Thursday, March 15, 2012

The ideal first reversal

The simplest to read kind of first reversal is a trend move from open consisting entirely of trend bars that penetrates a support such as HLC of prior day or ema (today was both C of prior and ema) and gives a reversal signal.

If the reversal signal is weak (for example, it has a large entry side tail or is a bar of the wrong color), it is likely to take out the low and try a second time.

Such a 1Rev is often the low of the day and will close near its high so its a good candidate for a day long swing. In practice, if you get a very sharp move (b31-35) that looks like an overshoot and gives a decent profit, its a good practice to take some or all off and wait for more price action.

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