How to Identify High Probability Reversal Trades. Where Fortunes are made!

How to Identify High Probability Reversal Trades. Where Fortunes are made!


hello traders it’s Samurai trader here welcome
to this training video how to identify high probability
reversal trades I’m going to be covering a lot of information in this recording
so I’d recommend if that’s you make sure you’ve got a pen and your trading
journal handy so you can take notes and please remember that the strategies and
ideas work on all time frames and all markets so if you’re a Forex trader or a
stock trader it really doesn’t matter or a futures trader which market you trade
a patterns a pattern now if there’s a great book by a trader called trade avec
methods of a Wall Street master and what he says in the book is where fortunes
are made identifying a change of trend and of course you would have heard if
you’re a member of a day traders fast track program you’ll hear me state a
time and time again please do not counter trend trade or look for a
trading change of trend until you’re consistently profitable as a trend
trader and you’ll see why very soon however there are fortunes made and if
you’re good at it and you get to master the patterns you can do very very well
out of them now very quickly yeah we will be going to some charts very soon
so I’d recommend you go to full screen bottom right hand corner you can click
on that then you’ll be able to go to full screen as always I do need to put
the disclaimer up there is a risk in trading if you haven’t read the
disclaimer if you’re new to my videos please pause the video and make sure
that you do read the disclaimer if you’re a current member of a day traders
fast track program you see this on every one of my videos also a very very quick
advertisement I promise traders I’ll be very quick you can request my ebook for
truth about day trading by going to a download link below or also requesting
my free training manual let’s see here right and of course if you’re a member
or if you join the day traders fast track program many of the ideas and
strategies that I’m about to cover with you I have very very comprehensive cheat
sheets downloadable power points and there’s actually over 300
training videos now in my entire program but specifically the t3 which they our
price extreme strategy which works absolutely fantastically it’s a mean
reversion strategy your t7s which is your double tops double bottoms I’ve got
specific training videos and cheat sheets and powerpoints on those you’ll
see t19 which is your standard divergence and your DDs and the 2ds of
double divergence which is an absolute killer if you’re a counter trend trader
and last of all before we get into content if you haven’t subscribed to my
channel please do and just remember $197.00 you obtain my entire program
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there’s nothing else else like this in the market for 197 there is no upsell
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okay that’s the end of the promotion let’s get into it let me talk about the
negatives first of all you’ve probably heard the saying the person who chases
two rabbits catch’s none and when we go to the charts in a moment we will see
this one of the challenges is that when you’re trading counter trend trades or attempting
to take counter trend trades if it fails quite often you will miss out on a
really good trend trade and this is where you need to be either very quick
or to really make up your mind which type of trade are you after even better
still if you go for the best of the best and that’s really what this video is
about is showing you what are the best of the best but the warning I wanted to
give here really is just be very very cautious and I tend to find that when
you’re looking for counter trend trades or a change in market direction we tend
to lose sight and to loose focus on looking for the trend trades and I still
say to this day for trend trades the safest trade you can possibly take
but there are some great counter trend trades and I’m sorry if I’m confusing
you here with these statements but it’s very very true and any experienced
traders know what I’m talking about here and my last statement here is tops and
bottoms are so attractive because they look good in hindsight it’s very easy to
go back over a chart and say alright I would have got in here would have got in
here but when you’re on the far right-hand side of the screen of your
chart things look very very differently now Jesse Livermore quoted this and I
love this statement after spending many years in Wall Street and after making
millions and losing millions of dollars I want to tell you this
it never was my thinking that made the big money for me it was always my
sitting and that is where it says so important traders that if you’re going
to take counter trend trades but you wait for the best of the best I want to be
giving you some invaluable tips and this is where right might even pay you to
pause the video members of course you can go into the members area you can
download the cheat sheets and the powerpoints which will give you all of
this information but for the general public watching this if you’re not a
member I want you to really take note of what I say in and then got it down it’s
very very important now in the end our business is about pattern recognition
and epic traders are great at pattern recognition and that’s in a way a great
thing about trading is that learning patterns if you’re not difficult but
that is what it’s really counter trend trading is about is looking for the
patterns that set up now in mastering the trades that I’m going to be showing
you today once you remember what I called the rule of 100 test your idea or tests
