Re-entering a trend

Identifying the highest probability technical entry points to a trend after a pullback.

Underlying assumptions:

1. Markets trend, some better than others. There is much empirical evidence to support this assumption.

2. Respective Buyers and Sellers view pullbacks in a trending instrument as' better value' buying opportunities in an uptrend / selling opportunities in a downtrend.

NB: The discussion below assumes an uptrend example

Before examining the central question of where the optimum entry/re-entry point is following a pullback, let us first examine what a pullback is and any technical phenomenons that exist therein.

A pullback in a trend is created by sellers overwhelming buyers at a level at which they a. think fair value has been reached and therefore take profit or b. the asset is over-valued and therefore sell. Of course if sufficient number of market participants believe price to be overvalued, the pullback could be deeper or even be the start of a new downtrend, howsoever long.

In technical terms, the tools at our disposals to determine whether either of these are the case are;

1. An assessment of the relative strength of the prevailing resistance that caused the retrace
2. Oscillator divergence/extreme readings on the longer time frames.
3. Price's relationship to it's historical volatility as measured for example against it's ATR.


Generally speaking price does re-test or attempt to re-test the area of the most recent highest highs if only to make an equal or lower high, lest the sellers resume their action re point b. above. The keytechnical factors in determining where the optimum place is to enter / re-enter a trend, ie: how far prices will pullback/retrace before the buyers assume that better value exists and re-enter the market in the direction of the prevailing trend are


a. The technical phenomenon of Support becomes Resistance (SBR) and Resistance becomes Support (RBS)

1. Where is the last identifibale broken resistance -and-

2. Are there are significant points in what we understand to be the last RBS zone, ie: the last now exceeded higher swing high and the higher swing low (the higher swing low being the other part of the price action phenomenon that occurs in a trend.) These points may include

a. Fib retraces
b. former offers
c. Any previous obvious higher swing highs further back on the chart in the same trend that fall in the last RBS zone.

From this we can guauge where the most confluence exists that suggests that sufficient market participants/volme will act and enter / re-enter athe trend accordingly.

Personally I look for certain repeatable hidden/reverse divergence / band deviation set-ups (discussed elsewhere on this site) within the framework outlined in the attached document (which is posted elsewhere on this forum.) I note too that others on this site advocate confluence as the key ingredient in finding high probability supp/res based areas, using price action to confirm, and I refer most recently to the thread by trader_dante

Here's one I missed on the 30m!

RBS 11306 (4 hr) almost tested
Asymmetrical Triangle Chart Pattern (30m)
Fib 38.2% rejection (30m) @ 11341
SBR 11338-41 (30m) rejection
Volatility squeeze - i.e very low buying pressure (30m)
A pretty pattern! (30m)

Good example this morning post that 0930am gmt Uk data. The 1hr screenshot shows the hidden divergence just ahead of the last identifiable RBS zone on that chart 0742-0687. The 15min gave one of trader_dante's pin bars to confirm, or hammer in this case as it goes in candlestick terms.

I took the entry off the 50% fib of the 0687-0824just above that RBS zone that existed on the 15/30/1hr chart, beacuse i had a good 1min trigger and 5min copnfirming set-up there.

Confluence= RBS, hidden/reverse divergence, band deviation and price action confirm.

In a trending market, I was considering a simple way forward. For something like gbp/usd, providing the trend is up, enter when it's 30-50points above the daily low. The only snag is, how do you know when you've hit a daily low? The answer is, if it's climbed back up 30-50 points, you'd hope it was resuming the upward trend. I backtested this idea for a month, ignoring spreads, and it appears to be fairly safe. Comments?

shadowninja: the methodology is entirely without foundation and is very arbitrary...taking no account of price action or supp/res....I wouldn't touch it with a *&^%!! stick, lol. The clue lies in the use of the word ' hope. '
Why hope when there are tools at your disposal to find the entries more often than not.

The screenshot shows the hidden divergence/band devaition based re-entry set-up that occured in the last 5min RBS zone (at time) which was 0819-06, today in gbpusd.

(Reentry type 1)

Hi bbmac,

you sound on the ball, which is very rare.

I have a suggestion. Can you please post your trades before the fact? I understand you may not have the time, in which case you can stick to the analysis and do not have to say what trades you took. I am not doubting you can pick accurate winning trades, but there is little point in saying 'i took a trade' after the fact. Thanks and all the best.

FXScalper...I'm not posting here to prove I can trade, that is not the point. I seek to provoke discussion into technical techniques re how to find hi-probability entries to trend, by offering my own set-ups/analysis as a starting point to discussion. Unless asked i make no mention of whether I acted on the set-up or not, thats's not my style and is as you say, totally irrelevant or useful to any discussion. The reason for mentioing it in the first post was that those who have followed my RBS /SBR trend re-entry methodology may have been wondering why I took the entry slightly above the obvious RBS zone at 0742-0687, and it was just the way i phrased it. All set-ups I do post however are fully explained and have an accompanying chart and are generally the most recent.

