5 Bar Reversal Buy Setup

January 17, 2012 by admin Filed under Education

The 5 Bar Reversal Buy Set up should be one of the primary tactics in your trading tool box.

This tactic is great for picking up nice gains against the prevailing trend.

This set up is deadly in all time frames ranging from the 5 minute to daily charts.

What To Look For:
- 5 or more consecutive lower highs or red bars.
- The stock trading well below the 20ma. (In any time frame)
- A reversal bar. (bottoming tail or narrow range bar)
- Volume increase.

How To Trade It
- Buy when the stock trades above the previous bar’s high.
- Place a stop directly below the previous days bar or the entry bars low depending on how much risk you are willing to take.
- Look to exit at the 20ma or previous minor resistance area.