a pattern over a minimum of 100 trades going back over the charts
then in Sim then before you go live very very important and that’s I suppose one
of the greatest challenges that I have with traders today is I now have
thousands of traders around the world that are members is lack of patience
and you know as Mark Douglas talks in his excellent book he talks about really
being patient and that is in the end that by the way it’s in the book for
Discipline trader he talks about this is having that the patients and as he said
what’s the rush the market is going to be here next week next month next next
year and also when you are patient and when you follow the discipline rules of
say back-testing over a minimum of 100 trades before you go to sim then maybe
100 in seem before you go live it’s also teaching you discipline which is perhaps
one of the key cornerstones of becoming an epic trader
so the setup setups that I teach you go back over 100 very very important now first
of all one of the most important rules of staying out of a potential divergence
trade is this do I have a strong trending market this is where it’s easy
to get absolutely hammered if you’re a counter trend trader or trying to pick a
top or a bottom and I want you to think of flashing red lights when considering
a divergence trade in a strong trending market and I’m going to give you when we
look at the charts a couple of heads up and things to be watching for and a
couple of really important tips that will really filter out the bad traits
but just really watch that so I want you to got that down if you’re in a strong
trending market you know once again just be very very where it’s really easy to
be chopped up in those circumstances so let’s now go through some key
considerations of trading divergence do I have angulation so we’re going to look
at this and I’ve mocked up some charts for you very very important and one of
the key ingredients or the key rules for a successful counter trend trade is when
you’ve got great angulation the great angulation the bed of a trade do I
have three mountains now what I mean by that and we’ll see this on a chart where
I go one in a trend two and three that is the more waves you’ve had
in a trend the more likely you are to have a correction or a change in trend
so if you’ve got three hills or three mountains or three great waves you are
more likely to be heading towards a successful counter trend trade or a change
in trend so remember when we’re trading a trend the best metaphor I give our
analogy I say to traders we’re like great surface we’re looking for those
waves so after you’ve had three waves you’re more likely to be heading towards
a correction now likewise do you have a double top or a double bottom the market
loves to test things twice and quite often a good double top or a good double
bottom is a good indication of a change in trend so one should be very aware of
us particularly when you’ve formed a new high or new lows and you formed so you’ve
got a new low and you formed a double bottom or a new high and you formed a
double top and combine that then with a key indicator such as an oscillator well
it’s this peak once again a great combination we’ll look at that in a
moment do I have a pivot bounce specifically I really like floor pivots
and I’m going to be showing you an example with that so when you have pivot
bounces and divergence and you’ve made either a double top or a double bottom
or I’ve got two divergence on price fantastic okay that’s a great combo do I
have a fanning of the EMAs most of you are aware and of course if you remember
you’re very aware that I love to use a combination of three to four EMA’s when
they are fanning apart and I’m getting angulation it’s also a great indication
of a great potential divergence to trade am I at a major support resistance area
and I get divergence fantastic do I have a trend line break so I’ve had a great
run I’ve had a trend line break and I like
to use fractals and those of you that haven’t seen my videos on fractal breaks
and I took a lot about those it just makes
confirming a trendline very mechanical recently I started using just as a
visual tool an ATR stop and a flip and unfortunately I only have it for
TradeStation so I’m using a very tight ATR stop and flip now it is something
else on the screen but it just it’s just a nice if you’re busy if you’ve looking
at a lot of screens it’s just another visual tool and so for tradestation uses
of course I provide that for those that don’t use TradeStation just use the
trigger line and we’ll look at that as well do I have a rising or fall in which
pattern we’ll look at that when I show you a chart and what is the anchor chart
telling me if I’ve got divergence on my entry chart what we call my EC and I
have divergence on the ICD the anchor chart start rubbing your hands together
it’s what I called 2d when I have a double divergence fantastic ok
dramatically improves the chances of my trade being successful so we can see
here that this is our just for an old PowerPoint from years ago but we can see
got a nice double bottom here you know if there was that support such as a
floor pivot fantastic now of course a double bottom or a double top can form
its own area of resistance or support but at times you’ll get a double top or
a double bottom at a floor pivot if you have it at a floor pivot row that
probably adds an extra 10 to 20 percent towards a probability of that trade
coming off so you may have standard divergence on an indicator so you have a
high high-end price you then have divergence on your
indicator fantastic but when you’ve got great divergence and it’s tried twice ok
it’s even better so you really want to understand the principles behind double
