reversal Period

strategy reversal Period

The Reversal Period Strategy

Thomas Wolski

By Thomas Wolski

majority stake Nasdaq the most volatile in the first hour of the trading session. Many call it amateur hour, and advised generally stay away from trading at this time. And because the possibility of large price movements for short period of time there are much more likely to at this time than at any other time of day. Therefore, we are constantly looking for promising and reliable input indicators during the first hour of the day.

reversal period is usually lasts from 9:50 to 10:10 am. This is often a large success enjoyed by experienced intraday-traders. Stock tend to change direction, determined in The first 20 minutes of trading. For example, if a stock showed 2 points of growth with the opening of the first 20 minutes of trade, it is likely that it lose part or all of this growth over the next 20 minutes of the rollback. Thus, we enter into the transaction were not before 9:50, when market indicators such as S & P futures, ticks and TRIN demonstrate a willingness to reversal. Sometimes it can start rolling back and end in a few minutes earlier or later but the basic reversal is more than 80% time. Now let's look at an example of how it works in reality.

reversal period VRTX after fall in the first 20 minutes

Razvorotny VRTX period after the fall of the first 20 minut

Figure 1

Here we see a neutral opening VRTX , so as not was no break in one direction. Soon came trend downward, but was discovered at the level of support 75 the beginning of the reversal period (9:50). It defines the entry point for high-quality long position. VRTX actually turned up in the next 20 minutes.

If the stock opened with a gap in any direction, and then during the first 20 minutes continued to move further in the same direction, opportunities for meaningful retracement between 9:50 and 10:10 are very high.

Our next example shows a very volatile stock, CIEN . Trade quickly moving stocks in the first hour of the session may be very difficult, if you do not have reliable indicators entrance. Note how the reversal period runs like clockwork for CIEN .

Fall CIEN during the reversal period

Padenie CIEN for reversal perioda

This example clearly shows the potential danger of buying at the beginning reversal period. A few minutes CIEN lost more than 3 3 / 4 points, the entire growth of the first 20 minutes of trading.


should keep in mind that professional market makers and other large traders are greater advantage over those often unpredictable fluctuations in the first hour. So , we must avoid dangerous entry points at any cost. In this case, buying CIEN more than 213 before started rolling back, the entrance was risky. It would be better to short-circuit CIEN between 213 1 / 2 and 214 1 / 2 - between 9:50 and 9:55 and make a bet on that it will lose part or all of the progress with the opening growth.

reversal period less visible (or may be completely absent), when state of the market does not determine the direction of the (strictly up or straight down) or when the action is important news-type updates, split, etc. In such situations, action is more likely to consolidate During the reversal period than the previous change trend. If you see a model that should enter into the direction of the previous trend in the late reversal period. Look at the graph EXDS for an example of this model.

No roll EXDS

Net roll EXDS

is very important to watch , as action behaves during the reversal period. If you notice that the action did not change in During the reversal period, there is a good the possibility that it will continue to move forward in the same direction as before the reversal period, which only slowed the trend. In the case of EXDS short sellers, perhaps hoping to roll back down over reversal period. However, once EXDS not found weaknesses and has made new highs at the end the reversal period of about 10:10, it - the time for short sellers to cut their losses. It You can also add force a breakthrough. This example also shows us that, like any other strategy, This also may not always work. If no rollback occurs during the reversal period, make sure you have a good stop-loss.

If reversal period makes the action anywhere to turn, you can look around 10:10, was a reversal period stronger or weaker than the first 20 minutes trade. Many shares have a tendency to become stronger after the rollback, if they are still positive (Since opening) and become weaker if they are - in the red (since opening). But Of course, you should always observe the general condition market.

strategy reversal period can be a powerful tool for the active intraday -trader, but should be used with caution. I I would like to add one more tip, if you want use this strategy. You'll often need to predict the coming pullback and enter appropriate position before it happens. We succeeded in getting into position against the earlier trend from 9:48 to 9:52. If you wait too long, until manifest a trend change may be too late to enter the desired price, because a change will already be obvious to other traders.


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