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Trading Strategies: Continuation vs. Reversal

The document explains the concepts of reversals and continuations in trading, detailing how price movements can either reverse direction or continue in the same trend. It categorizes various types of bullish and bearish reversals and continuations, providing identification strategies and strengths/weaknesses for each. The content is structured to assist traders in recognizing patterns and making informed decisions based on price action.

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20 views12 pages

Trading Strategies: Continuation vs. Reversal

The document explains the concepts of reversals and continuations in trading, detailing how price movements can either reverse direction or continue in the same trend. It categorizes various types of bullish and bearish reversals and continuations, providing identification strategies and strengths/weaknesses for each. The content is structured to assist traders in recognizing patterns and making informed decisions based on price action.

Uploaded by

Free風
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CONTINUATION WHAT IS A

REVERSAL?
OCCURS WHEN PRICE MOVES IN THE
OPPOSITE DIRECTION IT PREVIOUS TREND
BULLISH CONTINUATION BEARISH CONTINUATION

BEARISH REVERSAL BULLISH REVERSAL

WHAT IS A
CONTINUATION?
OCCURS WHEN PRICE CONTINUES IN THE
SAME DIRECTION AS PREVIOUS TREND REVERSAL

13
2-2 BULLISH ✓ 2-2 BULLISH CONTINUATION

CONTINUATION
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) UP
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) UP
3-1-2 BULLISH CONTINUATION
ENTRY 3-1-2 BEARISH CONTINUATION
3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ GREAT FOR CONTINUATION PLAYS
1-3 BEARISH REVERSAL STRAT
+ STAYING IN PLAYS
+ ENTER CURRENT TREND
+ EASY TO RECOGNIZE
- CAN LEAD TO FAKE OUTS MORE OFTEN THAN OTHER COMBOS

14
2-2 BEARISH 2-2 BULLISH CONTINUATION

CONTINUATION
✓ 2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) DOWN
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) DOWN
3-1-2 BULLISH CONTINUATION
3-1-2 BEARISH CONTINUATION
3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS ENTRY
1-3 BULLISH REVERSAL STRAT
+ GREAT FOR CONTINUATION PLAYS
1-3 BEARISH REVERSAL STRAT
+ STAYING IN PLAYS
+ ENTER CURRENT TREND
+ EASY TO RECOGNIZE
- CAN LEAD TO FAKE OUTS MORE OFTEN THAN OTHER COMBOS

15
2-2 BULLISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION

✓ 2-2 BULLISH REVERSAL


2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) DOWN
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) UP
3-1-2 BULLISH CONTINUATION
ENTRY
3-1-2 BEARISH CONTINUATION
3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ VERY COMMON ON ALL TIME FRAMES
1-3 BEARISH REVERSAL STRAT
+ GREAT FOR QUICK TRADES (DAYTRADES & SCALPS)
- MAGNITUDE OF GAINS CAN BE SMALL AS REVERSAL MAY NOT
SUSTAIN

16
2-2 BEARISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL

✓ 2-2 BEARISH REVERSAL


3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) UP
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) DOWN
3-1-2 BULLISH CONTINUATION
3-1-2 BEARISH CONTINUATION
3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS ENTRY
1-3 BULLISH REVERSAL STRAT
+ VERY COMMON ON ALL TIME FRAMES
1-3 BEARISH REVERSAL STRAT
+ GREAT FOR QUICK TRADES (DAYTRADES & SCALPS)
- MAGNITUDE OF GAINS CAN BE SMALL AS REVERSAL MAY NOT
SUSTAIN

17
3-2-2 BULLISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL

✓ 3-2-2 BULLISH REVERSAL


3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• AN OUTSIDE BAR (3)
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) DOWN
3-1-2 BULLISH CONTINUATION

FOLLOWED BY 3-1-2 BEARISH CONTINUATION


• A DIRECTIONAL BAR (2) UP 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
ENTRY 1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ LARGE MAGNITUDE TO FIRST TARGET
1-3 BEARISH REVERSAL STRAT
+ EARLY ENTRY INTO LARGER MOVE
- PRICE MAY BECOME TRAPPED IN PREVIOUS OUTSIDE BAR (3)

18
3-2-2 BEARISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL

✓ 3-2-2 BEARISH REVERSAL


2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• AN OUTSIDE BAR (3)
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• A DIRECTIONAL BAR (2) UP
3-1-2 BULLISH CONTINUATION

FOLLOWED BY 3-1-2 BEARISH CONTINUATION


• A DIRECTIONAL BAR (2) DOWN 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
ENTRY
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ LARGE MAGNITUDE TO FIRST TARGET
1-3 BEARISH REVERSAL STRAT
+ EARLY ENTRY INTO LARGER MOVE
- PRICE MAY BECOME TRAPPED IN PREVIOUS OUTSIDE BAR (3)