tops and double bottoms now then we have our triangles and wedges now when we
then get a wedge and promises what I call coiling okay so
usually we have a rising wage price action would usually collapse price
action will usually run serve alongside so this is where drawing your trend
lines is and just really developing the habit of joining trend lines it just
makes I’m spotting a great divergence trade a lot easier now for those members
that are familiar with fractals usually at these points here here here and here
I’m likewise I’m here here and here we would have a fractal point plot and
those are the points that I draw my trend line on it’s an indication of
course quite often we’ll see a lot of false breakouts but when you’ve got some
additional tools and some other things that we’ll look at it just makes it
easier for confirming a divergence trade now here we’ve got a faller sorry a
falling or a rising wedge here now in this particular case we haven’t formed a
new higher high or a low but you’ll still see a lot of these wedges still
work out so you’ve got prices is starting to coil it’s you you basically
a wedge is a trading range so you can see here we’re getting there tighter and
tighter in our range and finally pressure builds and we break to the
short side so just get used to looking for these patterns now Vic in his book
methods of a Wall Street master the new market Wizards he’s been written about
in the new market Wizards and super traders and I’ll mention his book four
methods of Wall Street master trader it shows two patterns which is your classic
pattern but in this particular case he’s not showing the use of an oscillator so
if you look at this so two by long we’re simply looking for these are what I called
two Hills and you’re quite often hear me talk about two Hills here’s your first
till it comes down Rises alright market fails again here’s your second Hill then
you get a break and away we go now this we know of
courses is fairly classic we will then have an oscillator will have divergence
as well so you’ve got to confirming them or look at a a pattern in a moment
you’ll see this here so this is directly out of his book where you’ll see this
pattern and so you’ve got some decent retracement close above and you high no
follow-through close below the breakout low short below the low target the major
swing low so you might have had a swing low way down here stop above the
breakout high which is just see a fairly classic patterns but you know what it
works however what is very very important traders is that you make sure
that either you’ve got great angulation or and that you’re not in a strong
trending market because you’ll see these regularly and really strong trending
markets see that have a long side of a short side now when you get this great
setup but you can still be hammered smashed by them so you want to be very
cautious now this is typical on this this is the same pattern we’re just
looking at except using an oscillator so we’ve got a lower low on price with a
higher low on our oscillator likewise here we’ve got a higher high on price so
this is our classic t19 setup so we’ve got a lower high now you can still take
them by the way if you’ve got a double top on your oscillator and a double top
on price action but better probability and by the way if I had a double top on
price and I’ve got my divergence it’s still fantastic I love my double tops of
my love and my double bottoms but I really want to see divergence on the
oscillator to me that is very very important so let’s go and have a look at
the chart so we’ll start off with just to set up so I’m actually set up that I
saw as I was preparing for this video today so what we’re looking at here is
the Australian dollar 55 tick chart so this is during the Globex session
alright so I’m recording this at 2:53 pm. in the afternoon
and we can see here that so this is during the Globex session what we call
the Asian session we can see here that we’ve formed a new high high so here’s
one Hill comes down we then get a bounce to Hill so got a high high on price and
I’ve got a lower high on my MACD and the MACD I use is a zero lag in that so a
zero lag and it’s got a very sensitive setting so I love zero lag MACD’s
but what makes this good and button by the way when you’re trading the US
dollar this semi Futures us currency contract it’s ten dollars per tick or if
you’re trading say the Euro or the YEN or the pound it’s 625 a tick USD so the
US dollar is ten dollars a tick you know when we take these divergence
trades always be prepared for a bounce off the major EMA’s right now here we’ve
broken through so this is good okay we’ve got a good move now here we’ve got
the divergence but my on my anchor chart I’ve also got divergence and that’s what
I called 2d I love it when I’ve got a 2d it dramatically improves the probability
of the trade coming off now let me just go here and to the other charts I wanted
to show you so what we’re now looking at is gold now remember it doesn’t matter
what market you’re trading with your trading for forex markets futures stocks
it really doesn’t matter the same patterns will set up so I’ll just run
through some of these so we can see here that we have a sign in our business
follow the gold so we can see my gold EMA’s so if we’re under the gold we want
to be looking for shorts for above the gold we’re looking generally for Long’s
now trading is not it’s really there’s lots of gray areas in trading and you’ll
hear me say close enough is good enough and it truly is for an example if I’m
looking at a double bottom or a double top on a day trading chart so this is a
144 tick chart if I’m within 2 ticks for me
that still qualifies as a double bottom or a double top and in this case we are
within 2 ticks so here I’ve got a nice of a divergence so I actually had an
