 All right, what's up everybody? This is Alex from Xtrades. And welcome back to another educational video. Doing something different this week. We are coming out with a little crash course on how to find reversals in the market. I put up a vote or a survey from Google Forms and the Discord, and a lot of you voted for this reversal video. It won 50% of the vote compared to 25% and 25% for the other two options. And not only that, there was actually 30 people that voted on it, which is a lot more than I thought would vote. Thank you for finding the time to vote and thank you for taking a second out of your day because it does help my creativity block. I've been kind of having trouble finding more educational topics to cover because I've covered so many. I've done a lot of videos for the community. So it's a little bit hard to keep thinking of ideas for education and trading. When I've taught a lot of what I already know. So this is a topic I haven't really covered too much, I guess maybe we've talked about reversals and other videos, but this is a video specifically dedicated for reversals. And we'll do a couple of different parts. So we'll do part one today. We're going to be going into how to read candle structures to find reversals. So this is kind of like the basics. If you're new to reading candles and technical analysis in general, there should help you a lot. And we'll do this in different parts. So this is part one, we'll have a part two because there's so many different ways to read reversals and use reversals in a strategy. Like if you're using it off support and resistance. If you're just using candle structures to find reversals, that is the video we are covering today. And we're going to dedicate the whole 10, 15 minutes just to this. So I hope you enjoy and let's dive in. When it comes to the market, there's usually two types of patterns inside the market. There's usually continuation trades and there's also reversal trades. So continuation is a topic of its own and reversals are also a topic of their own. So usually with reversals, you're going to see some type of extreme selling or buying some type of trend. And the reversal point is usually the end of that. Now a lot of people kind of struggle with reversals because you are trying to either call a top or bottom basically. And the important thing is to wait for confirmation. And reading candles is one thing you are going to do to find confirmation. And just straight up reading candles and marking a couple price levels is basically just reading into price action. So we can see this is a upside reversal. We're going to go over upside first and then we'll cover downside later. And you're going to see one thing a lot of them have in common, basically all of them have in common. And these are recent market conditions. These are all very recent. So you can know you can find these in recent markets still. This is actually from yesterday. This was CPI day, by the way. So this is an event day. There was volatility. There was a lot of volume and you're not going to get that every single day because we don't have events every single day that bring in a lot of volume. So you got to keep that in mind as well. But here's a classic upside reversal. You got really strong sell pressure right at the open. We have a gap up faked out all the longs. They took it down, filled the complete gap. And usually once gaps get filled, you're going to see that potential reversal to the upside after the gap is closed all the way, which is probably this 437-40 or so. Now the important thing is to wait for some type of confirmation. And usually you're going to find that in a candle. So with reversal candles, you're usually going to find like a doji or a bullish hammer, something like that. Something with a lower shadow wick showing by pressure to the upside. It could even be an indecision candle as long as it has that lower wick. It's showing a little bit of by pressure. But the thing is you're not going to see that confirmed until it takes out the previous bar high. So here's your doji candle. Here is your next candle taking out the previous bar highs. Once it takes out that structure high, we have a really big pop, have a little bit of consolidation, and it runs higher. Once it takes out that high of day at the gap up, it was over with. It still continued. So this is a classic reversal. This is not a continuation of a trend. This is a big reversal off of selling. And what you'll see in all these examples when we go over, they all have the same thing in common. They're either taking out a structure high or low, depending if you're looking for upside or downside. So I hope that makes sense for the first example. Let's go into the next. All right, example number two, you can see that reversals and looking for the ideal structure is not perfect. You can see in this first example here, we have a previous low. We have the previous candle high as well. So here's your previous candle. Here's the attempt right here. We have a close over the previous bar high. It tries, it falls back within the structure. Normally, this would be okay to stay in, even if it falls back in, but keep your stop loss at the previous low or your previous bar low. So this is your structure low. And you can see it took out the low, so you would have been stopped out here. And this goes to show just because it breaks the previous bar high and you do get that confirmation of a potential reversal. There are other factors at play. There's probably like a downtrend line right here that it rejected off of. Maybe the nine and 21 EMAs were in the way, making a lower high to set up for a move down. So no strategy is perfect. It's just important to know your risk, have a