Determining Swing Reversal Points

[barjon]

chorlton

I don't think there's anything that will tell you whether we've just passed a major reversal point. There are, however, a succession of things that occur which light up a succession of "maybe" warning lights. How many of those lights are lit before you are prepared to make an assumption that the trends has changed and trade accordingly is up to each trader - as is the number of lights to be lit before being prepared to say "definite".

I trade trend continuations via 3 bar retracements. In an uptrend my first warning light comes on if we fail to make a new high after such a retracement (lighting up the earlier high as a potential reversal point) and the second when the price takes out the low of the earlier retracement which is enough for me to assume the trend has changed and trade accordingly. I wait for what I assume to be a retracement to this "new" downtrend and trade off that for a continuation - if we then go on to make a new low in this trend it's at that stage that I'm prepared to say "definite" (albeit that nothing's really definite in this game!!).

good trading

jon

 

[TheBramble]

How about spotting when it's NOT at a reversal point - could that help?

I don't swing trade (least, don't think I do....), but someone who does (or maybe did – haven’t heard from them for a while) once suggested that any close above the high of the last 3 days indicates medium term trend is up. A close below the low of the last 3 days indicates the medium term trend is down. And he was no mean swing trader by the way so I value his comments enormously. Seems simple – so probably works.

I guess any close in between the high and the low of the last 3 days is an indeterminate. Which may, or may not, be a potential turning point that you might be interested in. Obviously only one potential indicator of a turn, but at least a possibility to build upon that perhaps?

I don’t know how far you could push this into shorter TFs.

 

[Chorlton]

chorlton

I don't think there's anything that will tell you whether we've just passed a major reversal point. There are, however, a succession of things that occur which light up a succession of "maybe" warning lights. How many of those lights are lit before you are prepared to make an assumption that the trends has changed and trade accordingly is up to each trader - as is the number of lights to be lit before being prepared to say "definite".

I trade trend continuations via 3 bar retracements. In an uptrend my first warning light comes on if we fail to make a new high after such a retracement (lighting up the earlier high as a potential reversal point) and the second when the price takes out the low of the earlier retracement which is enough for me to assume the trend has changed and trade accordingly. I wait for what I assume to be a retracement to this "new" downtrend and trade off that for a continuation - if we then go on to make a new low in this trend it's at that stage that I'm prepared to say "definite" (albeit that nothing's really definite in this game!!).

good trading

jon

Hi Jon,

Thanks for the reply.

This is one approach I possibly like as I would easily be able to code it up and backtest it to see how reliable it has been in the past.

To be honest, at the end of the day I'm only really interested in determining those points where Mrkt Sentiment has clearly changed in the past, albeit on a temporary basis only.

All the best,

Chorlton

 

[Chorlton]

How about spotting when it's NOT at a reversal point - could that help?

I don't swing trade (least, don't think I do....), but someone who does (or maybe did – haven’t heard from them for a while) once suggested that any close above the high of the last 3 days indicates medium term trend is up. A close below the low of the last 3 days indicates the medium term trend is down. And he was no mean swing trader by the way so I value his comments enormously. Seems simple – so probably works.

I guess any close in between the high and the low of the last 3 days is an indeterminate. Which may, or may not, be a potential turning point that you might be interested in. Obviously only one potential indicator of a turn, but at least a possibility to build upon that perhaps?

I don’t know how far you could push this into shorter TFs.

Hi Bramble,

Thanks for your input. The approach definately has some merit which I'll explore when I get some spare time!!!

Many Thanks......