What to Do When Your Trade Fails (Reversal Strategy)

What I want to show you here is what you can do if your trade fails and you get stopped out, because there is a way to get your money back. You would be surprised how often this actually works, so let me show you. This is called reversals. You use a reversal trade when a level fails. So take a look at this example. We have a volume accumulation setup, which is the number one setup that I was showing you. We have a rotation followed by a trend. What you do is draw a line at the beginning of the heavy volume zone, and that is your short level. The next step is to wait for the pullback and go short from there. Boom you just got stopped out, and here comes the reversal. You take that level, that short level, exactly the same level, but now, because the price went past it, it is no longer a resistance but a support, right? It is a new support, exactly the same level. You wait for the price to reach that level and enter the reversal, which in this case is long, because first you went short. That did not work, and you got stopped out, so then you enter long. As you can see, we have a beautiful reaction here, and that is the reversal. You will be surprised how many times this will actually save your day. Those volume profile levels are very strong, and it very rarely happens that the market just shoots past them with no reaction at all. When this happens, the market is giving you a signal that, in this case, buyers are much stronger than sellers, and they are so strong that they simply ignored this super strong level. Yes, they ignored it. The buyers pushed through, but very often they make a pullback to that level to get some liquidity. So very often you get the chance to jump in again, and very often you need to be quick. Do not think twice about trading those reversals, because very often you do get the chance, but only for a moment so that is my experience. So just set a limit order here for a long and go long from there, from the same level that is the reversal.

Let me show you a couple more examples. What you see here is a downtrend, and within the downtrend you can see that there was a significant volume cluster. So that is the trend setup and the short trade scenario of it. This is the level you mark on the chart, you wait for a pullback, and from this place you go short. Tough luck loser. Price goes up. Boom. So it is time for a reversal. Wait for a pullback from the exact level, and you go long like this. This just saved your day, right? That is the reversal. I would say that the most challenging thing about this is actually here, because you need to shift your initial opinion about the market. Initially, you thought that it was a great idea to go short, right? But now you need to shift and think about going long from the same level. Very often it is tough to pull the trigger to enter the reversal because your head is still in the mode of “I should be right, the price should drop,” right? But practice makes perfect, so you need to practice. Here is one more thing I wanted to tell you: if you want to practice, do not practice on a demo account. A demo is good for getting to know the platform, but not for real practice. If you want to practice, you might want to use micro trades or very small positions where you risk a couple of cents or a dollar per trade, but you trade with real money, because real money means real emotions. You will learn much more than trading on a demo. So if you want to train, do it on a real account, not on a demo.

Anyways, here is another example of a reversal trade, the last example. We have a volume accumulation setup because there is a rotation where heavy volumes were formed. By the way, the volume accumulation setup is the number one setup I was showing you. So we have that heavy volume zone here, and from there strong trend activity. It looks like a good setup right here. This level looks like a solid level to go long from, right? So you go long from there. Unfortunately, as you can see, the price makes a pullback to the level but then shoots past it with no reaction at all. So it is time for a reversal. The same level, only with the position reversed, so it is a short from here. As you can see, another beautiful reaction exactly to the pip. By the way, one thing about reversal trades: the best reversals are when there is a super strong heavy volume zone and the price moves past it as if it were not there. If there is no reaction at all and the price just goes straight through, then those are the best reversals.