if it seems like every time you enter a trade the market reverses to the opposite side chances are you don't understand Market reversals in this video I'm going to help you anticipate the top and bottom of stocks to help you become a more profitable Trader in today's video we're going to be talking about how to identify Market reversals this is a very important video I believe in a lot of people's trading strategies especially if you're a newer Trader what happens is you try to enter good trades but sometimes it just seems the market is against you and it's most likely due to the fact that you don't understand market reversals so has this ever happened to you you enter a good trade based off of your strategy however the market reverses right when you enter your trade to the opposite direction now you're confused if your strategy isn't working or if you're just not a good Trader in this example here we can see a very clear uptrend so it makes sense if on this bounce right here we wanted to enter in for a long position to the upside looking for let's say High of day because this Market is in an uptrend however when we look at this example we come up and we actually break to the downside now if this happens to you if you enter into these type of Trades and you believe this is a good setup for a long position however the market reverses that means chances are you don't understand higher time frame the reason your trades don't work is likely because you don't understand the higher time frame you only look at the micro trend of the stock and don't put emphasis on the macro Trend due to this you have entries and exits that make sense to you based off of your strategy but they're incorrect now I've seen this happen with students very very often where they simply don't look at the higher time frame before coming into the day and what happens is they have a very good A+ setup right in front of them that they execute because they understand they need to execute A+ setups however because they don't understand what's going on on the higher time frame what key levels are near them what type of pattern the higher time frame is making the market will reverse against them and they'll be so confused why the market made such an impulsive move to the opposite direction when their strategy tells them it should have continued in the direction that they were looking for well this is simply because they didn't understand the macro trend of the stock so as Traders there's one simple fix to determining where the market will most likely reverse from to understand when a stock May potentially reverse there is only one thing you have to fix and that is understanding the higher time frame and before we go to the next slide it's super crucial that you see that I put the word potentially as Traders there's nothing that is 100% guaranteed therefore I put the word potentially to help you understand that there is a level of uncertainty with whatever you do in trading and this is just a higher probability chance of you understanding if the market will reverse or not so to understand where the market will reverse from there is a two-step process the first step is higher time frame levels on the higher time frame we can look at the weekly time frame the daily time frame the 4our time frame and then of course we trade on our own time frame for you that could be the 5 minute time frame the 1 minute the 15minute whatever you're comfortable trading on the higher time frame we're going to be looking at things such as patterns we're going to be looking at key levels we're going to be looking at Market structure and if we can identify that on the higher time frame that will allow us to understand which way the stock wants to move intraday now step number to understanding intraday price action because we cannot blindly trade at any of these levels if we have a daily time frame level we can't blindly enter in on that level hoping that the stock will reverse no that would indicate that we're guessing or we're gambling there's no strategy or process behind that we need to react to moves I've talked about this before as Traders we need to react rather than predict and therefore when the stock does come down to our specific levels we need to look at Price action understand it and only then can we enter or exit the stock if you're a little bit confused on how to read price action I have multiple videos explaining exactly how to read price action so make sure to go look at those videos after you're done this video now that I've talked you through the process of how to understand if the market will reverse let's go look at some real examples to help you visualize the process before Tesla opens up on the day here we are on the daily time frame on The Daily time frame we want to Mark out key levels or patterns that we see that can help us determine where the higher time frame wants to go and where it could potentially reverse from so the first thing that I like to do on the daily time frame is always Mark out the previous day high and the previous day low these levels are super important because above previous day high and Below previous day low is where most liquidity from the previous day is sitting if you don't understand liquidity make sure to watch my previous video that I made last week on how to identify liquidity now the next level I have on the daily time frame will be the swing high after this Gap up and the swing low after this Gap up as well these are also areas on the chart where we could reverse from now we want to head on over to the 4-Hour time frame on the 4-Hour time frame we can see that we actually Consolidated on this stock near this 23736 level after this consolidation we broke out came back in and now we're consolidating underneath it again this shows that if we do come back into this level we could potentially reverse for a move to the downside right and vice versa we could also make a move to the downside and then come back into that 23736 level so on the higher time frame those are all the levels that I believe are important now we're going to hop on over to the 1 minute time frame on the 1 minute time frame because in this video I just want to show you how to anticipate the market reversals we're not going to be drawing out pre-market high or pre-market low levels or previous day levels that I usually would because I just want to show you guys the higher time frame patterns and recognition of the levels so let's play out this trade and see what happens if we only trade the higher time frame levels right off into the open what do we see we see a very very strong reversal off of that 23746 level you could have even potentially entered in for this reversal at 23736 after this candle closed you could have entered in with your stop loss having to be at high of day and your profit Target having to be at low of day now this would only give you a 1. 35 risk reward trade as you guys know me personally I try to look for at least a 2. 0r trade and therefore this just simply wouldn't align with my own personal strategy and I would have to skip this trade however let's see what happens when we come near this level so what do we see here we see a very strong push to the downside we see some consolidation and now we're going at that 23233 level what most Traders would do is once they saw this consolidation here they would be waiting for the break of the low of that consolidation to enter in because the trend clearly on the day is to the downside so you'd be waiting for a breakout to the downside of this consolidation however they fail to see that on the higher time frame we have a very strong level of support here at 23233 from the previous day therefore there is a lot of buying liquidity sitting at these levels and we do not want to enter a short before we see price action occur near these levels so let's play out the trade and right here we see a very strong price action candle like I said step number two is always to see those strong price action candles because we got a strong price action candle here which is a strong Hammer stick candle we see a lot of buying after we we Wicked below and then had a strong body close up we can actually enter into this trade here looking for once again that reversal to either brand new high of day or just to our key level at 23736 we can have our stop loss a little bit below this previous low at the whole psychological number of 232 this would give us a 3.