To be quite honest, my first priority is trading and on a 1min trigger I have no time to make a screenshot and post analysis in real time, so have to do it after the fact. The only practical way to make l calls in realtime is in a live chat room, and indeed i did try and garner some interest in that a while back but there were insufficient takers so the idea withered away, (for now?)

I have posted much anlaysis on various threads here and elsewhere on my specific set-ups and a wider discussion of tech analysis techniques.

FXSCALPER2 said:

Hi bbmac,

you sound on the ball, which is very rare.

I have a suggestion. Can you please post your trades before the fact? I understand you may not have the time, in which case you can stick to the analysis and do not have to say what trades you took. I am not doubting you can pick accurate winning trades, but there is little point in saying 'i took a trade' after the fact. Thanks and all the best.

Click to expand...

I think you're asking a lot ( with respect). I had a good run, too, this morning. I would have had no time to show what I did before the act.

bbmac, I'm trying to follow your method. Not sure how much was pure luck, because I, almost, closed the trade before it went my way. I got into Footsie just after market opening and had to suffer all the congestion, lasting a few hours, before it broke downwards.

Is it patience, that I need, or is there a way to know that there is congestion ahead?

Regards, Split

The 1min (my trigger) and 5min confirm (my intermediate) set-up referred to above at that 1hr hidden divergence set-up, at the 50% fib are shown below

1min Reversal Extreme and 5min confirming Reversal A)

The 5min chart below shows the Reentry to trend set-up [hidden/reverse divergence and 2 bol deviation] at that 38.2 of the 0688-0851 that coincided with the 61.8 of todays lo-hi move. It bought up 20pips off that in trend direction but has been reversed now by reaction to U.s ISM data just out.

FXSCALPER2 said:

Hi bbmac,

you sound on the ball, which is very rare.

I have a suggestion. Can you please post your trades before the fact? I understand you may not have the time, in which case you can stick to the analysis and do not have to say what trades you took. I am not doubting you can pick accurate winning trades, but there is little point in saying 'i took a trade' after the fact. Thanks and all the best.

Click to expand...

With the greatest of respect FXScalper2, you seem to have missed the purpose of the thread which is to illustrate high probability trend re-entry setups. Whether or not they are live is not relevant.

Attached is an indicator based on the osma oscillator that i found on the forex-tsd forum. It highhlights both regualr immediate and hidden/reverse immediate divergence so might be useful for any of those using divergence techniques as they are getting proficient in spotting them. The second indicator is based on RSI and talso highlights divergence from what I read on that thread on the aformentioned other forum, although I haven't ever looked at this one.

sorry wouldn't attach with those extensions, had to zip them up...here they are

1. I wait for it to retrace down/up to the 20 MA (assuming the MA is rising/falling).

2. I enter once it makes a pivot reversal off the 20MA providing I dont see divergences on Stoch and MACD that is against my entry. (i.e if I am entering long, I dont want to see a bearish divergence)

3. I also use ADX/DMI to quantify the trend strentgh.

Found a good example of a re-entry on Spot Gold 15min prior to blast off to 808:
Ascending and asymmetrical chart pattern
RBS c793-94
Volatility squeeze
A pretty pattern on the oscillator!

1hr showed:
Ascending triangle chart pattern
RBS c794
Fib 61.80% c794
Volatility squeeze

I was looking for that thread specifically about divergence, but couldn't find it so here will do. Actually the technique demmonstrated here is I suppose about re-entering a trend, albeit a new trend that may develop.

So called see-saw divergence is the technique and is useful at a lower high or higher low. Combine it with SBR / RBS and it adds to the confluence and probability of success.

TRhe screenshot shows the good example on 15min gbpusd today (Thurs 29th Nov 07.) The overnight high of 0832 found support on it's last leg up to those highs at 0788 area following a shallow retrace down from earlier highs at 0823. Now price sells off those new 0832 highs making a low at 0753, then finding resistance at that failed 0788 support (SBR).

Notice now the oscillators, the peak at it's previous swing high 0721 is higher than at the 0788 lower high SBR area, the peak in the middle being the fulcrum of the see-saw so to speak.

This is a technical technique for dealing with a lower high or higher low , and is best when combined with SBr / RBS. It is the simplest form of see-saw divergence.

best for now.

you will see that the same see-saw divergence existed on the 30min too at that level, making it a higher probability ' lower high. '

(Ps: ignore the horizonal levels on osma and macd, it's actually a 5min chart with time adjusted to 30min for the purposes of screencapping it easily.)

bbmac.please explain to us over-under divergence.thanks

Now whereas the above is see-saw regular divergence...what about see-saw hidden/reverse divergence. Good example in gbpusd again, price finding support at 0597 and a run up to 0621 before a new dip to new lows at 0595. price then buys off that new low to 0638area before a dip down to 0615, and what do you have

Firstly that choppy RBS zone around 0621, and a re-entry set-up at a higher low, but also higher than the first low at 0597 (not lower for a regular see-sw div set-up) and in 2 of the 3 oscillators you have the hidden/reverse hidden divergence.

Price went on to 0641 as i write this, there being a potential SBR area from around there.

Come on keep up, Lol. Seriously though, effective technique for these lower highs, or higher lows.