Hey guys Ross here from Warrior Trading, We're going to go over my reversal Day trading strategy. This video is a two part video. We're going to look first at a live trade that I took today on ABY where I got long at 2142 with a 20 cent stop and scaled out for over a dollar of profit. After we look at that trade, we're going to go into an actual webinar where I talk about the reversal trading strategy and all of the details I'm going to explain how I find the setups what I look for my entry requirements my eggs are requirements and give you all of the nitty gritty details that you need to know in order to trade this strategy with me.

Alright, so anyone that's interested in joining us, you can find us over at Warrior Trading Com. Our chat room is live every day Monday through Friday Starting at 8:30 9:00 a.m. and running until the close. All right, anyone who questions feel free to email me Ross at Warrior Trading Comm and now we're going to jump in to the live trade that I did today on ABY This was the setup, the big sell-off bottoming out $21 support.

Got long 21:42 for the move here. This moved all the way back up to 23:28 and one of the things I'll tell you a little later in this class is that we can't always anticipate when stocks are going to make big moves, but we know that most moves will get reversed. There will be a correction and so we look to jump in as the tide is beginning to change and ride that momentum back up. Alright, so we're going to go in here to the live trade again.

Anyone questions? Feel free to email me. Hey guys! Alright, so I'm watching this ABY here for a possible bottom bounce. We've got daily support. You can see down.

at $21 this looks to me like a good potential reversal. You can see it on the V5, the V8 reversal. We've got the low RSI candles right now are riding the bottom Bollinger Bands I Would like to see a doji at the bottom. We have that little pop right there, but it didn't quite hold I Wish we had more consecutive red candles on the one-minute chart so we could take a possible 1 minute entry.

but I'm going to watch this around the 21 dollar price area just to see if we get a little bit of a bounce there. Generally with these reversals, you know we're looking for the action around the whole dollar for an over/under type of thing. So I'm thinking maybe a flush down to 21 and then maybe a dip down below it and catch the move back up over 21. We'll see how it looks.

I'm going to keep watching this here. Let's see if anything else shapes up, but this is a I think this will be a good one so let's keep watching it. I'm watching this ABY high if the last candle right now is 2142 I'm watching this to take a thousand shares along at 2142 with a 20 cent stop. So 21 22 will be my stop.

Profit Target is 2250. that's the View app. I Think this actually has the potential to even get further than that, but that'll be the first Profit Target. So let's see if this.

if this goes. we need this one-minute candle to make a new high. That'll be my entry. Ok I'm long at 42 needs to get over 2150.

There we go. I'm going to put my stop at breakeven don't want to get stopped out I really want to try to hold this and let it work. So I'm long ABY 2142 or Bottom Bounds Hive: the last five minute candle is 2178. Now we knew that this had support at 21 and it wouldn't have been a bad idea to try to take a hundred shares or two hundred shares down here.

21:11 2115 with a stop down 27. So you could get in with a stop like twenty dollars and ninety cents. So you you're kind of scaling in expecting that it may continue to drop. You'll add another hundred below the figure and hope it comes back up hard.

Stop would be at twenty dollars and 85 cents or something like that. so we're up 23 cents on ABY right here. Alright, come on, let's see if we can get a nice move on this. There we go.

Okay I Just sold half at 2183. Forty cents profit. Just my stop to definitely break even the low of the last one minute candle is 2157. And if I likes Netflix hitting an all-time high one in 1896 34 gain of 5 a.m.

percent break Netflix NFLX So we've got the nine moving average here coming down at 22 dollars and 20 cents. That's the first target. The 9 second target will be the twenty third target would be the volume weighted average price. So right here we've got to break over this moving average On the one-minute twenty two dollars, we know we might run into little resistance at that whole dollar.

There we go. SH PJ We're not too far off here from getting a getting a 1-point winter. 22:42 is the spot we would need to see. So the whole idea on these is that we're trading stocks that are at extremes.

Whether we're trading momentum stocks in the morning, the gap, and goes, you know, breaking news or reversals, we're looking for stocks, they're trading at extremes. Now, this is trading at an extreme because it's really, really weak. It's been selling all day long and we look to try to find the bottom. Now you know this can sell five points and then bounce 50 cents.

