I am starting a journal with the goal of finding the nuances that diferentiate a Reversal from a continuation, in order to define what I understand by reversal and what I am looking for is the last countertrend movement before the trend turns into either a trading range (no more Higher Highs in an Uptrend, or Lower Lows in a downtrend) or a different trend (from up to down and from down to up). I am observing the market in replay in the one minute chart and I am only going to pay attention to what happens between 8:00 am and 9:30 am in the NQ futures contract. I am not an expert, nor want to pretend to become one overnight, I just want to start a journal in order to force myself to "post" regularly and get some feedback. If you do not think your input will contribute to my effort (i.e. Trolls), please refrain yourself from posting or else I will just add you to my ignore list. My analysis today starts at 8:00, by then we came from a downtrend that started overnight that bounced at 6654 and prices rose rapidly on decreasing volume until they reached 6661, there was a considerable increase in volume, compared to the volume of every bar in the preceding upwave (Here I thought climax) So I started paying attention. I went back to the left and found that around 7 am there was a small congestion and 61 was the place where traders found value, so another thing to take into consideration here. The other thing I was paying attention to was that after the congestion resolved itself to the downside it formed a downtrend and the uptrend had not broken above te top of that trend at 63. So here I had a climax on an area of importance for traders and was expecting that traders tried to find value either above or below. There was a downwave with decreasing volume, and then an upwave also on decresing volume (not sure yet how to read this), after a small correction at a, volume rose as well as price, but when prices rose above toe top of the last uptrend at 6150 prices just collapsed, like nobody was interested in paying a tick more for this, above the area of interest that I noticed before. Here I started recording (using a sell order) what happened with price at this reversal, what happened later was an upwave on lower volume that ended in a lower high, and then volume showed up as holders ran for the exits. This started a downtrend that went all the way to 56 uninterrupted by either a higher low or a double bottom, when we got to 56 volume increased again with respect to the rest of the bars in the downwave. And the next downwave had less volume and the offerers were unable to find trades below 56 for a second time. An interesting thing here is that this is happening where price bounced off support at 7:55 after a selling climax. But after this upwave there was no more interest above 58, where demand showed up after 8:00 and prices fell all the way to the bottom of the last upwave in (b). (Here volume is decreasing so I do not know how to read this with respect to volume). There was a new volume spike, even larger than the one at the last bottom at 56, and we are heading towards 54 where there were no more offerers at 7:50. So here is where I am more interested and this is what this journal is all about, is this spike in volume a selling climax and I will prices reverse or this is part of a continuation and prices will keep on falling. The first thing I notice after the breach of 54 is that the upwave comes with increasing volume and price stops rising ant 56 (where it stopped falling at 8:20) The correction here comes with decreasing volume and then prices rise, so I start recording this with a buy order, the new wave confirms the movement as the test after the climax and prices keep on rising (although on erratic volume from my perspective) until we reach 59.50 and something interesting happens, volume keeps on rising, but price stalls around 59. After the small pause there was an increase in volume again, as prices reach 60.50 which is where the test after the last buying climax occurred, and even though volume rose, seems like there was no more interest and prices fell. Prices fell along with volume, and when prices retraced on the way up volume started to rise again. In the next downwave volume rose, but one can see the rejection from 57 (c) before price rose again, forming a higher low. From there a trend formed until prices rose to 60.50, but then nothing special happened (prices rose along with volume and the correction came with lower volume). On the next attempt of an upwave volume was even lower, and it only rose as prices reached the apex of the congestion from the premarket at 61. Here I though I needed to start recording the way down, but wasnt fast enough. so I waited for the next opportunity in case it arose. A lower high formed as the new upwave came with lower volume, but volume remained low on the way down, it only started to rise after the low on 59 was broken. From there a downtrend formed. But the downtrend was over pretty fast as prices rose rapidly before the open. This is where my analysis for the day ends.
There are lots of reversal signals for day traders. Your charts rather messy/elaborate compare with mine. Mine is rather simple. so easier for me to spot reversal signal.
From this coarse view, your volume gaussian’s are not coupled to the actual moves in the progression of trend, a volatility expansion, a failure to traverse, nor the crossover of a RTL. It’s like trying to drive a fast car with very loose steering, bad shocks, old brakes and a lagging throttle on a wIndy windy road,... If you want a simple answer, others will undoubtedly chime in. If you number your bars, it will be easier to comment.
1M timeframe may be too fast for you, if your just learning.Try higher timeframes like 4H, where stronger reversals occur.
I totally agree. To play reversal, don't watch 1 min timeframe, there are too many fake reversals. IMO, 1 min is for 1/2 pts scalpers (majority of losers), not reversal traders. CM
In this case using volume and a 1 min chart is creating too many signals. The commission costs and slippage in this program will make this analysis be sub-par.