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| Opening Reversal. ''Opening reversal simply means the initial price move in one direction on the open '''stops or reversals''', usually within the first 90 minutes (bar 18).'' Opening reversal is an early reversal at support or resistance. | | ''Opening Reversal ，'''开盘反转'''。Opening reversal is an '''early''' reversal at '''SR''', since'' the turn is usually at some '''key point''' ([[MSR]]) like: |
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| == Probability ==
| | * a moving average (MA, where '''most''' Opening Reversals take place<ref>[[笔记:49C Swing Trading Examples]]</ref>) |
| *'''80% of days''', market test support or resistance in '''1st 90 minutes (bar 18)''', and the '''reversal often creates high or low of day.''' | | * a test of the '''high or low of yesterday''' |
| *'''80% of days''' with strong rally on the open have minor reversal down lasting '''at least 5 bars (typically 5-10 bars, i.e. a TBTL correction)'''<ref>https://www.brookstradingcourse.com/trade-price-action/video-48a-trading-the-open/</ref>.
| | * a '''swing''' '''high''' '''or''' '''low''' of yesterday or today |
| *'''80% of days''', the market opens have ''(at least a '''minor)''''' '''reversals''' (''Opening Reversal, indicating the end of the trend from the open''), which also means '''Trend From The Open lasting all day only 20% of day ''(i.e. once every week on average)'''''<ref>''https://www.brookstradingcourse.com/wp-content/uploads/2018/10/181030-futuresio-Patterns-on-the-Open-Al-Brooks.pdf'' </ref><ref>''https://www.brookstradingcourse.com/wp-content/uploads/2017/10/171017-Futures.io-Presentation-Opening-Reversals-Al-Brooks.pdf''</ref>. ''And only 10% of days are strong trend days''<ref>''https://www.brookstradingcourse.com/trade-price-action/video-48a-trading-the-open/''</ref>. | | * a '''breakout''' of a trading range of yesterday or today |
| *'''50% of days''', the market has a '''major reversal''' on the open, no matter how strong the initial BO looks like, '''however at the same time, notice that by the close of 2nd bar closing near its low, 60% chance of MM down from the open of 1st bar to the close of the final bar of the bear BO (in bear case)'''<ref>''[https://www.brookstradingcourse.com/bonus-videos/trading-patterns-on-the-open/ Bonus Video 02: Trading Patterns on the Open]''</ref>. | | * a '''trend line''' or '''trend channel line''' |
| | * or any of the above on a '''different time frame''' chart or on the Globex chart''.'' |
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| == Things to Look for Higher Probability of a Successful Reversal ==
| | Most traders should work hard to become experts at spotting and trading the best opening reversals, and '''make these swing trades the cornerstone of their trading'''<ref>[[Book:CHAPTER 19 Opening Patterns and Reversals#Initial%20move%20of%20ORV%20is%20often%20strong%20looking|''Book:CHAPTER 19 Opening Patterns and Reversals#Initial move of ORV is often strong looking'']]</ref>. ''See more about how to trade ORV on [[Strategy:Trade ORV]].'' <references /> |
| *''For it to become a successful reversal, '''the single most important thing to look for is''' '''whether the initial move is climatic''' (for e.g. parabolic wedge). Examples can be found here: [[Encyclopedia:Sell Climax on the Open, Then Reversal Up]]''
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| *''If it is to become a successful reversal, take bear case as example, it usually starts with a Double Bottom(or DT) or Wedge Bottom(or WT). This also means that if the initial move is not clearly climatic, traders should look for strong patterns like DT or Wedge Top at resistance (for e.g. HOY/LOY) after a good gap up.''
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| *''When the context is right, the chance of a successful reversal can increase to '''60% or higher'''. For e.g. if the open has a very strong selloff for 18 bars, and market forms a possible consecutive parabolic wedge bottom, and there is a huge bear bar late in the bear trend, there is 60% chance of a successful bull reversal or one more leg down and then reversal. See example in [[Gap Up and Sell Climax, Then Reversal Up]]. '''However note that''' while the climactic selling pressure on the open can increase the chance of a strong reversal, it has 60% chance one more brief leg down before reversal up, see [https://www.papals.live/images/thumb/4/49/Screenshot_2023-01-17_at_22-16-41_The_Brooks_Encyclopedia_of_Chart_Patterns_Brooks_Trading_Course.png/1200px-Screenshot_2023-01-17_at_22-16-41_The_Brooks_Encyclopedia_of_Chart_Patterns_Brooks_Trading_Course.png example chart].''
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| *''Factors that can '''increase''' the probability of a successful reversal: (which increases the probability that the selloff on the open is some kind of profit taking or vacuum effect v.s. beginning of a strong bear trend)''
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| *#''yesterday was a bullish day (sign of climactic)''
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| *#''gap up on open (sign of climactic)''
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| *#''the sell climax from the open has big bars or consecutive sell climaxes, indicating more bears probably get exhausted (sign of climactic)''
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| *#''good looking entry bar and FT, especially when the reversal comes from major support levels, such as LoY, HoY, etc.''
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| *#''PB after the entry bar looks weak for the bears, some scalping bears might sell the 1st reversal at EMA and the results will be a PB, the PB '''should not''' take out the low of the entry bar''
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| *#''other minor details such as gaps, tick gaps, etc.''
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| *''Factors that can '''decrease''' the probability of a successful reversal:''
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| *#''the sell climax itself is a [[SPBRT]], which might indicate less exhausted bears, hence decrease the strength of bull reversal (if there is a reversal attempt).''
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| *#''the first reversal fails immediately at EMA and PB to entry bar which then take out the entry bar (this time trader may consider reversing into short), the market usually has 1 more leg down. (after that, 20% bull reversal, 60% or more, you get a TR on the lower half day range)''
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| *#''the entry bar doesn't have good closes or the FT bar looks weak, traders need to be aware of possible [[SPBRT]].''
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| *#''other minor details such as lacking of gaps, tick gaps, etc.''
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| === Initial Selloff Matters ===
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| *If the initial selloff is 25%-50% of average range, then often get big bull trend after the reversal; if it is 50%-100% of average range, then usually get TR day, even if big rally. '''This is true for all reversals, not just on the open.'''
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| [[File:Screenshot 2023-01-16 at 10-52-08 Video 48A Trading the Open Brooks Trading Course.png|center|thumb|749x749px|Big failed bear BO: TR more likely than big bull trend ]]<blockquote>''but I think a few things worth to point out about this slide: 1) there is a assumption that market had a reasonable strong enough reversal attempt, at least 3+ CCBLBs in the reversal attempt; 2) whether market reversed from an important/obvious SR, if so that should increase the PP of successful reversal; 3) relative strength of bulls, for e.g. if the initial sell off was very strong but the bulls reversal are equal strong or even looks stronger, that might also increase the chance of bigger reversal.''</blockquote><references /> | |
| [[Category:Case Study]] | | [[Category:Case Study]] |
| | [[分类:Reversals]] |