Even though that bounce is relatively small compared to the sell-off it's still an opportunity for profit. and you can see that right in here. This is a very clean set up. Alerted to us on the scanners right here, the V5v, a reversal hybrid scanner and also showing here as a stock with a low.

RSI So we think about that rubber band getting stretched out, the weaker and weaker and weaker they get, the more stretched out against until finally it needs to pop. It needs to bounce back a little bit and we look to get into the bottom of that you know extension and just catch the momentum right. Back up. 22:09 Right Here is the high of this.

This move back up and we are running into as you can see the nine moving average coming down here. So this is one where we do have to be a little cautious, but it looks good. With the one-minute chart consolidating above, it's moving averages. We'll see.

Maybe if we can we get this to continue on the move back up. Some traders might think about flipping short here, selling the long position and then getting short with the target of moving back down to the low. Now we're not that far off the low, you know, but you could get a nice little sell-off. The problem though is that we were bouncing off a pretty significant daily support level of $21 If we didn't have any nearby support, I would be more inclined to go ahead and flip short if this breaks down.

But because we've bounced off a really really solid support level I'm thinking that this is a better chance of trending up, maybe even for the rest of the day. So 20 to 15 here on the ask I want to try to get one point out of it that would be selling at 22 42. So generally the way I size is going to be based on the stop and how much I'm willing to risk. So I'm going to risk generally not more than 500 dollars per trade, sometimes as little as 200 if I'm not really confident.

and of course, if I can sell for a loss sooner because it's not working, I'll do that. But you know, worst case scenario: the loss on this was looking like, you know, maybe $300 and that meant that I could take well, $300 loss meant I could take a thousand shares If I was willing to risk 600 or 700, I could have taken more sighs. So I make sure that all of my risk on any trade is capped at about $500 with the profit potential to make 500 to a thousand depending on the strength of the setup. But something we talked about earlier today is the importance of building your cushion each day.

You know the cushion is your profit from the first few trades. So if you do three or four trades in the morning and you can get yourself up three four hundred dollars, now you have a cushion on the day. it's a backstop. Worst-case scenario: you adjust your stop on the day to 100 dollars daily profit.

So if you're up 400 and you give back 301 dollar, you say Alright, I'm done for the day. I'm going to walk away with ninety nine dollars a little bit of profit. I'm not going to risk letting this day go red. You don't want to go from green to red, so getting that cushion is really important.

It's a confidence builder, but it's also you know it's an account building technique. Once I have the cushion right. If I'm already up four hundred, five hundred dollars, or even a thousand dollars. I will sometimes allow myself to take a little bit of a larger risk because now I'm working with you know, basically this big cushion and I can leverage that to take some bigger trades.

And yeah, worst-case scenario: I end up closing the day only up a hundred or two hundred dollars which is still profit. but I had the potential to, you know, roll a good three four hundred dollar morning into a $1,500 $2,000 winning day. Which is You know that those types of days will cover lots of slow days. So I'm really looking for that.

One point here. see, we broke over the nine moving average. The next resistance is the 20 moving average at 22 66 so we really don't have. We shouldn't have any issue continuing to trend up.

I'm going to set a profit stop on this at $22 So as long as it holds above $22 I'll stay in the trade and let it ride if it comes down to 22. I'm going to stop out of the rest and the idea there is trying to keep that final piece as long as possible. Alright, I Don't want to sell that last piece until I Get stopped out by getting stopped out I'm proving that I've taken this trade from start to finish the right way. It's very frustrating when you're in the habit of selling your winners too soon and holding your losers too long and a lot of traders do that.

You know there's a fear of loss and that fear of loss makes you sell trades really quickly because you're up $100 in your 1880. Center Second, you know how quickly it can go against you. So you just take the hundred dollars profit and maybe it would have been a $500 winner, but you're just happy to take the hundred dollar profit. And then on the flip side, when you're down 100 or 200, you're afraid to take the loss so you don't want to make that loss real.

and so you just hold it thinking that maybe it'll bounce back. You know, maybe this will recover and it just gets worse and worse and worse. Until finally you're faced with having to take the loss and it ends up being much worse than before. And you say I'm never going to do that again.

but you end up doing it again. It's something that new traders do all the time. and a lot of the students in our course are working through those emotions. And the best strategy is a strategy for emotional conditioning.

