06 Sep Understanding the big reversals

The Big Reversals

Now that you know the basics and have played around with draw­ing trend lines on charts we can start look­ing at charts from a bird’s eye view. If you haven’t mas­tered the basics yet, I sug­gest you go read this arti­cle Boot­strap Trad­ing. If you haven’t played around with the draw­ing tool I sug­gest you go read this arti­cle on The Hon­est Secrets to Trad­ing Con­nect­ing the Dots.

DISCLAIMER

Like you, prob­a­bly, I am learn­ing how to trade. I don’t claim to know any­thing. What I do claim is that I will be a suc­cess­ful trad­er. I am con­fi­dent that I will be one because I am putting in the time and effort. If I can’t become one, it’s because the game is rigged and I was nev­er able to be good at it any­way. And basi­cal­ly the bot­tom­line is… It’s nev­er my fault 🙂 

BECAUSE THE GAME IS RIGGED!

Obvi­ous­ly, I don’t believe this.

This series of posts are my per­son­al approach­es to under­stand mar­kets and trad­ing and in the end my path to suc­cess. So if you can be hon­est about your sit­u­a­tion as I can be about mine, we can do this togeth­er and get crack­ing. If ‘they’ can do it… We can.

After all, you can’t be a good trad­er if you are not com­plete­ly and bru­tal­ly hon­est with yourself.

This series is called ‘The Hon­est Secrets to Trad­ing’. I call it this because Yes, it is a ‘click­bait’ thing. Part­ly. How else can I get your atten­tion amid all these oth­er guys. But I also call it this because I will show you in all hon­esty what my approach to learn­ing this craft is. Because I am look­ing for these secrets as well. Just like you. I am putting in the time. Are you?

Last note. Gen­er­al­ly, you will find a com­mon theme through my arti­cles and that is GOOGLE for your­self. Don’t know a term that I’m talk­ing about? GOOGLE it. I’m not here to tell you all there is about trad­ing. I am here to tell you how I learn and how you can start learn­ing by your­self. I hope you can appre­ci­ate that. 

Here it goes…

Bird’s eye view

When you start draw­ing trend lines (don’t know what trend lines are? Google it) on charts you start notic­ing that price action ‘flows’ in a cer­tain way. Then it changes direc­tions and flows in anoth­er way. When you take a bird’s eye view though you see that these indi­vid­ual flows are a part of some­thing bigger.

Let’s look at the dai­ly time frame on WTI crude oil look­ing back a year. What do you see? Have you noticed that the top side of the price is fol­low­ing a diag­o­nal trend line? Every time it touch­es the trend line it goes back down and touch­es anoth­er trend­line that is in line with pre­vi­ous lows of the price action. Isn’t that interesting? 

The Big Reversals

Now, what I would find even more inter­est­ing is to know what made prices go down or up after it hit these trend lines. By the way, the upper trend line is called the resis­tance and the low­er the sup­port. They are called these because they resist prices from going fur­ther up and there’s enough sup­port under­neath to pre­vent prices from going fur­ther down. That’s a free­bie from me because you could have just Googled it. 

Light a candle

So how do I sug­gest you approach to ana­lyze these ‘big rever­sals’? After hav­ing estab­lished for your­self where these ‘big rever­sals’ are, you can know take a clos­er look at them. Zoom in on each one of them and play around with the dif­fer­ent time frames to see if you can rec­og­nize a cer­tain pat­tern. I use can­dle­sticks because they give me a lot of infor­ma­tion in just a small form fac­tor. Obvi­ous­ly you need to know the basics about how to use can­dle­sticks before u can start inter­pret­ing them on charts. Google! Or have a look here: http://www.investopedia.com/walkthrough/forex/beginner/level3/candlestick.aspx

Don’t judge, mere­ly observe

When tak­ing a clos­er look at these ‘big rever­sals’ please keep in mind that you are here to learn. You are here to lis­ten. You are mere­ly observ­ing what prices are doing at these turn­ing points. Don’t try to under­stand just yet. Just fill up that beau­ti­ful brain of yours with infor­ma­tion col­lect­ed at these points. What would be a good way to start mea­sur­ing? How would you approach try­ing to under­stand what’s going on at this ‘Big Rever­sal’ point?

Thank you

Thank you for tak­ing the time to read this arti­cle. If you have any ques­tions or sug­gest­ing please feel free to let me know.