Secrets On Reversal Trading: Master Reversal Techniques In Less Than 3 Days

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INTRODUCTION

Like any other endeavor, good trading should be simple. In other words, you shouldn’t employ too many systems or indicators at the same time. But, success in financial trading goes hand-in-hand with good organizational skills.

Frequently, traders fail to organize their trades by neglecting to put their system into the bigger picture of the market. This may lead to more unexpected losses, which will affect their trading beliefs and attitudes. Once they lose the necessary positive attitude in trading, things will be much harder as they go forward.

Think about it... You must optimize everything in your life, from basic skills, like how to speak, how to listen, how to negotiate with others, etc. We are taught to implement things in a way that generates the best possible results. However, the fact is that we cannot perform well until lots of effort has been made. We learn from mistakes, understanding which attempts can be improved and which should be retained to achieve better results while suiting our style. In short, we need to optimize strategies, techniques, and tips via trial and error to find a way to sustainable success.

Things are exactly the same in trading. Although many profitable strategies and patterns have existed for a long time, not everyone makes good use of them. As a matter of fact, not understanding enough about market momentum behind the candlesticks patterns costs traders a lot of hard-earned money. In this book, you will see how I identify these momentums using pure price actions. The reversal trading techniques presented in the book may help you make some BIG steps on the way to consistent profits in trading. They are proven methods that I have been using consistently for years, which would save you a lot of time unlocking trading mysteries. Yet, it will not free you from necessary back-tests via your trading platform, which will help you get a deeper understanding of the new concepts I am conveying. Most importantly, you need to be patient, sticking to secrets on market structures and the 3MS principle for a long enough time. Bear in mind that all good things in life take time, and success in trading is not an exception.

Also, keep in mind that while many of the real examples in the book are from the currency market, the concepts apply well in any other markets.

Now, let’s get started.

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CHAPTER I: PRICE ACTION TRADING

Price action is the core of the trading strategies presented in this book. Therefore, let’s first take a brief look at this popular concept. I believe that after reading and grasping what I convey about reversal trading in this book, you will have a much deeper understanding of price action. All strategies and techniques I present in this book help answer the question: What is price action?

Price action describes some characteristics of an asset’s price movements, which are normally analyzed in connection with price fluctuations in the recent past. Put simply, price action is a trading style that enables traders to read market signals and make trading decisions based on recent historical data, instead of relying wholly on complex technical indicators.

This trading style takes many technical analysis tools into account, including but not limited to charts, support/resistance, trend lines, price ranges, swing highs and swing lows. Which tools to use depends on each trader’s preference, but a price action trader generally keeps the chart simple. The trader would believe the most important source of analysis data comes from the price and the candlesticks, and everything else is built upon these two elements. For example, if the market is creating higher highs and higher lows, it tells the price action trader that an uptrend is in place. The trader then assesses, based on the aggressiveness of the buyers, whether the trend is likely to continue before identifying a trade setup and trigger.

Compared to technical indicators, price action can free traders from complex formulas and time-consuming analysis. Although technical indicators use price as their basis, they often lag behind the price, meaning they often provide belated data for analysis. By simply focusing on the price, traders get the information in real-time instead of waiting for a lagging signal that might mislead their trading decision.

As a price action trader, you should be patient, waiting for opportunities to come and analyzing them based on price action signals, ideally in conjunction with some popular patterns such as trend lines, break-outs, channels, etc. Trading setups based on price action analysis don’t appear very often, but once they are present on the chart, chances are that they are well worth careful monitoring and analyzing.

Candlestick patterns such as the pin bar, engulfing pattern, and double top/bottom are typical examples of visually-interpreted price action formations. There are more candlestick formations that are generated from price actions to project what may come next in the chart. In this book, we will focus on these three patterns with in-depth analysis. From a new and interesting angle, we will explore the insights into fatal mistakes traders often make in trading.

In the next chapter, let’s discuss some crucial philosophies that differentiate successful traders from losers in the markets.

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CHAPTER II: SHAPE YOUR MINDSET FOR SUCCESS IN TRADING

As you might have heard, trading psychology accounts for around 60% of traders’ success in trading. Hence, before employing any trading systems or strategies, it is important you understand the importance of an appropriate mindset in trading and how it should become second nature to you. Without a correct understanding of the way the market operates, what the opportunities and dangers are, you will be overwhelmed by a lot of market signals, causing an imbalanced state of mind, where loss is inevitable.

Below are some of the most basic yet important characteristics of trading:

The unpredictability of the market

If you have certain experience in trading, you would agree with me that the market is just unpredictable.