We teach our traders on a three-month trading plan to increase their risk slowly, starting with a small, a small share size. So by starting small, you can begin to experience the emotional frustration of of loss. And you know the frustration of seeing a winner turn into a loser. But you train yourself to just take the loss and bail out because you know that's the right thing to do.

And you know when you're trading 100 shares that the profits really don't matter. As a new trader, it's not about being profitable, it's about building a foundation for a career as a trader. A foundation for your future success. So that's going to be focusing on your statistics.

What's your percentage of success? What are your average profits versus your average losses? You know those are the type of things that we really want to focus on with with all of our new students. All right. So we've got a high here: 22 42 cents off getting one point of profit? there's 40. Come on, 42.

And we really don't have any resistance on this up until 66. so or 64 now, so this should just continue to grind up. My stop. My life stop is still at $22 but at this point it makes sense to probably tighten that up to something like 20 to 19 just below this moving average which is holding a support.

Okay guys, so let's get started with the webinar portion of this video. We're going to go over the reversal trading strategy in all of its details. I Talked to new traders almost every single day I've talked to hundreds of traders this month alone and one of the common themes among new traders is I don't know what to trade There are thousands of stocks moving in the market every single day, but finding a setup that is consistent and that is a good fit for you is really hard and so I'm going to introduce the reversal trading strategy. It's really hard to catch stocks before they make a big move, and this is an example here of a stock that's sold off really hard right out of the gates.

Now it would be really hard to catch this type of move to the short side, but we know what what goes up must come down and what goes down must come up eventually. so it's easier instead of trying to chase these moves to wait for either a good opportunity to get in a pullback which is a momentum trade or instead to wait for a reversal opportunity. Alright, and this right here shows a picture-perfect reversal: a pin bar at the bottom signifying a potential reversal, and then that big swing back up this V-shape Alright, and we took this long right off the bottom with a tight stop at the low of day and trail that stopped up for a really nice 6 to 1 profit loss ratio. right? And you can see we found this stock right here on one of our stock scanners.

Now, the advantage of reversals the big one is that like I said, it's difficult to anticipate when stocks are going to make big moves, but we know that almost all of the big moves will eventually be corrected. So one of the big advantages is the opportunity to watch stocks that are running up while slowly calculating possible resistance points possible areas that could provide a good reversal opportunity. And it allows you to, instead of feeling like you need to be impulsive or rush into the trade to watch the trade develop and wait for the momentum to begin to shift. Alright, so when you're looking at reversals, you want to make sure that you only trade extreme.

So the example we just saw was a stock that made an extreme move to the downside and then that move got reversed. Now, a stock that's just been slowly selling off all day long usually isn't suitable for a reversal. Instead, we want to think of stocks the way we think of rubber band. We want to get them really stretched out.

To the downside that mean or the upside for a shorty, that means we want to see the big extension. A lot of volume. Alright, And then we look for a couple of key indicators that are going to suggest the tide may be about to turn and that's when we take the position. All right, what goes up must come down.

Here's a trade that we took on VA a nice big move up from $34 the open up to 36 50, and then that quick pullback right. Oftentimes these stocks will give up hours worth of progress in a matter of minutes, so being able to time the the reversal is really critical. All right. Now, the key to success with top and bottom reversals is trading the extremes.

So there are a few things that I look at in order to quantify and extreme one is going to be a high or low RSI That's the relative strength index. So an RSI above 90 or below 10 are going to peak my interest, A candle outside the bounzer bands is going to peak my interest alright. And also, five to ten consecutive candles ending with a pin bar or a doji is definitely going to strike my interest. Now there are times where we'll have five to ten consecutive candles, and they may not have had a lot of price action, so they may be drifting down slowly, but not quickly enough to give us the feeling that it's a good reversal.

So we kind of look for a combination of these indicators, all occurring at the same time. So what I'm going to teach you here is how to find reversal setups using stock scanners. How to read the Bollinger Bands to find extremes, How to use pinbar candlesticks to take an entry, How to understand where to set your stops and your profit targets, and how to trail your winners. This is important.

