Have you ever felt like your entering the market at exactly the wrong time? You see a great trade setting up and enter, only to see the price almost instantly reverse, stop you out, and then run in the direction of your original trade. If that sounds familiar than you have been the victim of what I call a day trading stop run reversal. Market makers, banks, and institutions do not intentionally move the price in this fashion to hurt retail forex traders, they do so to profit from them.
Retail forex traders do not create the moves we simply ride them. Knowing this, if we can recognize frequently recurring chart patterns such as stop run reversals, then we can effectively learn to day trade these reversal patterns. Quite simply put, large banks and financial institutions have to move huge sums of money and want the best price possible. Another factor supporting the stop run reversal trade setup is that of the breakout trader. Many traders buy the breaks of a previous highs and sell the breaks of previous lows.
Additionally as the larger bank or institution moves the price down after a stop run reversal setup they know that all those that bought the false breakout higher will have to begin closing the position. Its a beautiful thing for those moving large sums of money, they move the price up into an area of huge supply stop location, as well as people buying a breakout and thus fill their demand, then after the false break is seen, the breakout traders are forced to cover their position sell and thus fuel the institutions short trade.
Additionally by the time this is seen by most retail traders the demand becomes so high the price has no choice but to continue down! So how can we profit from this setup. First identify previous major intraday swing in the market. This forex trading strategy is similar in many respect to trading an area of support or resistance but much more powerful!
Knowing this, jumping on the wave their creating results in some powerful day trade setups. Notice the market retraces to a previous intraday swing high, briefly breaks it and is quickly rejected. Additionally the candle that broke the previous resistance closes as a nice reversal candle. The market then continues down nicely. In example 2 there is a nice double bottom that already formed.
As the price looks to make a third test of this level it accelerates threw it and is quickly retraced. As with example 1 the candle that broke the support closes as a nice reversal candle formation. The market then continues up. As the market approaches the previous high it actually test and breaks the level a few times. Finally there is a strong bearish reversal candle that closes, of which you would short below that candles low. The market then continues down after the stop run of the previous high.
Your article seems to hit the target. It now makes sense to me why most of the time the market goes the opposite way and stop me out. I would love to ride with the smart money after they make their final move and I ride on their back. There not many like you who would share in detail their experience and knowledge. I hope that strategy helps your bottom line! If you not on the email list make sure you join as that is where the info will be sent. Lost nearly all my substantial capital over 3 years in such repeated trades!
Great to understand why I lost and even better looking forward to riding those previous losing trades into some long-awaited profits! Hugely generous of you to share this.
Awesome lesson, I am learning a lot from your website and videos. The thing I like best is that you are not teaching what every one else teaches, which is the same old support resistance and chat setups with their own name on it, which seem to only breakeven for me. Thank you for this blog posting. I recently was trying to go short on what I THOUGHT would be a pretty standard fib retracement after a major downtrend on the nzdusd pair… only to be surprised by a upward trend that seemed to come out of nowhere..
Blog Back To Homepage. Day Trading Stop Run Reversals Have you ever felt like your entering the market at exactly the wrong time? Tags currency day trade Day Trading Forex forex course forex education forex traders forex trading strategy forex training gbpusd reversal stop run stop run reversal. Thanks Ali, I hope that strategy helps your bottom line! I already got screwed by this kind of movement more than thrice.
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