How can we catch the reversal of the market?

Under normal circumstances, when we make a transaction, we will divide it into several steps:

The first step is to analyze the direction of the big cycle (such as the weekly chart, the daily chart, and the four-hour chart) to decide whether to go short or long on the day;

The second step is to find important support and resistance positions;

The third step is to observe the performance of candle charts at key positions on small cycles (such as hourly charts, 15 minutes and 5 minutes) to decide whether to enter the market to go long or short;

This is a normal trend-following trading process.

But what if there is a sudden reversal in the market?

Then traders who follow the trend must miss it. So is there any way to catch the reversal market?

Answer: There is a way.

If we want to grasp the reversal of the market, we cannot see it from the big cycle. Only when the market is over, can we see that it is a reversal from the big cycle; if we want to be aware of the market reversal at the first time, Then we must look at the small cycle first, and then switch to the large cycle step by step.

This method of operation is exactly the opposite of the steps of homeopathic trading.

Let's do a practical review based on yesterday's crude oil reversal case:

crude oil map

The day before yesterday (2019.11.19) crude oil closed with a big negative line, so according to the analysis based on the idea of ​​​​trading with the trend, we are bearish on the continued decline of crude oil.

But in fact, crude oil closed a big positive line. So on the sky chart, we can only know that crude oil has reversed from the perspective of hindsight.

crude oil four hours

If you look at it from the perspective of crude oil for four hours, you can only see one positive line with a long lower shadow, followed by two consecutive positive lines, and there is no obvious sign of reversal.

crude oil 15 minutes

If you look at this wave of reversal from the 15-minute up of crude oil, there are traces to follow.

First of all, after the crude oil goes downwards, when it goes out of the moving average golden cross, it begins to show the possibility of short-term failure; from an ultra-short-term perspective, we should use a small stop loss to close above the red horizontal pressure on the candle chart After that, try to go long.

Second, when the crude oil is always running above the 15EMA moving average, we will hold it; when the crude oil backtests the 15EMA moving average, we can move the stop loss of the long order A to the entry position, and at the same time increase the position in area B to do long.

Later, after crude oil broke away from the volatile upward zone, it began to move upwards to compound interest and accelerate the upward trend.

This wave of compound interest has accelerated the rise of the market, and we have no way to find opportunities to increase positions on the 15-minute period, so we need to switch to a smaller 5-minute cycle to find opportunities to increase positions:

When the crude oil goes out of the oscillating upward area, the stop loss of long order B should also be raised to the entry position. At this time, even if the crude oil reverses, we not only have no risk, but also make a profit.

So after an adjustment in 5 minutes, it is time for us to increase the position for the third time.

In the end, crude oil went up a wave of reversal, and we increased our positions three times in a row.

But at the very beginning, we did not consider long orders from the perspective of following the trend, but focused on the short orders of crude oil downward.

Even if you were lured short when the crude oil broke down, at the beginning of the upward reversal, we just wanted to be a short-term long with an ultra-short-term thinking; in the end, the market evolved into a strong reversal Long; the short-term will become a normal intraday long transaction with the evolution of the market.

This is a classic case of doing a reversal.

From this we can conclude: To trade with the trend is to go from a large cycle to a small cycle; to do a reverse market, you need to go from a small cycle to a large cycle.

Whether it is to follow the trend or reverse; as long as you can make a profit, the method is only an auxiliary means.

Article source: tanxuefx (public account)​