This is a strategy that is really successful for me and has one of the best profit loss ratios. Your profit loss ratio is your average winners versus your average losers. And a lot of new traders end up trading with a very poor profit loss ratio because they sell their winners too soon and they hold their losers too long. It's a very common habit among new traders, but the reversal trading strategy really lends itself to having bigger profit loss ratios because you always get in stocks when that rubber band is super stretched out and when you time it right you're in, is the rubber band snaps back and you just get to ride that momentum right back up.

Alright, so we find these setups using stock scanners powered by trade ideas. All of the scanners that we use we share with our students in our trading courses. All right now. This is a proprietary scanner that I've developed over the last few years, the V5v Eight Hybrid and this is a scanner looking simply for RSI extremes You can see looking for RSI below 20 and then down here you can just barely see the green above 80.

All right. So what we're looking for are stocks that are really stretched out and we give the filters all of those data points. so we need a certain RSI level. We need a certain number of consecutive candles, the position within the Bollinger Bands and so on, and so forth.

Here's a candle outside the Bollinger Bands. Okay, now the Bollinger Bands. They're right here in pink. This is just your standard 20 period with a two standard deviation.

Most of the price action on any given day will occur inside the Bollinger Bands. so it's very rare to see a candle fully outside the Bollinger Bands. It indicates an extreme situation for the stock. All right, and that's what we're looking for.

Stocks trading at extremes. The stock here Pepsi made a big move up from 96 up to 97. 60 topped out here. We got short recognising this stock had a high RSI.

it had a candle outside the Bollinger Bands. It had six plus consecutive green candles and the final candle was taking the form of a pin bar. We short up here with a stop at the Hive Day, a profit target of a return, back down to our moving averages, and potentially back down to the V web, the volume weighted, average price, and here's an example: the bottom bounce again with a candle outside the Bollinger Bands low, RSI one, two, three, four, five consecutive red candles with a final candle showing as a pin bar doji hammer kind of, you know, in between candle. but definitely a candle of indecision at the bottom of a sell-off that peaked in pretty high volume.

All right. So on this one, we got long here at 75 77 75 for the bottom bounce and we got this nice move here. up to looks like a high of 78 50 stop was 77 20. Now a pin bar is a candle that has a longer wick than the body of the candle.

so you can see this. top example: you've got that long upper wick. Some would call it a topping tail, that little shadow. Someone called this candle a shooting star.

In the context of a big move up this candle, we call it a pin bar. This is the same thing here. On the downside, move down the candle with a long bottoming tail. That's a pin bar.

It's a candle of indecision. We know that the candle tells us four things: the open price, the close price, the high of that period in the low of that period. So when you have a candle with a big bottoming tail or and tail, it tells you that at some point during that candle period, the price moved up and was unable to hold those levels and sold off, indicating a little bit of a battle between the buyers and the sellers. So when we're looking at reversals, we write down the list of our entry requirements.

We look for the strong extension, the rubber band that strong move on high volume preferably half a million in shares or higher I prefer a million, but we know don't always get that perfect set up. The best reversals will have volume peaking at the bottom of the sell up, so they'll have literally high of day volume, the most volume out of any of the five minute candles, at the bottom of the sell off or at the top of the run up, the RSI should be at extremes above 90 below 10, and that final candle should be outside the Bollinger. Bands. So once we have our entry requirements listed, we have to look for an actual entry.

An entry for me is going to be the first one minute or the first five minute candle to make a new high. So when we've had a big run of consecutive candles, making new lows, candle after candle, the first candle it makes the new high is really significant. That's my entry point. Now, there are times where I'll use the 1-minute chart if we have five consecutive red candles on the five-minute chart, and we have 20 consecutive red candles on the one-minute chart.

I'll use the one-minute to time my entry, but typically I'll wait for the 5 minute because it's better confirmation. The 5 minute chart is cleaner. So the first 5-minute candle to make a new high is where I get in the reversal with a stop either at the low of day or simply down twenty thirty cents. Usually if a stock goes thirty cents against me I sort of admit defeat I Think that I miss time my entry and I might as well just try again rather than continue to hold.

