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I have difficulty executing with confidence on breakouts of what feels like could be a Major Trend Reversal (MTR) or just a pullback to 50% of the preceding leg. How does one tell if it's a V shaped reversal or a sudden MTR rather than just a correction/ pullback to 50% before a resumption of the current trend? Thank you for any help in advance.
Simply put, you can not tell 🙁 but if the reversal comes from a good setup the probability is that you will get, at least, a second leg up and, many times, I am referring now to the EMINI, there is a 1-2 hours move up so, even with a deep PB, it is safe to buy. If still not sure, better to wait for a PB to buy.
If still not sure, better to wait for a PB to buy.
Ahhh but then you are wondering if it's a pullback or resumption of trend.
@mjvestedgmail-com not really, either buying the BO or waiting for the PB means I think the MKT is going up so the previous bear trend will not resume. Yet, buying BOs is very difficult to do profitably because one loser will wipe out several winners and waiting for the PB is a reasonable thing to do. Still can fail but your loss will be much less.
1.As you mentioned breakouts, when breakout, trade like breakout, breakout and reversal are the same, both are fast move in search of a more fair price, whatever breakout of, for example big down(or big gap down), when you see three decent consective bull bars, simply look for buy entry, sometimes can be clear after only one bull bar.
2.Abrupt reversal without transition is extremely rare such as V top/V bottom, that's a low probability event and eventually followed by MTR. V shapes are climaxes, if happen quickly, current dirction traders will trapped in and opposite dirction traders will trapped out, so expect MTR attempt for both.
3.Breakout trendline, if it's weak then look for transition to a TR, TR's high always not certain, 50% pullback is not accurate also, traders assess TR's price action, and look for 2nd entry or MTR to opposite dirction.
Some of my thoughts.
