Near trendline trading: It is possible to draw a down-trendline with several touches. This trendline represents resistance for higher prices. The trade has been opened when the price was approaching this resistance.
- At the time of entry background was neutral. In this case you should check background in above timeframe: weak –for short trades, strong – for long trades. In this chart we definitely have a bear market – maximum of every wave is lower than previous one. It is not wise to open a long trade in this case (at first we should witness accumulation or selling climax).
- There were several weak signals before trend changed. It is unlikely that the price will break resistance when the market is weak (there is no strong signal near the trendline). As you see Reversal is also confirming market turn near the trendline.
- Dynamic trend turned from red to green and entry was made in a narrow spread bar on low volume – this is a correct setup for a long trade.
Actually this was a good place for a short trade if we would have entered the market after dynamic trend turned to red. We had all the necessary signals to be bearish.
The version 1.20 of Reversals is now available. In these last 2 updates, there was a general improvement on reversals success rate, while the least successful reversals were removed. The detection algorithms were also improved, and the lower sensitivities are now showing more reversals than before. There were also some important bug fixes along the way.
Altogether, Reversals 1.20 is now a more robust indicator than before, so if you don’t own it, you can check this page to try a free demo of the indicator.
If you already own it, make sure to update it in the Terminal > Market > Applications (while logged in the MQL5 account), or visit its page here and click ‘Buy’ while logged in (it won’t spend anything as you already own it, and it’ll download to Metatrader automatically).
GBPUSD H4 with Sensitivity = 3 (FxPro feed), a low sensitivity that has been working well in this pair’s H4 for the past months
After near support reversal described in previous USDJPY analysis, price continued to rise and background turned to strong. The following trade was opened after very strong signal detected by VSA indicator. Reversal is also confirming these signals.
- Background was strong.
- Several strong signals (Major Demand and Minor Demand) before trend changed. Reversal indicator also confirms market reversal in this place.
Let’s look closely at the Major Demand bar from the prospective of Volume Spread Analysis theory. As you see this is a wide spread down-bar with high volume. High volume represents high activity. But there has to be more buying than selling on this bar for the price to close in the middle. Next bars are also up. It means that professionals were absorbing selling from the herd by opening long positions in this place. Imbalance between supply and demand is in favor of demand, price continued to rise.
- Dynamic trend turned from red to green, entry in a down-bar when the price is near D.trend.
- Exit by reaching TP level
Total: + 30 Pips
On this chart you can see our new Reversals indicator which has high success rate of market reversals (you can see how accurately it detects price reversals on this chart). It can be used alone and together with VSA indicator. In last case you will have the greatest advantage in your trading and the best view of the market.
In USDJPY analysis at first I would like to discuss H4 timeframe. After the shake-out which was also a stopping volume for mark-down movement, the price started to move sideways within trading range. This was a wide trading range. Therefore trading strategy was to wait price reversal near the resistance/support of the trading range and open a trade after the necessary signals from VSA setup. With VSA and Reversal indicators it is very easy to find a good entry and exit place. This pattern has been valid for 2.5 months until we had very strong signal (Major Demand) + Reversal signal. As a result there was a break-out from this trading range.
More recent picture we can see in M15 timeframe. Now the price has drawn two key levels:
- Long term support – on the above picture you can see how this support was established after several strong signals detected by VSA indicator. What is more important – the support has already shown itself twice when the price turned direction near this line (every time we had strong signals before price reversal).
- Long term resistance – this is the level which has also shown itself. Very remarkable setup here – up-thrust, which was also a stopping volume for mark-up movement. The up-thrust is a wide spread up-bar on very high volume which closed on the lows. The high of this bar is slightly higher than previous top (not shown in this picture). Weak Holders went long in this point and smart money used this liquidity to open short positions. VSA indicator also detected a very weak signal (Major Supply) on this bar.
Look carefully when the price is approaching these levels. VSA and Reversal indicators will help you to understand next price movement.
At the time of entry background was weak. Therefore it was o’k to look for short trades at that moment. The entry was made after dynamic trend turned from green to red. But before the trend changed to red there were no weak signals. Entry bar is a wide spread down bar – the price moved too far. It is better to go short in an up-bar with low volume, because it shows that professionals have no interest in higher prices.
The main mistake here is that the trade was not closed after buying has entered the market. You should exit immediately after 2 Minor Demand or Demand, Major Demand signals. In addition as you can see the Reversal also confirms exit in this point.
As it was noticed in CADCHF analysis, price was moving in a trading channel. In the above chart we see how the price has broken the upper limit of this channel. Break-out was made by high volume up-bar. Later price touched the trendline (very often once resistance is broken it becomes support) and continued to rise. There are several wide spread up-bars with high volume near the break-out. Background turned to strong and it was clear that pattern of moving in trading channel was changed. It was time to look for long trades.
- Background was strong
- Several strong signals (Demand and Minor Demand) before trend changed. Reversal also confirms these signals.
- Entry after dynamic trend turned from red to green
- Exit by reaching TP level.
Total: + 125 Pips
Right after my exit in the chart appeared weak signal and signal from Reversal indicator, price turned down.
Reversal indicator is looking for different patterns compare with VSA indicator and quite accurately detects price reversals in the chart. The best view of market can be achieved by using both indicators.
