Dynamic Reversal Guide

Dynamic Reversal are sophisticated mathematical calculations that identify potential market turning points using multi-period highest and lowest price analysis. RelicusRoad Pro’s implementation provides three distinct period ranges (Small, Medium, Large) to capture reversals across different market structures and timeframes.

Understanding Dynamic Reversals

What Makes Them Dynamic

Unlike static support/resistance levels, Dynamic Reversal:

• Continuously recalculate based on recent price action
• Adapt to changing market volatility
• Identify both immediate and swing reversals
• Use mathematical precision to filter noise
• Provide early reversal signals before traditional indicators

The Three-Tier System

Small Period Reversals (Default: 9 bars)

• Capture micro-reversals and scalping opportunities
• Quick reaction to short-term momentum shifts
• Ideal for M1-M15 timeframe trading
• Higher frequency signals

Medium Period Reversals (Default: 60 bars)

• Identify swing trading reversal points
• Balance between noise and reliability
• Perfect for H1-H4 timeframe analysis
• Moderate frequency with good accuracy

Large Period Reversals (Default: 156 bars)

• Detect major trend reversal points
• Highest reliability, lowest frequency
• Suitable for H4-D1 timeframe trading
• Long-term structural changes

Visual Representation

Circle Markers:

• High Reversals: Appear above price at local highs
• Low Reversals: Appear below price at local lows
• Size Coding: Larger circles = longer period reversals
• Color Coding: Different colors for each period type

Labels (Optional):

• HH(X): Higher High with period length
• LL(X): Lower Low with period length
• Period number shows calculation range

How Dynamic Reversals Work

Reversal Detection Process

Dynamic Reversals analyze price patterns over multiple periods to identify significant turning points:

Period Analysis:

• Small Period (9 bars): Quick reversals and short-term pivots
• Medium Period (60 bars): Medium swing points
• Large Period (156 bars): Major structural reversals

Detection Logic:

• Identifies highest and lowest prices within each period
• Confirms genuine reversals vs. minor fluctuations
• Filters noise to show only significant turning points
• Prevents duplicate signals in the same area

Quality Control:

• Only the most significant reversal per period is shown
• Newer reversals replace weaker ones in the same range
• Ensures clean chart display without overcrowding

Multi-Timeframe Operation

Dynamic Reversals can operate on any timeframe while calculating from different chart periods:

Input Timeframe: PERIOD_CURRENT (default)
Calculation Options:
- M1: Ultra-fast reversal detection
- M5: Scalping reversal points
- M15: Intraday swing reversals
- H1: Session-based reversals
- H4: Daily structure reversals
- D1: Weekly structure analysis

Core Trading Strategies

Strategy 1: Small Period Scalping

Focus on 9-Bar Reversals for Quick Profits

Perfect for active traders seeking frequent opportunities with tight risk control.

Setup Requirements:

• M1-M5 timeframes
• High liquidity pairs (EUR/USD, GBP/USD)
• Active trading sessions (London/New York)
• Tight spreads (≤1 pip major pairs)

Execution Process:

1. Signal Identification: Small period reversal appears
2. Confirmation: Wait for next candle to confirm direction
3. Entry: Enter on confirmation candle close
4. Stop: 8-12 pips beyond reversal point
5. Target: Next reversal level or 2:1 R:R minimum

Example Trade:

EUR/USD M5 Chart Setup:
Small Low Reversal at 1.0845
Next candle: Bullish engulfing at 1.0847

Execution:
- Entry: Buy at 1.0848 (candle close)
- Stop: 1.0835 (13 pips below reversal)
- Target 1: 1.0874 (2:1 R:R = 26 pips)
- Target 2: Next Small High Reversal

Result: +26 pips in 45 minutes
Risk: 13 pips, Reward: 26 pips (1:2 R:R)

Strategy 2: Medium Period Swing Trading

60-Bar Reversals for Intraday Swings

Ideal for traders seeking balanced frequency and reliability with moderate holding periods.