19
2-1-2 BULLISH 2-2 BULLISH CONTINUATION

CONTINUATION
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL

✓ 2-1-2 BULLISH CONTINUATION


2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) UP
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• AN INSIDE BAR (1)
3-1-2 BULLISH CONTINUATION

FOLLOWED BY 3-1-2 BEARISH CONTINUATION


ENTRY
• A DIRECTIONAL BAR (2) UP 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ ALLOWS ENTRY DURING MOMENTUM, NOT CONSOLIDATION
1-3 BEARISH REVERSAL STRAT
+ GREAT FOR SAFE ENTRY INTO ESTABLISHED TREND
- RISK OF TURNING INTO AN OUTSIDE BAR (3) RESULTING IN A 1-3
REVERSAL

20
2-1-2 BEARISH 2-2 BULLISH CONTINUATION

CONTINUATION
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION

IDENTIFYING ✓ 2-1-2 BEARISH CONTINUATION


2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) DOWN
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• AN INSIDE BAR (1)
3-1-2 BULLISH CONTINUATION

FOLLOWED BY 3-1-2 BEARISH CONTINUATION


• A DIRECTIONAL BAR (2) DOWN 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
ENTRY
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ ALLOWS ENTRY DURING MOMENTUM, NOT CONSOLIDATION
1-3 BEARISH REVERSAL STRAT
+ GREAT FOR SAFE ENTRY INTO ESTABLISHED TREND
- RISK OF TURNING INTO AN OUTSIDE BAR (3) RESULTING IN A 1-3
REVERSAL

21
2-1-2 BULLISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
• A DIRECTIONAL BAR (2) DOWN
✓ 2-1-2 BULLISH REVERSAL
2-1-2 BEARISH REVERSAL
FOLLOWED BY
AN INSIDE BAR (1)
3-1-2 BULLISH CONTINUATION
• ENTRY
FOLLOWED BY 3-1-2 BEARISH CONTINUATION
• A DIRECTIONAL BAR (2) UP 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ OFFERS LARGE MAGNITUDE TO FIRST TARGET
1-3 BEARISH REVERSAL STRAT
+ ENTER AT BEGINNING OF MOVE
+ ENTER AFTER CONSOLIDATION NOT DURING
- RISK OF TURNING INTO AN OUTSIDE BAR (3)

22
2-1-2 BEARISH 2-2 BULLISH CONTINUATION

REVERSAL
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• A DIRECTIONAL BAR (2) UP
FOLLOWED BY ✓ 2-1-2 BEARISH REVERSAL

• AN INSIDE BAR (1)


3-1-2 BULLISH CONTINUATION
ENTRY
FOLLOWED BY 3-1-2 BEARISH CONTINUATION
• A DIRECTIONAL BAR (2) DOWN 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ OFFERS LARGE MAGNITUDE TO FIRST TARGET
1-3 BEARISH REVERSAL STRAT
+ ENTER AT BEGINNING OF MOVE
+ ENTER AFTER CONSOLIDATION NOT DURING
- RISK OF TURNING INTO AN OUTSIDE BAR (3)

23
3-1-2 BULLISH 2-2 BULLISH CONTINUATION

CONTINUATION
2-2 BEARISH CONTINUATION
2-2 BULLISH REVERSAL
2-2 BEARISH REVERSAL
3-2-2 BULLISH REVERSAL
3-2-2 BEARISH REVERSAL
2-1-2 BULLISH CONTINUATION
2-1-2 BEARISH CONTINUATION
IDENTIFYING
2-1-2 BULLISH REVERSAL
• AN OUTSIDE BAR (3) UP
2-1-2 BEARISH REVERSAL
FOLLOWED BY
• AN INSIDE BAR (1) ✓ 3-1-2 BULLISH CONTINUATION

FOLLOWED BY 3-1-2 BEARISH CONTINUATION


ENTRY
• A DIRECTIONAL BAR (2) UP 3-1-2 BULLISH REVERSAL
3-1-2 BEARISH REVERSAL
1-2-2 BULLISH REVERSAL STRAT
1-2-2 BEARISH REVERSAL STRAT
STRENGTH/WEAKNESS
1-3 BULLISH REVERSAL STRAT
+ ALLOWS ENTRY DURING MOMENTUM, NOT CONSOLIDATION
1-3 BEARISH REVERSAL STRAT
+ GREAT FOR SAFE ENTRY INTO ESTABLISHED TREND
- RISK OF TURNING INTO AN OUTSIDE BAR (3) RESULTING IN A 1-3
REVERSAL
- RISK OF CHOP WITHIN OUTSIDE BAR (3) RANGE

24

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