plan. Your previous bar low or just your structure low in general is going to be your stop loss. If you were going to attempt a reversal right here, you would have gotten stopped out and you would have had to wait for something else to set up. Well, here's where it sets up. We would keep the same previous bar low right here, obviously, because it was an obvious flush level and also an obvious short-term bounce level right here. Now we're starting to get more clear doji candles. This was not the best reversal candle for your previous bar, but either way, it was kind of setting up for that break over the structure high. So you did need to consider it regardless of this ugly candle right here. These are a little bit more clear. They're obviously dojis, lower shadow wicks, potential by pressure. You got two in a row trying to push up to the upside, but you're not going to be confirmed until it reclaims your previous structure low. Once it reclaims that previous structure low, that is signaling a potential reversal. And then obviously, since it rejected here earlier, you probably want to mark this if you were day trading at this little resistance right here. It's probably like 440, 50 or something. Kind of hard to tell. We're not on trading view right now. This is just a screenshot, but I'm guessing you'd want to mark this high from where it rejected. And you can see there was one little candle that rejected that general area, but overall, once the structure low got reclaimed, that is some type of reversal. And it was able to overcome the short-term resistance and push all the way up into 230. And you can see here why this wasn't confirmed a reversal. Even though this is a huge buy candle, look at the previous bar. We were not able to take out the previous bar high, which was this opening candle right here, this big red one. This big bar was not able to engulf it and it did fall short of resistance right here. Even these candles did not break over it. It went over briefly, according to these wicks, but then once they closed back inside, it reversed back down. But it did start making a solid structure down here. So here's your previous bar. Once we see this big push right here, we know that this previous bar is our structure high and our structure low. We go ahead and mark that once we have that kind of engulfing structure or at least a break over it, a clear break. You can see it actually kind of rejected, went back in. But the important thing is, like I said earlier, it's holding the lows. So it holds the lows right here. So maybe you took it right when it broke. Maybe you waited for a little pullback. Either way, your stop loss is going to be at structure low. You could probably even adjust to this little candle right here. But the important thing is, we have that push over the previous structure high, this little candle that signaled something. The algorithms, other traders, they are trying to push this back higher. Even though it did back in, the structure's still holding and then we did have a larger reversal at hand over some time. Looks like it took about an hour. So it started at 10 and ended at 11. So I hope that makes sense. Really, reversals are just taking out structures, either to the upside or to the downside. Taking out previous structures like this, reclaiming structures, that's gonna signal a reversal as well. And that's how you read it. It's probably the most simple way to read it with candles. And like I said, there's many ways to use reversals. You can use supply and demand zones. There's two different types of supply and demand zones you could use. And we'll go into those in different parts. But these are probably the most effective and simple way for a beginner, or really for anybody to read a reversal just using candles and price action and a little bit of levels. Now, here is a reversal structure, but with a support line intact, a previous support line. So we have an obvious gap structure low here. Big gap up. I think this is from NVIDIA earnings from the whole market gap up. So we know for a fact this gap structure low is going to be a big level at some point. You could even see price consolidating off the general area right here. You're not gonna get an exact touch every single time like this. Don't expect, just because you draw the gap support low it's going to touch it exactly. Pay attention to the general area because if you pay attention to the general area you can catch something like this even though it didn't tap directly. That's why you wanna use your candle structures. Look at this. We have a little high right here, low right here. Look at this big push up bar right here. Took out the previous candle high on the one hour. Look at that huge reversal. I probably should have marked this one on my screenshot but I really like this one a lot to set as an example. Not just because it tapped the gap structure low exactly but because it also has a bullish engulfing bar. It is briefly a little bit under the low of the previous bar but very much over the high of the previous bar as you can see. So here's the high, here's the low. It's basically an engulfing bar and look what it led to. All that needed to do is push over the previous bar high close over it on the one hour and you did have a continued trend the next day. Little pullback continued trend the day after that. So this is the one hour. The other examples we were looking at were probably like 15 minute or five minute. You can find these on one day, one week. It doesn't matter. They all have the same thing in common. They're taking out previous structure highs or lows. The bar next to it or just the general structure around it but it's really good to mark your previous candles. If you