Good Day Traders,
in this article I want to show you three ways for taking trades after a reversal as I do in many cases. These three ways are higher/high – lower/low pattern, engulfing pattern and Double Red/Green strategy. You know that many of my trades are mainly reversals but if I want to take a trade after a reversal I use these methods.
First of all, let’s talk about engulfing. It’s a popular and strong candlestick pattern and I am sure that you have noticed it many times in your charts .Take a look.
In this screenshot we have two engulfing patterns, one bullish and another one bearish. In the first blue box we have the bullish one.Our reversal was made in the red horizontal line and this line is our support.Then it appears a small red candle and after that a big green candle which engulfs the red .This is a buy signal.The next candle is green.In the second blue box we have a bearish signal.The big red candle engulf s the green and the next candle is negative.
Higher/high – Lower/Low
Let’s see the second screensot about higher/high – lower/low pattern.It’s a little bit different from the first one.
We have again two signals here.One bullish and another one bearish. Look at the first blue box.The red horizontal line is our resistance.The green candle makes a new higher high, hit in the resistance and makes a reversal. The red candle open below the green and close below the green,too.It’s a sell signal and the next candle is red. In the second blue box we have the opposite.The green candle opens above the red and close above the red.It’s a buy signal and the next candle is green. In this method I am always trying to avoid candles with long wicks.
Double Red/Green Strategy
Another similar way to trade after a reversal is the double red/green strategy. There are many traders who using it especially in short- term trading.
In the first blue box notice that after the reversal in the red horizontal line we have two red candles.The second one close below the first.It’s a sell signal.The third candle in the row is red,too. In the second blue box we have a positive doji star after the last red candle, maybe you can’t see it in the screenshot, and the next one is a green candle which close above the doji. This is a buy signal and the thrid candle is green.
If you read my previous articles you will see that I never take a trade without confirmation. You should always need some confluence to take a solid trade.In these cases the first confirmation for me is RSI. I don’t want the price to be in an oversold/overbought condition because there is a possibilty for a pull back.Furthermore,I avoid to trade these methods if there are whole numbers in the area in which we had a pull back in the past.The same for S/R.Moreover, I don’t trade these methods against the general trade. If you are trading 60 seconds binary options like me, take a look to the 5min chart to identify if there is a strong trend.
Another confirmation might be MACD crossovers but I don’t use it many times because there are many crossover signals. Some of them are good entries but some of them are bad entries and I don’t want to base my strategy only to an indicator’s signal.