entry point here I’ve got a low a new lower low and here I had an entry here
we can see we then got a bounce off the EMA we come back down it could have
formed a wall for me it is a double bottom I called it a double bottom and we
can then see traders that it then bounced for me I call that a double
bottom and up it went again and just be with bounces of your major EMA’s so we
travel along here and in the direction of my trend of the overall trend I now
have a new high high with a lower high on my MACD so I have an entry this
actually comes down and it forms a great double top and I have divergence thank
you very much now of course gold is $10 a tick now I’m a scalper so I’m quite
happy to pick up 5 ticks ok that’s what scalpers do we then have what I call a
snap back which is a mean reversion trade we can see here that prices gap
right away from my trigger line and and these by the way on gold
I love snapback so and we call them T3 on gold on CL you can gets they’re
not quite as good you’ll get some good ones on incubit’s sometimes you need to
wait for your second entry so you want to go have a high one high two or a low
one high low two strategy but snapbacks can be great but it’s still a counter
trend trade and there we had a really great snapback here we had another great
snapback these are all change in trend strategies here we’ve got a new high
high on price I have divergence in here by the way I’ve got slight divergence
you can see it there as well thank you very much I then have set up a nother
snapback ok you’re going to see clear separation a price for my trigger line
we come down we then get a bounce we then form a this is what I call a big
picture double top I have divergence I’ve then got a big
picture double top and the market Falls okay falls away very very nicely now
here this is where it’s very very easy to be hammered taking counter trend trade and you can see here I’ve got here the comment very untidy notice here we do
have divergence but just be aware that when you’re in these channels this is
almost a tight channel and your entry is very close to your major EMA’s time and
time again you’ll bounce off them and your divergence trade will failed so just
be very very cautious there when you’ve got a channel and price action is very
very close to your EMA’s come along here okay and you can see how mechanical it
can be I’ve got a high harm price lower high on my MACD great and we get a
bounce once again you only would have picked up five ticks but that’s mighty
fine it’s a very rules space mechanical trade up here I then get a double top
forms it’s not perfect it’s and if you set this one out I could understand so
that is one however it’s still a double top
time-wise the afternoons early over and that’s when we then yeah that’s right so
it’s the end of the session let’s go and have a look at the what are the market
was I being NQ that’s right us going to show you the NQ so let’s have a look at
the NQ and this is where we look at angulation now let me scroll back a
little okay so we look at the NQ 144 tick so this is actually at 904 so the
market doesn’t open till 9:30 so price action is a little slower now here this
is what I’d called I would call this a double top triple top whatever you want
to call it so see price action has come up we’ve tested this high a number of
times there notice how my MACD has fallen okay here’s my entry just here
thank you very much I then have a double bottom formation
form here notice how my MACD is rising them on a standard MACD of course this
is you wouldn’t be getting these sensitive entries but I do love my tight
entries here so we’ve got a double bottom now this is where you’ve got to
be cautious if we look at this one here we then get to 918 you’ve got a higher
high in price you’ve actually got a lower high but then you bounce straight
away and then come up you may have chosen to take this we then have formed
a double top and these are some of the areas where you can be chopped up badly
and I’m gonna be showing you a bit of a solution here one of the things you can
be doing or looking for to minimize these false entries so this is the first
rule we want to be looking at is what we called good angulation so let me explain
this here so what exactly is angulation angulation is where you see price action
moving away at a great angle away from your major EMA’s that is what we call
angulation so effectively we’ve got a wedge formation so you’ve basically
driven a wedge price action is risen okay so here we’ve also got this is the
first wave out of three so you’ve got great angulation so you could take that
as a short there remembering always whenever you take a counter trend trade or
a divergence trade be prepared for a bounce off the EMA sand which is exactly
what happened so this is a great scalping opportunity what you’ve also
got to be aware of and you may remember I mentioned earlier that Hugh chases two
rabbits catches none and this is one of the points I wanted to bring out its
exhibits right here you had a little time but where do you actually get out
so if you’d have taken this as a short you could have easily skilled your seven
eight ticks maybe ten haven’t measured that here but then you had a great a
great trend trade setup now quite than though you’ll have these over time
and you actually had one here you had divergence you had another potential
entry now here the ATR kept me out of it so that’s another story for another time
watch I’m as well I saw I should mention that the ATR remained blue so here it
told me that the Average True Range was to stay long
so would have kept me out of that one but I still may have got in here but
what I’ve got here is is um I’ve got no angulation notice how price sections