get an obvious break like this go ahead and mark the previous candle see if it's breaking over that previous structure high or low if you're looking for upside or downside. And if you get that confirmation you may have a reversal on your hands. So hope that makes sense. That's all the examples for upside. We're gonna go ahead and get into downside next. All right not to downside. So the rules are basically similar. When you're looking for downside you're looking for it to take out your previous bar low. Here's your previous bar low. Here's your big engulfing bar. You also have a big line of resistance at 446-64. It's a big line of resistance. You get a short-term rejection here. If you wait attempted to take out the previous bar low on this bar right here and it just ended up shooting up so you would have gotten faked out right there but if you waited for another signal you would have a really big short makeup for it right here. So you're not always gonna get signals right away. It's not always gonna go in your favor just like my screenshots. It just doesn't work like that. So you gotta be prepared. Have a plan just in case even though this took out the previous bar low you could see we did get that big impulse move up but ultimately that led to an even bigger move that would probably make up for the little loss. You probably would have kept stop loss at high day. If you went short here or a few ball puts you would have had stop loss at high day. It would have taken you out. Then you would have had another structure setting up later. So that's really basically it. You're just looking for structures to get taken out of your previous candle. You wanna find some type of obvious candle that is taking out a structure. In this case we have a really obvious red bar. This is your focus bar structure. So you get the high and the low. Takes it out. Really nice flush. I mean this could have made you a lot of money on day trades even a nice two day swing. And then you just go ahead and mark your levels. Obviously this is a little back test area. So you could have taken profit at 442s. He had another structure low here at 436s held up there. Also a structure at 433s didn't quite make it there which is I'm pretty sure the gap structure low that we just covered in the upside example. And then look at here. We have another upside example. So you got the previous bar high, previous bar low. Look at this big candle. Took out the previous bar high. Even took out this little structure high right here. That is some type of bottom reversal signal and look how big that push up was. So they all have the same thing in common. They're either taking out a structure high or structure low and that's all you're looking for. Even right here, look we have a previous bar low, previous bar high, big red candle takes out the previous bar low right here. This one. And look at the downside following through after. Very big. So you can find these everywhere. You're gonna find them on multiple time frames. You're gonna find them really on any timeframe. It's all the same. The only thing that matters is that you're making a plan based on your timeframe. So if you have a higher timeframe trade, you might be holding in for a couple of weeks, maybe a couple of days overnight. If you're on a one hour to 15 minute, you might be day trading, taking quick profits. It just depends. You could even use one day bars, one day structures, mark your previous day high and low on the one day and that can be your day trade levels for the day. And you can still find big reversals for day trades on the one day. Even though you're looking at a higher timeframe, you can still day trade off those as well. So it just depends what you wanna do. But I recommend checking out multiple time frames and see what fits for you. I really like the one hour and 15 minute for day trading and stuff like that. I use the one day as well for one day levels. Marking your previous day high and low is really important. It's very simple and effective. So make sure you do that. All right, now to another example. This is gonna be Nasdaq one hour again. And we have multiple reversal signals, basically in the same chart here, all within the same eight, nine days here, which was pretty cool. Cause these do come a little bit more often than you'd think, even though obviously the market can stay in a range very often, it doesn't trend all the time. You can still find these pretty well, depending if you zoom in when it gets choppy to the shorter term time frames, you might need to do that. And if we have more volatility and ATRs are expanding, you can kind of zoom out to the higher time frames and find some pretty big swings honestly with these. But you can see all the same stuff. We have the previous candle low, previous candle high. We have a bar breaking under that previous candle low, sets up for a flush. Same thing right here. We have a big breakdown bar right here. Here's your previous bar low, previous bar high, sets up for a flush down again. Here's another one, big engulfing bar. Once you see one starting to try to take out that low, you can go ahead and mark your previous bar low, previous bar high. That's gonna set up your structure and potential trade idea. Same thing again, previous bar low, previous bar high. Once we start seeing this break, we start paying attention for a potential reversal. So it's the same thing over and over. Here's kind of a failed example. We have a previous bar low, previous bar high. You can see this big red bar try to engulf it, but it failed to close under the previous bar low. And once this gap closed, usually you're gonna see some type of bounce in the market. Even if it's just short term, a gap close is