Wide Range Reversal Climax on
Intraday Charts
January 25,2020
Linda Raschke
Linda Bradford Raschke,
LBRGroup, LindaRaschke.net
Risk Disclosure
Futures’ trading contains substantial risk and is not for every investor. Risk
capital used to trade Futures is money that can be lost without jeopardizing
one's financial security. PAST RESULTS ARE NOT NECESSARITLY INIDCATIVE
OF FUTURE RESULTS WHEN PAST PERFORMANCE IS MENTIONED. The
contents of this webinar provided, displayed or conveyed in this presentation
is not intended to guarantee success or positive results using this material and
information. Linda Raschke is not responsible for the accuracy of this material
in this presentation and it is only the opinion and trading strategies used or
acquired by Linda Raschke. This is presentation is demonstrated using historic
data and PowerPoint slides. This may be considered a solicitation for
business. There are no claims or use of trade history or P&L from past
performances used in this webinar.
Copyright Notices
This presentation is copyrighted:
© 1996 – 2020 LBRGroup / Linda Raschke
All Rights Reserved.
Certain chart images are copyrighted © CQG
Certain chart images are copyrighted © TradeStation
Certain chart images are copyrighted © PhotonTrader
Linda Raschke
President, LBRGroup, LindaRaschke.net
Linda Raschke is a professional trader with over 39 full-time years trading futures,
equities and options in numerous global markets. She started as a market maker in
equity options with memberships on the Pacific Coast Stock Exchange and the
Philadelphia Stock Exchange. Her unique, self-developed strategies served as the core
program for 24 years of successful money management. Her hedge fund was ranked
17th out of 4500 for best five-year performance by BarclayHedge. She was recognized
in Jack D. Schwager's book, The New Market Wizards: Conversations with America's
Top Traders. She recently released her own book, Trading Sardines: Lessons in the
Markets from a LifeLong Traders, (available only on her website LindaRaschke.net)
Original Wide Range Reversal Model on for Daily data.
1) Bar makes the widest range of the past 4 days.
2) In the case of a down trend, the HIGH of the bar must be taken
out either the next 1 or 2 days.
3) This creates a “v” spike
4) The initial low is the most recent swing low.
5) Trail a stop up – the lowest low of the last 7 bars till stopped
out.
This is a model, not a mechanical system, but it did prove to be
profitable year after year on a basket of 16 futures markets.
Examples of Wide Range Reversals on Crude: The best trades
occur at the Keltner Channel boundaries. The higher the time frame,
the lower the frequency of occurrence.
Wide Range Reversal Buy or Sell = Widest Range of the last 4
days which takes out its low or high within 1 or 2 days creating
a “V”.
We are fading price extremes in a trading range.
Price is always our main indicator
Keltner channels are an ATR function. The majority of my price
patterns that have stood the test of time are based on ATR
functions (average true range) or other range functions as
opposed to oscillators.
Indicators may or may not help with confidence levels.
Volume may or may not add any significant information.
Indicator Settings:
Keltner channels: 20 EMA with 2.5 ATR bands.
You may or may not find an oscillator useful. Often an oscillator
will appear to be making new momentum highs or lows at
extremes of a swing.
The real trap is in looking for flags or continuation patterns when
there has been a strong price rejection spike.
Volume can draw the eye to a wide range bar as there is usually
an increase in volume. It does not have to be climax volume
though.
Stay at least one time frame above the noise.
Look for the traps or mini climaxes to happen on 30, 60, 120 or
240.
Don’t make countertrend trades when there is no overhead
supply or support levels below. Context is everything.
Use two time frames. The higher one should show
support or resistance level. Place initial stop on the lower time
frame above first reversal bar. Initial target = last pivot point.
You can use CLOSE outside of Keltner Channels or a spike through
them where the bar has above average range. Wait for a reversal
bar. Enter at the pivot on the WRR bar. Stop goes on the other side
of the reversal bar.
These trades are easiest to enter via buy or sell stop that pulls
you in. Don’t wait for a retracement after a WRR point is hit – the
good ones wont give one.
The initial trade location will feel terrible! Thus, look to scale out
of half to lower your basis. This will allow you to stay with the
higher time frame for a longer period of time and not get jiggled
out on noise.
You must develop your own process for trade management.
Different techniques work for different people given their
psychological makeup.
Resistance shows on higher time frame.
The green line on the 240 shows where the trade was taken. The
trigger was on the 120 minute. Though it looks like the 240 minute
was in a strong downtrend, the daily charts had higher lows and this
was a retracement into a pocket area, providing strong support.
Pivot!
pivot
Here is an example of a legitimate signal on the 30 minute chart where
there was no higher time frame resistance. The context did not support making a
trade at this level, even though the trader could have scalped a few ticks. This is
not a scalping pattern.
This was an interesting case where the wide range bar closed right
at the Keltner Channel. The entry was at the low of that WR bar. Note:
you did not get a second chance to enter at the sell stop trigger.
The BUY at the lower Keltner could have been taken when price
came above the high. The short trade only had good context after the
trap was made. Buy on the right side fit the criteria since the price
does not have to close below Keltner. High of WR was taken out.
Context on the sell at the top was marginal since the daily
chart was making highs and there was not resistance at the
time. The Buy setup at the bottom was very clean.
Context on 60 minute GC Buy showed buying in support area.
It led to marginal results though. You can see the WRR in the middle
of the chart. Up to you to see if those work for you or not.
CD off report number this AM…early rally was into well
defined resistance level. Maybe one out of 20 trades gives a
reaction like this! Opposite of the previous chart example.
Stay at least one time frame above the noise.
All Technical trading looks easy in hindsight when we can see
what has happened. As the price patterns unfold, though, there
is lots of uncertainty.
With any new idea, you must study it and make it your own. Don’t
take someone else’s word for it. Examine the frequency of
occurrence. Come up with your own trade management style and
stick with it. You must have a consistent approach in order to
build up confidence.
There are no right or wrong parameters. You can try different
settings on Keltner channels. But the range on a wide range bar
is black and white. This is an easy pattern to program into
programs like Trade Station to give an alert.
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