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Reversal Trade Strategies: Entry & Managing Expectation

Bund Block Reversal 14 March 2018

The way a market reverses a move depends very much on how the market finds and reacts to an extreme before the reversal – a fast high energy move into a level is more likely to create a similar energy reaction and possible reversal, whereas a market that becomes lethargic at an extreme exhibits a more steady, measured reversal. Appreciating the characteristics of order flow and technical set up at an extreme, will not only inform where an entry is but the expectation of how the trade will progress.

Bund traded in a block at the lows on 14/3/18, price action was lethargic and could not continue the move lower; this creates positioning that can be reversed as the market moves out of the block to the upside – the lethargic nature of the low means that positions don’t rush to get out, instead shorts are slowly exited creating a sustained grind that could be hard to hold a trade through without prior knowledge of the price action context beforehand.

This live Axia daily debrief takes in a blocking move higher in Bunds, looking at where trades can be entered, expectation of trades based on price action and how resistance consistently turns into support.

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