5r trade so let's enter into the trade here and see exactly what happens now though this trade did take some time to fully get to our profit Target we can see that we had a full reversal from those higher time frame levels and this trade resulted in a $22,000 gain by simply understanding where the higher time frame emphasis on the buy and sell liquidity is now let's go look at another example here we are on QQQ on QQQ what do we see on the daily time frame once again we're going to Mark out the previous day high and previous day low once we Mark out those levels we're also going to Mark out the swing high and we're going to Mark out the swing low for this example here we can see we come into a gap after this level so this will be the low these are the levels that I'm marking out on the daily time frame now once we hop on over to the 4-Hour time frame what do we see well on the 4-Hour time frame I see that we actually have a downtrend break as well we see this downtrend break right here if we break above these levels this will show us and indicate to us that the stock does want to move higher because the momentum is to the upside once again therefore on the higher time frame it indicates that this is a good trade for a longside position if we do break above that and finally I see consolidation and a retest at this 38651 level on QQQ on the higher time frame now let's go over to the time frame that we want to trade on this time frame we want to see exactly what happens on QQQ we need to understand that the market could reverse off of 3917 or 38846 and we also need to understand that there is a higher time frame bias to the long side as well because of this this downtrend break so let's play out this trade and see what happens right into the beginning of the day the first thing I see is buyers were aggressively trying to take the stock above that flag level however sellers came back strong and are bringing it back below that flag therefore what we need to understand is there is a potential for reversal near this 38846 because this is the next level or area where buyers will try to defend to continue this momentum to the upside however if we do not defend this area or do not reverse off of this area this means we simply have to wait and sellers are in control and the higher time frame buyas for the long side will be invalidated so let's keep playing out this trade and right here I want you guys to notice that we come back very strong below this and then we put in a very very strong Hammer candle what does this indicate this indicates that sellers were trying to bring the stock down but because of this Wick we can see that buyers came in strong below this previous day low level because they came in strong we closed the stock Above This level with a very strong Hammer candle which is a very strong price action candle for us to enter for a long position how would I enter into this trade I would look to long this trade here looking for high of day or once again those higher time frame levels at 3917 because that is the next level we can reverse from and we can put our stop loss simply a little bit below this previous Candlestick so we can put our stop loss just like so this would give us a 5. 0 risk to reward trade where most Traders are trying to short this position we're going long because we understand the market has a higher probability chance of reversing at higher time frame levels so let's enter into the trade here and see exactly what happens and just like that we can see we hit our previous day high and made $1,470 off this 5r trade by simply understanding where the market could potentially reverse from now let's go look at one final example to help you solidify this concept here we are on the final example on spy now what do we see on spy well the number one thing that I see is there is a clear uptrend we broke this previous high that we had over here we're currently breaking it and therefore the overall bias of the stock is to the upside so we want to be looking for long positions now like we've done in previous examples we want to mark out the high and low of the previous day once we Mark out those levels we see that we do have this Gap level therefore we want to Mark out that level as well now on the 1hour time frame the level that I see that has a strong pivot point is 43861 this is the last high that we made before making an impulsive move down consolidating and then breaking above therefore there would be a lot of buy side liquidity sitting near this level where buyers are waiting to enter in for a pullback for a continuation move to the upside so now that we've marked out our levels on the higher time frame let's go to the time frame we want to trade on and let's play out this trade so right into the open what do we see first thing that I personally see is a very strong price action candle indicating bearish sentiment however because we understand that we are so close to it level of support we need to let price action develop to help us understand if we should enter for a reversal or if the trend is indeed to the downside and right here what do we see we see that we came back we Consolidated this means buyers and sellers both believe this is a fair price and then sellers on this Candlestick right here at 955 tried to bring the stock below this 43861 level however buyers believed that this was not a fair price for the stock and they wanted to keep it above 438 61s this means that buyers will most likely defend this level of support and we can enter into the stock here looking for a long position all the way back up to previous day high and our stop loss in this scenario can simply be a little bit below this Candlestick this would be a 4. 16 risk reward trade let's enter into the trade here and see exactly what happens and just like that we saw that we could capture this whole move by simply understanding where the market reverses and this was a $2,160 trade on a 4.