So there are times where I'll simply use a twenty or thirty cent arbitrary stop if the load day is too far away. and that may be the case on stocks that are more expensive or that are just simply more. Now once you're in one of these trades, your exit indicators are pretty simple. If the stock pops up and then suddenly moves back down on a bottom bounce, you stop out for a loss.

All right, if you jump in the stock and it ends up just going sideways, it's a good indicator that we're probably getting a flag. A bear flag. and that's an indication that the price is probably going to continue to drop. So if I get in, I hold for a few minutes and the price stays flat I get out if I get into the profit zone I can start adjusting my stop first to break even and then to the low of the last 5-minute candle.

Once I'm in the profit zone and I'll keep adjusting my stop as I move up All right now. I'll give you a couple examples here and then we'll go over a trade that I did in real time. All right. here's a bottom bounce alerted on the scanners, a big sell-off followed by that long bottoming tail at the bottom, and that nice reversal.

Another sell-off here. Strong sell-off bottoming out. We don't get the perfect doji at the bottom, but we do have high volume and then the move back up to the V web, this orange dotted line, this example that we had on the first page, the big sell-off doji pinbar at the bottom, and the big return back up again. We found this on our scanners.

Okay, right here. a sell-off out of the gates, a gap down sell-off catching the bottom. $85 and 68 cents was our long entry. We got to move up to eighty six dollars and fifty cents for one point.

Twenty cents top $1 profit. That's a really good profit loss ratio. Another quick sell off. That final candle at the bottom doesn't take the form of the perfect doji.

They're not always a perfect setup, but when we line up the other indicators, the low, RSI, the consecutive 5-minute candles, and potentially resistance or support areas on the daily chart, we can help build a case for taking the trade, even if not all of the indicators are lined up exactly right now. the same as bottom reversals top reversals. We're going to look for that big rubber band, the big move to the upside, and then the quick pullback. Now I'm along biased trader I like to be long most most of the time when I'm trading and I feel that a lot of retail traders are like that and it means that stocks can be irrationally strong.

People continue to buy them up, buy them up, and they just run much further than seems logical. So I allow the stocks to be irrationally strong. But once they start to show the weakness indicated by the doji's I'll look to take a short position with a stop at the high a day and trail that stop coming back in. And like I said, the move up that may have taken hours can get give can.

the move up that may have taken hours can be all given back in a matter of minutes. On the good: top reversal right, the Bulls take the stairs and the Bears take the window so the sell offs can be very quick. This was a really nice reversal with the doji up at the top indicated again on our scanners. another top reversal with the doji at the top, the pin bar.

easy two-to-one profit loss ratio. And here's a top reversal that wasn't as obvious. We didn't have that really clean pin bar, but we were hitting a level of resistance that was notable on the daily chart along with the whole dollar $43 and that made sense for a potential short take a stab. We took the stab.

We ended up making over two points. Really nice return. Another candle here up outside the Bollinger Bands these Bollinger Bands are bold to make it easier to see really nice reversal here. a grinding stock all morning and into lunch, finally peaking around 1:15 and then a big sell-off coming from 1:15 to 2 P.m.

right? So we can't always time when the momentum will strike, when these stocks will suddenly make a big burst up why it happened here and it didn't happen an hour earlier. Impossible to know, but once it starts to happen I start thinking, when will this reverse and when can I short it now I Also, trade momentum and that's one of our other strategies and this is a good example of a stock that was excellent for a top reversal and then once it started consolidating here along the moving average, it's a good opportunity to sell or cover the short position and flip long, get back in because now it's actually showing strength, consolidating and flagging along the moving average and now flip long for a move back up to the highs and we do that a lot. We'll get into stock that is a great reversal trade and then it ends up turning into a momentum trade once the reversal gets rejected, but other times you'll see stocks that end up really breaking those moving average support lines and sometimes selling off for the rest of the day. Alright, so the goal of Reversal trading is to get an entry with a tight stop as tight of a stop as possible.

Set the stop, let it ride, adjust your stop as you're in the profit zone, Rinse and repeat. Do it again and again. We do it every single day in our live chat room. Anyone with questions, please feel free to email me Ross at Warrior Trading com.