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How to Trade Extreme Reversals and VWAP Reversals

| Published: 10/9/19

In our community, we trade two types of reversals:

  1. VWAP reversals (or as Brian coined the them: Double Bottom Reversals)
  2. Extreme Reversals (or as Robert coined them: Booty Reversals)
Brian and I usually trade VWAP or Double Bottom Reversals as we are both momentum traders at the Open. Robert and William trade Booty Reversals.

As you may know, today I slept in and got to the trading station a bit late, around 11 am. I saw X was selling off heavily and since I had already missed the Open, I decided to look for good candidates for Booty Reversals. I traded 2 reversals on X. The first one did not work, but the second one worked quite nicely.

Have a look at my recap from today to see how I traded.

Here is the criteria to keep an eye out for:

  1. There’s an extreme sell off for at least 60 minutes
  2. Once that happens, wait for indecision candlesticks on both your 15-minute and 5-minute chart
  3. Your entry criteria is then:
    • a new 15-minute high
    • a new 5-minute high
    • a cross-over of 9 or 20 EMA and 50 SMA on a 1-minute chart
Often (a) and (b) will not happen at the same time, so it is best to be patient and wait for criteria (c) to ensure you get the best entry.

4. Stop loss: below 50 SMA on a 1-minute chart, or the low of the day, or a new 15-minute low
5. Profit target: your final target is VWAP, but partials can be done in moving averages on your 5-minute chart

Just like any other strategy, getting a solid entry in this particular strategy is more of an art than science, and it definitely comes with experience and practice.

Do you see The boot in my 15-minute chart?

Below, you can review my trade on X with arrows showing my entries and exits. As I mentioned above, getting good entries requires experience, and sometimes a few stabs. For me, my first trade was not a good entry and I got myself stopped out (I could have stayed in there, but I had too much size). I then later went long again when I saw the bounce from the moving averages.