Many years ago I played Tug of War, a game where two sides, using a long strong rope, sought to pull the opposing side across a line between the two groups. A ploy to trick the other side soon developed – we called it “Fake and Reversal”. The strategy is simple – suddenly intentionally give up a little ground, but quickly reverse and catch the other side off guard. This tactic would often result in gaining back the intentionally lost ground – and a lot more – very quickly.

I see such a movement take place often in FOREX trading. When a pair has made a very large move in one direction, the pressure builds up for a reversal move – price wants to oscillate up and down even if trending in one direction. FOREX markets are prone to follow the trend tenaciously – until it finally reverses. When I see an extended FOREX move on my primary intra-day trading chart I am automatically alerted to start watching for the signs of a trend reversal.

A FOREX trend reversal sometimes happens as a “Fake and Reversal” move. Price will suddenly move rapidly in the current trend direction only to quickly reverse and move in the opposite direction – often for a considerable amount in a very short period of time. All of those trend following traders in FOREX (and there are tons of them, especially the robots) must quickly react to this change of trend and this can cause a really nice move in the new trend direction as they reverse positions.

A savvy trader can catch a very nice ride if they get in on a Fake and Reversal move very early. TBL is a great way to spot such scenarios and you can learn all about how it is done in my eBook, See the Music of the Market – which is currently available at a great discount. www.tradingbetweenthelines.com

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments Protected by WP-SpamShield Spam Blocker

See the Music of the Market

The unique trading method that is Trading Between the Lines