moved away nicely here so you would have been stopped on this trade now here this
is where we’re starting to get interested particularly if I don’t have
great angulation because I’ve had one wave 1 wave to wave and now a third wave
so the probabilities increase for a successful counter trend trade after I’ve
had three waves which is exactly what I had here so one two three wait for three
waves or wait for the great angulation now another great setup that you’ll have
see regularly is when you get a double bottom or a double top with the trends so
I had divergence double bottom with the trend I didn’t go too far and and by the
way I mentioned are the NQ here different markets have different
personalities and so get to know the personality of the market because you’re
quite often fine it’s very very different so here you’ve got a double
bottom here in the direction of the trend but you’ll see this fail quite
often anyway you will NQ you just got to watch the NQ it has it’s
different to say gold CL etc once again as I say continually get to know the
personality of the market here we’ve got another great setup we’ve got here
you’ve got angulation so prices come down this is actually T3 it actually
failed then you got um you had no divergence here we’ve got divergence and
notice angulation once again angulation is where price is angling away from my
major EMA’s so that’s setup set this up very very nicely we come up here I’ve
got now I’ve got great divergence a lower high higher higher my price thank
you very much we’ll move a lot we’ve now end up forming a big picture
double top now big picture double top is when I go over an extended area I call
that a big picture so I love that as many of my traders know I love double
tops and double bottoms so here we’ve got a big picture double top so this is
over a much larger area okay and that worked out very very nice moving along
here what other ones I forgot here now this is what I wanted to point out
here’s another case where we had divergence and it failed very very
quickly and you actually had a couple of waves here so you could have said one
two then finally you’ve got your third wave and it worked out mighty fine so
let me just show you something here so as soon as I get two points and see my
black dots these a fractal points here’s what I do so let me just show you this
this is very very important that I’ll do this
so here we’ve got I formed two points I then want to form a new parallel line
which I’ll bring up here so in this case at this stage I’ve just got two points
here and we can just want to watch channels and if I extend this so at this
stage here I would only have these two points I then extend to the right and we
can see what happens here and so precision come up we bounced again we
rose so once this has happened I then and I formed this I then form this as I
would extend this parallel to the right price section comes up and test the
upper channel and finally it fails but the point I wanted to bring up here is
this when we form a channel in a tight trend like this where we bounce off the
height so you sell the highs you by lows sell the highs by lows but
once you’ve had at least two to three waves get ready for you will probably
heading towards a breakdown at last which is what happened so be very very
cautious with divergence trades when you’ve got these channel formations
hopefully this makes sense and of course we cover this in the day traders
fast-track program a great deal but draw your channels in it’s just a good
indication of what may happen now also back on of these as I think I mentioned
this is where you take these and you quite often then miss the trend trade
because by the time you get stopped is so if you take this shorter I should
mention it so I apologize I’ve mentioned where would my stop go two ticks one to
two ticks above this swing high one to two ticks above this swing high so by
the time you if you got out of this counter trend trade and jumped on the
trend trade the moves already well and truly underway so this is one of the
challenges in focusing on count taking counter trends you miss out a lot of
really good trend trades so you’ve got to be quick and able to recognize these
here moving along here we then had a price action this is actually T3 you
actually ended up forming support or a I’ll call this a double bottom yes one
could call it a triple bottom whatever you want to call it but we ended up with
some nice divergence over here we end up with a nice side double bottom again now
notice here my indicator is basically giving me the entry signal now of course
some traders just don’t like using our indicators we’ll hear very great tool to
use so what if thumb traders is very quickly over the last thirty three
minutes run through some of the trading rules now you can do very very well in
trading divergence the secret areas is to really understand learned
the pattern very very important traders that you take the time is that when you
get a great T3 or a double bottom or a double top or a great we call them T19
a true divergence trade you can do very very well out of them but I
recommend the traders stay away from counter trend trading and till you’re
consistently profitable as a trend trader it is easier to make money
trading with the trend but you can make a fortune counter trend trading as well if
you understand and master the patterns so once again if you haven’t subscribed
to my channel please do please visit my website become a member and I look
forward to seeing you or hopefully you look forward to hearing me on the next
video thank you traders

3 thoughts on “How to Identify High Probability Reversal Trades. Where Fortunes are made!

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