4 Actionable Tips When Trading Reversals and the Current Setup on the Eur/Aud

The danger of trading reversals is simple: trends tend to push further than most traders anticipate. Ultimately revenge trading is around the corner when a reversal trade fails because the trader could attempt the same setup at a new spot.

This process could repeat multiple times until a trader finally gives up in desperation after having a streak of losses on what is essentially the same setup… of course it is “Murphy’s Law” which dictates that at what point the currency pair finally could reverse (not always though).

18- 12- 2014 usdjpy

My best advice when trading reversals is:

  • Allow yourself only one shot of trading the reversal. Do not attempt to trade the same setup multiple times and see your account disappear just because of your disagreement with the market (is valid for all trading in fact);
  • Do not underestimate the trend. Realize that consolidations can last long and ultimately price often uses it as a base for further trend continuation (see chart above). This process could be pared with ugly spikes before a trend persists;
  • Wait for multiple confirmations and confluences. Before trading a reversal make sure that multiple tools and indicators confirm and provide a confluence. Often a single reversal indication will not be sufficient to provide for a winning trade;
  • Be realistic with the target for the reversal. It’s a fact that smaller reversals occur more often than bigger ones. Big reversals only occur every so often. Planning for a big reversal could pay off tremendously, but realize that aiming for smaller targets will often be more realistic and lead to a decent win percentage.

EURAUD REVERSAL SETUP

Keep the above pointers in mind when I review the EURAUD daily chart and show a potential reversal trade setup. Here are some of the most important elements for this analysis:

  • Price has reached the most important Fibonacci target: the -61.8 level. Price has a very tough time to extend past this target without making some type of correction first (reversal or consolidation);
  • Price is showing a candle stick reaction to the -61.8 target: a bearish pinbar. The daily candle is a big time frame candle and it has a sizeable wick on the candle top. The close is bearish as well.
  • The pinbar is occurring after a long uptrend which lasted 20 days. Could the pair be overstretched? Yes this would certainly not be a strange moment for price to make some kind of reversal to the mean.

The above points are showing confluence but of course you can use or add more yourself.

18- 12- 2014 EURAUD

TRADE SETUP EURAUD

I have now identified a potential trade setup but the next step is even more crucial: will I trade it and if yes, then how? Obviously the trigger can vary from setup to setup, so what could be my trigger for the EURAUD?

The EURAUD is in a bullish trend channel and price has reached the bottom of it. This could therefore easily be a bullish bouncing spot. Tweet This

 The probability of making money with a short is not so favorable at this spot. But the dynamics change if one of the following 2 events occurs:

  1. If the price reaches the resistance Fibonacci levels and shows a candle stick pattern at the Fib levels;
  2. If the price breaks below the support trend line and invalidates the bullish channel.

Reversal targets are at the -27.2 (1.5065), -61.8 (1.50), and -100.0 (1.4914).

18- 12- 2014 euraud 2

Both triggers make sense and offer a method for traders to trade the reversal. Just be aware that trading reversals always have their uncertainties but if the trader avoids revenge trading and keeps risk under control (via risk management) then all should end well regardless of the outcome of this setup.

What do YOU think of reversals?

Are you interested in trading the EURAUD reversal setup?

Happy Hunting!

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  • We just closed it and now we are waiting for a Retrace to get back in but that was a beaut! we got in right on that pin bar! 🙂
    Thanks for the feedback we truly appreciate every comment. It adds value to us and to our readers.

  • Paul

    Chris & Nathan
    Outstanding trade

    Its still going…

  • Chris

    Thank you Paul! Pushing very nicely lower and lower indeed. 🙂 Always great to see trades like this. Happy New Year and all the best for 2015

  • Paul

    Very well done Chris & Nathan

    Price has dropped out of the bottom of the consolidation (currectly around 1.48) & is heading nicely toward your ultimate target zone

    Nathan must have locked in a superb Risk / Reward on this?

  • Chris

    Hi Paul, thank you for the detailed analysis. It is much appreciated! I fully understand your reservations about the trading the reversal. Many times indeed price does consolidate first and then continue with the trend. With the EURAUD things have gone well and the trade has developed for a nice bearish gain but lets see if it can get to the 1.457-47 zone indeed. Thanks again!

  • Chris

    Hi Dave, thank you for the interesting information.

  • Chris

    Thanks Nathan!!

  • Chris

    Hi Erron, yes great comments, thanks for that! I agree with all of your points – also the end of the session tactic. In my trading I focus more on with the trend setups as well but some reversals have enough confluence and risk to reward potential to make it worth it. Thanks again.