Optimal Conditions:

• H1-H4 timeframes for analysis
• M15-H1 for entries
• Major and minor pairs
• Clear trending or ranging conditions

The Swing Setup:

1. Trend Analysis: Identify overall market direction
2. Reversal Signal: Medium period reversal against trend
3. Confluence Check: Align with support/resistance
4. Entry Timing: Use price action for precise entry
5. Management: Trail stops with structure

Example Trade:

GBP/USD H1 Analysis:
Uptrend in progress, pullback to support zone
Medium Low Reversal appears at 1.2650 support

Setup Confirmation:
- Bullish divergence on RSI
- Volume increase on reversal bar
- Previous support level holds
- No major news in next 4 hours

Execution:
- Entry: Buy at 1.2655 (break of reversal high)
- Stop: 1.2630 (below support and reversal)
- Target 1: 1.2705 (previous resistance)
- Target 2: 1.2740 (trend continuation)

Management:
- 50% profit at Target 1 (+50 pips)
- Trail remaining 50% with 20-pip stop
- Final exit at 1.2730 (+75 pips average)

Total Result: +62.5 pips average
Risk: 25 pips, Reward: 2.5:1 average R:R

Strategy 3: Large Period Trend Reversal

156-Bar Reversals for Major Structure Changes

Designed for position traders and those seeking high-probability, low-frequency signals.

Structural Analysis:

• D1 timeframe for trend context
• H4 for reversal confirmation
• H1 for precise entry timing
• Multiple confluence factors required

The Major Reversal Setup:

1. Trend Exhaustion: Identify overextended moves
2. Large Reversal: 156-bar reversal appears
3. Multiple Confirmation:
   • Volume spike on reversal
   • Momentum divergence
   • Key level interaction
   • Fundamental alignment
4. Position Entry: Staged entry approach
5. Risk Management: Wide stops, long-term view

Example Trade:

EUR/USD Daily Analysis:
6-week uptrend from 1.0500 to 1.0950
Large High Reversal at 1.0948 after ECB meeting

Confluence Analysis:
- Bearish divergence on daily RSI
- Volume spike on reversal day
- Previous major resistance at 1.0950
- Fundamentals shifting bearish

Execution Strategy:
Entry 1: Sell 1.0940 (25% position)
Entry 2: Sell 1.0930 (50% position) 
Entry 3: Sell 1.0945 (25% position) - retest

Stop Loss: 1.0980 (above reversal + buffer)
Target 1: 1.0850 (previous support)
Target 2: 1.0780 (major support zone)
Target 3: 1.0700 (trend retracement)

Management:
- 30% profit at Target 1 (-90 pips)
- 40% profit at Target 2 (-160 pips)
- 30% trail to Target 3 or trend change

Result: -130 pips average per position
Risk: 40 pips, Reward: 3.25:1 R:R

Strategy 4: Multi-Period Confluence

Combining All Three Periods for Maximum Probability

When multiple period reversals align, probability increases significantly.

Confluence Types:

Triple Alignment:

• Small + Medium + Large reversals within 10-15 pips
• Extremely rare (1-3 times per week major pairs)
• Highest probability setup (80%+ success rate)
• Justifies larger position sizes

Double Alignment:

• Any two periods align within 20 pips
• High probability (70%+ success rate)
• Good risk:reward opportunities
• Regular occurrence (2-3 times daily)

Sequential Alignment:

• Reversals appear in sequence over time
• Medium period followed by Large period
• Confirms trend change in progress
• Extended profit potential

Trading Confluence:

EUR/USD M15 Chart:
Small Low Reversal: 1.0832
Medium Low Reversal: 1.0835
Large Low Reversal: 1.0830

Analysis:
- All three within 5 pips (high confluence)
- Coincides with daily support zone
- Volume spike on Large reversal
- Bullish divergence across all timeframes

Position Sizing:
- 1.5x normal position size
- Tighter stops due to confluence
- Multiple targets for scaling out

Execution:
- Entry: 1.0838 (break of confluence high)
- Stop: 1.0820 (below all reversals)
- Target 1: 1.0865 (1:1.5 R:R)
- Target 2: 1.0892 (1:3 R:R)
- Target 3: Trail remaining position

Expected Result: 1:2.5+ R:R
High probability: 80%+

Advanced Reversal Analysis

Reversal Strength Classification

Weak Reversals:

• Single period reversal only
• Low volume on reversal bar
• No additional confluence
• Trade with caution, small size

Moderate Reversals:

• Two period alignment OR
• Single period + strong confluence
• Standard position sizing
• Good risk:reward potential

Strong Reversals:

• Triple period alignment OR
• Double period + multiple confluence
• Increased position sizing (1.5x)
• Highest probability trades

Volume Analysis Integration

High Volume Reversals:

• Above average volume on reversal bar
• Indicates institutional participation
• Higher probability of follow-through
• Suitable for larger positions

Low Volume Reversals:

• Below average volume
• May indicate false signals
• Use smaller positions
• Require additional confirmation

