Oil Setup from Friday

by 19:55 4 comments
I mentioned in my other post from Friday that I had an Oil chart I'd like to post, wanted to post this yesterday but didn't get a chance, here it is now!

I'm posting this as it highlights a different type of entry that a friend uses on a regular basis and i've just started looking into myself. We see reversals on the chart all day long, real, fake, poor examples, all sorts. I'm looking into taking entries based on the "text book" reversal. There are a few rules attached to the entry of course but with these I should hopefully get some more entries. I've found they're particularly common in a fast moving market where perhaps the market doesn't pause to give us a test for a long or a no demand for a short. As is the case with this chart.

Anyway, on this 5min Oil chart from Friday you'll see I have a couple of Fibs from bar A and from bar B. Both of these bars had the highest volume at the time of the reversal, just before the drive down.

The rules attached to the reversal for a short are as follows; Bar 1 has an increase in volume closing near the highs. Bar 2 makes a higher high before closing on or near it's lows. Bar 2 has less volume than bar 1.

(opposite for long positions)

This, coupled with the obvious resistance at the high of A and the reversal appearing at the 50% of A made for a really good entry. Which of course I didn't actually take, or to be honest even see until it was too late.

USOil 5min



28. Forex. Trading. Music. Beer. Food. Travel.


  1. The ideal entry for me would be a short as the price went below point B. That's a nice 5 min reversal pattern as well a continuation trade with the general trend in the morning. Although I don't think I would place too much emphasis that the second bar must have less vol than the first bar or that the second bar must have a higher high. As Al Brooks would put it, "close is close enough".

  2. I realise we probably trade differently but I tend to look for No demands for shorts and No supply / tests for long positions, break outs just don't sit with me, which is why i'm looking at these reversals as another type of entry for fast moving markets like this was.

    Sure, i've attached a lot of rules to these but it's through talking with other people and observing what seems to work well, coupled with VSA teachings. The second bar having a higher high to me shows an attempt to push up off the back of the first bar and then failing and collapsing to it's lows. That's the thought process behind it anyway. The lower volume is to make sure there isn't any hidden buying as a result of the quick push down.

  3. Hi Liam, I didn't mean to imply that your rules are not valid. In fact, the reasoning behind them makes perfect sense. Just giving you what would've been my thought process on that trade.

  4. Oh I realise that, the thought process and comments are welcomed! Hope you got on well today!