  • Ripped Off

    You can’t stop me Casey, I can change emails, Ips usernames and keep posting. Best you just pay my 14yr old son back his $100

  • Ripped off

    You could never helped me. Nor do i want any help from a snake oil salesman such as you.

    You are a thief and liar.

    You made the statement of spending time and money and phone calls on me. Now is time to prove it? Whats my phone number? Show me all these calls you claim? And show me your time sheets where you claim to have spent all this time and money?

    You are the scum of the earth.

  • Ripped Off

    So now you are not posting my posts simply because they are negative towards you.

  • Ripped OFF

    Above article is so interesting that it proves you can not trade and you are big noting yourself by using Nathans trade. You are such a clown. You should have put the that in brail so blind people can read it.

    Or why aren’t you using your amazing double trend trap LOL. You know why, don’t you Casey?

    For a piss arse $100 refund I don’t understand why you allow that small amount to cause so much negativity marketing towards you and winnersedge that amount of damage.

    And also don’t ever imply that you are trying to help me trade when you know that’s a lie. I have never ever used any of your analysis, trading software or advice ever. And that’s the reason I am a profitable trader.

    Only reason I am here is because you Casey Stubbs ripped my son off. And i will continue to prove to others the type of person you are until you refund him.

  • Ripped OFF.

    I am very well ahead in my life. I am just sick of people within the forex industry selling software that does not work and those people such as yourself not honoring their own refund policy . You have not called me on the phone at all. Another lie. I just want a full refund. You have not put any time or effort in helping me, nor do i want your time or effort as you can not trade to the level i trade at and further more it was my 14yr old son who purchased your crap indicators against my knowledge. Man up Casey. Why is a refund of around $100 USD so difficult for you?

    Further more I know your from 2006, even then you could not trade. Get a life and stop stealing from others.

    I am also posting on every forum i can find that you do not honor refunds,

  • Paul, it is not a scam, we even called to help you on the phone. We have put a great deal of time and effort and money into helping you. But you have to be willing to help yourself. The reason you can’t get ahead in life is because of your excuses.

    I truly want the best for you. Please start reading our articles and posting some positive comments on the site, if you want help we can get you trading profitably.

  • Paul

    This is not a pair I have been watching. I have just taken a look at a weekly chart and note that 1.50 10 acted as solid resistance in July & August ’13 and again May ’14
    From December ’13 when price broke above it, it became support until March ’14
    Price again broke above three weeks ago and has now retraced back to it and appears to be consolidating right on it at the moment
    I wouldn’t be prepared to risk a counter trend (short) trade at this price, because the consolidation could very easily continue for another week or two, forming a ‘base’ to push up to the 2013 high @ 1.55 40 & on to 2014’s high. 1.58 30
    Having said that, Nathans early entry, at the top of the ascending channel was an excellent trade, as from that level, even a retrace to test the support / resistance at the present 1.50 10 level provided a robust risk / reward. 1.47 50 to 1.45 70 could be Nathans ultimate target zone, should 1.50 10 not hold as support at this time…

  • Ripped off

    The only danger here is buying products from you Casey. You are liar and thief. You don’t honour refunds. Just another Forex Scammer.

  • Dave, Thanks for sharing!

    So what your saying is that the larger wicks tend to be fake outs? That is actually not what I would have thought. However in trading you never know until you test. So do you have any examples you can show us? I will be checking this right now.

    This could be valuable info to our community here.

  • Dave

    I pay attention to each candle and it’s wick, as each candle has the potential to be a reversal candle regardless of time frame being considered. What I have found is the larger the wick, the higher the risk but more importantly,is a large wick tends to be a false reversal. What I like to see are the subtle reversals that normally wouldn’t be noticed by the rest. Try this logic, see for yourself, I quite sure you’ll see what I’m talking about…

  • Those are great tips Erron, thanks for contributing to the discussion. I think the key to finding a good reversal is make sure that the trade has enough reward to make it worth the risk and effort.

  • NathanTucci

    Great article, I am already short on this in fact.

  • AuthenticFX

    Hi Chris,

    I prefer to trade with the trend, but sometimes will take a reversal if there is a convincing enough confluence of reasons to do so. For this I use pivots, S/R, round numbers etc. and most importantly sometimes, the time of day at which the peak occurs. Grabbing such a confluence at the London close for example, can be rewarding.

    Erron