Slide 8: Trade Management of Reversals

Hi Noah,

If I took that trade, I (personally) would've been looking at the purple resistance level and the yellow TL as obstacles for the bulls. And I would also expect a break out of the TL to first be retested once or twice before the true move begins. So, I (personally, not saying this is the right way just how I would've done it) would've taken partials on the breakout itself when it reached the purple resistance. 

After that I'd be looking for the BO gap to stay open. If market comes back to my entry for the 2nd time I usually exit BE.

It's a little hard to see on this chart whether (A) went through the entry or not and maybe it's also discretionary for every trader if they count this as a serious test of their entry. But (B) definitely came back so some would count it as 2nd touch of entry and exit BE. Others might only see it as the 1st serious penetration of the entry price and continue holding. 

But in general I do agree about taking partial profits especially on climactic bars into potential tops and bottoms of TRs. 

Hope this helps,
CH
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That's v. helpful, thank you.

So on the very next video, Al says a couple of things:

1. HL MTR = minimum goal is 1 leg (if LL then we can expect TBTL)

2. He would TP on half once 2:1 R:R was reached, and let the rest ride until the TBTL had been completed (starting from the LL ofc)

So why are we looking for TBTL here when it's a HL?

Thank you!

Usually after a DB or MDB (which HL MTRs often look like) can expect 2LSU (2 legs sideways to up).  On the other hand, if it looks like leg 1 already happened (from a strong push just before) then only 1 more leg remains so we lower our expectations. So it probably depends on the case by case basis what works best for leg 1.

For example, which one of these works best as leg1 leg2? Probably a lot of discretion is involved here. May even reference HTF charts to see how many legs are in progress there (Al mentions this in the videos as well).

Indeed quite confusing, as this slide: Slide 17 from Video 21D, shows a similar setup, but the reversal up prior to the HL MTR is arguably weaker than the one we've been looking at so far.

I'm going to guess this is just being used as a learning tool, and traders could've equally made just trading the TR and not holding for a Swing. Probabilities one way or the other are 40 vs. 60% so even if it looks like a sure thing, you're going to naturally get it wrong as there's no sure-thing, just a slight edge.

To answer your question on which looks like Leg 1 and Leg 2 (assuming I'm expecting TBTL), I'd probably lean towards Al's reading... mainly because after Leg 1, the next touch of the top of the TR didn't BO beyond it... I would assume Leg 2 needs to go higher than Leg 1?

Unless I'm misunderstanding, I'm not sure there's a requirement for leg 2 to be higher than leg 1. It could even be as small as a single bar (an attempt to start leg 2 that fails immediately) due to being at some S/R level. 

I pasted the wrong image, here's the correct one.

Following what you said, I guess it's about Trade Mgmt then, and taking partial profits at 2:1 and watching the trade play out. You can never be too sure it will play out so bank some profits first.

Hi jose,

Technically yes, that's classical counting of waiting for a bar to tick above prior bar. However, counting is less effective inside trading ranges so maybe that's why Al hasn't marked them here after the TTR has gone on for a  while:

A more advanced approach to counting is to think of "pushes" and then watch for them to fail. For example, here we can think of bears as pushing sufficiently hard 4 times and unable to resume the bear trend, which increases the possibility of bulls taking over sometime soon. 

What constitutes "sufficiently hard" and "sometime soon" is discretionary and every trader will develop their own criteria. But some hints of what constitutes strength are bars (or a series of bars) larger than prior bars, or pushes that make new lows like here. However, it's a pretty bad sign when one side makes a new high or low but fails to have good FT. Together these add up to produce sufficiently strong pushes by the bears (relative to prior bars for this chart) that kept failing and eventually the bears gave up.