going to result in something. Sometimes we'll just butter through it to the downside, but lots of times you will see kind of long skates established once the gap is closed. I don't know why, but it's just kind of a psychological thing. And 80% of gaps do fail, by the way. Pretty sure that's a known statistic. But yeah, that's pretty much all of our downside examples. You can see they all have the same thing in common. They're taking down the previous bar low, previous bar low, previous bar low, previous bar low. And here's that attempt under a previous bar low right here. Try to fill a gap, made it long. You actually have a potential reversal signal right here. Here's your kind of your structure high that you would want to see taken out. And then once it tries getting over that right here, even though these two candles are ugly, we do kind of get a little reversal right here. Obviously not the cleanest one. Here's another example of a reversal to the upside, previous bar high, previous bar low. We have a brief close over right here. Nice run the next two hours right here. Probably good for a little scout. And onto our last example, this is the one day. And basically our conclusion, many reversals all have one thing in common, to take out the previous bar structure low or high. That is exactly what they're doing. Here's a major reversal on QQQs. One day, structure low, structure high. Big breakdown. If you marked this previous day high and low, literally every time the market closes, go ahead and mark your previous day high and low for the next session. Because once we saw QQQ gapping under this, we're probably looking for shorts to be honest because there's a lot of buy and bounce to fill down. Same thing right here. We have a previous bar low, previous bar high, bar gaps under it, great day trade, even a great multi-week swing here. I think these were when the market was correcting back in August to October for the big rally that came up. Volatility was a little bit more expanded. So it's not really realistic to expect volatility to be enhanced like this all the time, but it's still good to go over volatility periods because they do come occasionally, actually more often than people think. Here's a previous bar high, previous bar low. Look how it took out the high right here. The setup for a really nice higher timeframe reversal. Even at a big dip into it, kind of hold up the general area of your reversal bar or your previous structure bar right here. We have another previous bar high, previous bar low. Takes out the low, sets up for a big reversal down. Here's a previous bar low, previous bar high. We have a close over that just briefly. Kind of chops around a little bit, but overall still holds your previous bar low, never breaks under it, sets up for a big reversal over some days. Same thing right here, previous bar low, previous bar high. Takes out the low, kind of goes back within it, but overall did not clear your previous bar high. So as long as you get that break under, you can start keeping your stop loss, you know, at your structure high and just kind of be patient because sometimes it could chop out for a little bit before going down, as you can see right here. As you can even see for upside too, takes out the previous bar high. You have a confirmation right here, but it took a couple of days to kind of get going. And then here's your last, before our huge rally, which has been never ending into 2024 basically. Here's your previous bar high, previous bar low. This is actually an inside bar. So this was a bearish bar, inside bar formation. So if you get an inside bar like this, you're gonna wanna mark the high and low anyways of that inside bar. Once we broke out of the inside bar and closed over it, that did signal something was potentially coming. And we did get a really big push up to the upside right there. Big gap right here that hasn't been filled. Big gap right here that hasn't been filled. We'll have to see if those come back into fruition. Like I said, 80% of gaps do fill eventually. Pretty sure that's a known statistic. But I hope you guys enjoyed this video. Make sure you like, comment, and subscribe for our Xtrails YouTube channel. I'm gonna go ahead and get this chopped up, sent out all that good stuff. Make sure you keep a lookout for part two. We'll go into a little bit more depth. Today, we just covered candles, reading candle structures, keeping it simple, using your previous bar high and low. It's really easy, probably the most simple and effective way to read for a reversal. Like I said, make sure you're on your one day charts. You are marking your previous day highs and lows whenever the market closes. It's a really easy way to get day trade levels and to know when a potential reversal can come in, wait for that previous bar high or low to get taken out. Make sure you do have some type of selling or buying because not everything is gonna be a reversal. Like I said, this would be a continuation. So just because this took out the high this big bar right here, this is not a reversal. This is a continuation of a trend that was already there. This has strong selling, which leads to a reversal. This is already an established trend, which led to continuation. Even though it took out the previous bar high, this would not be a reversal. And like I said, there's two different ways to the market. There's reversals and continuation. Those are the two main patterns. And there's plenty of patterns we can cover, head and shoulders, double bottom, triple bottoms, et cetera. And we can get into those later in a different part. So I hope you guys enjoy. Make sure you like, comment and subscribe. 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