Yes, that’s right. It’s possible to trade with the trend as a reversal trader and I will give you 2 examples of my recent trades where I applied this technique.
Let’s start with this week’s trade on the AUDNZD:
The left Daily chart shows that we have been in a downtrend since early March with lower highs and lower lows. Since April, we have seen a bullish run which lasted roughly 2 weeks but on Monday price printed a pinbar, indicating a new lower swing high. Tuesday then showed a bearish bar, confirming the pinbar signal.
When we go to the 4H timeframe on the right, we see a Head and Shoulders and then a break of the neckline. The green arrow pointing to the left shows my entry. Putting it all together, this was a great confluence trade and many of our pro members took this trade.o get the whole system and all explanations, plus daily interaction with me, click here: Learn more about
Plus, we trade 3 different such setups and a variety of re-entry setups in there.
Last week’s trade was another good example of how to analyze a daily-4H chart and then find reversal entries, using a trend-following higher timeframe approach.
We start on the daily where, after a strong downtrend, we see a sequence of consecutive bullish bars. This is a great first sign that the trend might be over and turning around. This is not enough to just enter yet but it provides us with enough information to start looking for long trades on the 4H, especially after the daily inside pinbar. On the 4H, we then just apply our rules from our trading system and we find a great entry.
You can see, we started on the daily timeframe for both trades, looked for information that the trend might be reversing or continuing into its original direction. On the lower timeframe, we then time the trades. It’s a big misconception that reversal trading has to be ‘catching tops and bottoms’ and my system is a mix between reversal and trend following trading to get the best of both worlds. And, keep in mind, every new trend has to start with a reversal at one point. Thus, traders who understand how to read reversals have a big edge.