Why Trading Reversal is Difficult
Trading reversal is like catching a falling knife, One must know when is the turning point of a trend. Many peoples like to trade Reversal, because of the great Risk to Reward ratio. But it is very difficult to timing the "turning point" and enter just when the trend is reversing.
There are two things to think about when catching a Bottoms or Tops: Is it a Reversal ? or is it a Retracement ? as We know, Reversal and Retracement are two very different things, in a Retracement price movement is only slowed down before it continue, but in Reversal the price will keep moving in the opposite direction until it reach the beginning of the trend.
In a Reversal price will not directly moves to the opposite direction in one go, but instead it will moves in stages, step by step until it reach the beginning of the Trend movement. Trading Reversal is considered the Most difficult trade to make because: 1. It is difficult to find the entry, 2. It is difficult to hold the trade.
It is said finding entry for the reversal is difficult, but Holding the trade after is also proven to be quite a challenge. In a Reversal all previous Support zone will become a Resistance Zone and all the Resistance Zone will become a Support Zone. So, for Reversal to be a successfull, price must cut pass through all the barrier. It need to break through the previous support (now Resistance) and previous Resistance (now Support).
Consider the illustration below for a Reversal Trade
In The Illustration above, the Previous Support is Currently becoming the Resistance Level and a Trader must able to Hold gain when His/Her Trade reach the Resistance. Most of the time a Trader will Cash in His/Her Trade before it reach the maximum profit, why because it is Human Psychology to take the profit and avoid risk.
In the resistance Zone, the Trader will have the feeling of Uncertainty whether the price will continue to goes up or keep falling down. It is a burden for the Trader Mind to see some of the profit gone because the price will not soar up directly like a rocket, but instead will ripple like water in river and slowly goes up.
The most basic skills for every trader is to able to Draw Support and Resistance Correctly, it is so basic that it should be the first skill to master before one even learn other Technical Analysis skill.
So What is a Support and Resistance lines ?
Support is a Price level or a zone of a certain asset's or futures that prevent a price to fall even further. Support reflecting Market psychology where Bear power exhausted and Bulls are coming in, Because the price is quite low, more and more people are more eager to buy rather than sell which in return bounce the price to goes up.
Resistance in the other hand is a price level or a zone of a certain asset's or futures that Resist the price to goes even higher because this is the price level where most people will be more eager sell their position either for profit taking or for "Sell the High".
Support and Resistance is not a permanent things, Support and Resistance line can and will be break over time if there are enough catalyst in the Market.
There are two types of Support and Resistance : Static and Dynamic.
A Static Support and Resistance are solely based on the price itself, drawing a static support and resistance lines is actually quite straight forward, we begin to find a price level in the past where when a price touches that level it bounce and hold that level.
A Dynamic Support and Resistance are provided by Indicator, the most simple example is by using Moving Average Indicator as Support and Resistance level.
In My search for "Holy Grail" in trading this is by far the most suitable trading setup for me, yes.. the most suitable not the perfect one. This is the setup I feel most comfortable to.
I've read many books about trading, Forex, and etc. There are no one have said they found a "Holy Grail" of Trading, a Setup that will never lose, a Method that will win 100%. If somehow You met someone that claim they have "Holy Grail" Method, then it is better to Ignore him and run away because the only "Holy Grail" they have is how to clear out Your pocket.
Bollinger Bands (20, 0, 2.0)
Heiken Ashi CandleStick
Custom Indicator : SywaAlert
- Awesome Oscillator with Alert
- Upper and Lower Bollinger Bands act as Support and Resistance, I use these lines as entry Point.
- Parabolic SAR is used for the confirmation
- Alligator lines (Lips, Jaw and Teeth) are used as short term target level (profit or stop loss), and as confirmation.
- Awesome Oscillator are used together with Bollinger Band for Entry.
- Heiken Ashi Divergence are used for Entry.
So, I have three priority entry Condition in sequence from the most important to less are : Awesome Oscillator, Upper and Lower Bollinger Band, and Heiken Ashi.
While other Indicator act as secondary confirmation.