Momentum Divergence Confirmation

Bullish Divergence at Low Reversals:

• Price makes lower low
• Momentum indicator makes higher low
• Confirms reversal strength
• High probability bounce setup

Bearish Divergence at High Reversals:

• Price makes higher high
• Momentum indicator makes lower high
• Confirms reversal strength
• High probability reversal setup

Session-Specific Applications

London Session (3:00-12:00 GMT)

Characteristics:

• Highest volatility period
• Most reversal signals generated
• Best for all period types
• Strong follow-through potential

Optimal Strategies:

• Small period scalping
• Medium period swing entries
• Large period confirmation
• High-frequency trading suitable

Execution Notes:

• Spread awareness during open
• News impact consideration
• Volume confirmation critical
• Quick decision making required

New York Session (13:00-22:00 GMT)

Characteristics:

• Continuation of London moves
• USD pair focus
• Potential reversal exhaustion
• Institutional participation

Optimal Strategies:

• Large period trend reversals
• Medium period retracements
• End-of-day positioning
• Cross-pair analysis

Asian Session (22:00-8:00 GMT)

Characteristics:

• Lower volatility environment
• Fewer reversal signals
• Range-bound conditions common
• Conservative approach needed

Optimal Strategies:

• Small period range trading
• Consolidation reversals
• Conservative position sizing
• Major pair focus only

Risk Management Protocols

Position Sizing by Period Type

Small Period Reversals:

• High frequency = smaller size
• 0.5-1% account risk per trade
• Quick in/out approach
• Multiple opportunities daily

Medium Period Reversals:

• Moderate frequency = standard size
• 1-2% account risk per trade
• Swing trading approach
• 2-5 trades per week

Large Period Reversals:

• Low frequency = larger size
• 2-3% account risk per trade
• Position trading approach
• 1-3 trades per month

Stop Loss Placement Rules

Technical Stop Placement:

For Low Reversals:
Stop = Reversal Low - (ATR × 0.5) - Spread

For High Reversals:
Stop = Reversal High + (ATR × 0.5) + Spread

Buffer Calculation:
ATR(14) = Average True Range
Spread = Current bid/ask difference
Safety = 2-3 additional pips

Time-Based Stops:

• Small period: 2-4 hours maximum
• Medium period: 1-2 days maximum
• Large period: 1-2 weeks maximum

Profit Taking Strategy

Systematic Approach:

1. Target 1: Next period reversal level
2. Target 2: Previous swing point
3. Target 3: Major structure level
4. Target 4: Trail with period-based stops

Scaling Out Method:

• 25% at Target 1 (secure profits)
• 35% at Target 2 (capture main move)
• 25% at Target 3 (extended profits)
• 15% trail to exhaustion

Integration with Other Indicators

Dynamic Reversals + Support/Resistance

Enhanced Confluence: When reversals align with S/R zones:

• Increase position size by 25%
• Tighten stop loss placement
• Expect stronger reactions
• Higher probability outcomes

Dynamic Reversals + Fibonacci Levels

Mathematical Alignment:

• Reversal at 38.2% = High probability
• Reversal at 61.8% = Strongest signal
• Reversal at 78.6% = Deep retracement
• Multiple level confluence = Maximum probability

Dynamic Reversals + Trend Analysis

Trend Confirmation:

• Reversals against trend = Retracements
• Reversals with trend = Continuations
• Multiple reversals = Trend change
• Volume confirmation critical

Performance Optimization

Statistical Analysis

Expected Performance by Period:

Optimization Guidelines

Period Adjustment:

• Increase periods for lower frequency
• Decrease periods for higher frequency
• Match to trading style and timeframe
• Test with historical data

Pair Selection:

• Major pairs: All periods work well
• Minor pairs: Focus on Medium/Large
• Exotic pairs: Large periods only
• Cross pairs: Medium periods optimal

Common Optimization Mistakes

❌ Over-Optimization

• Don’t chase perfect settings
• Use default periods initially
• Avoid curve fitting
• Focus on execution quality

❌ Period Mismatch

• Small periods on daily charts
• Large periods on M1 charts
• Wrong timeframe selection
• Ignoring market conditions

Practical Examples and Case Studies

Case Study 1: Perfect Small Period Scalp

EUR/USD M5 Chart:

Market Context:
- London session, high liquidity
- Ranging conditions between 1.0830-1.0860
- News calendar clear for next 2 hours

Signal Development:
Time: 09:15 GMT
Small Low Reversal appears at 1.0835
Volume: 15% above 20-period average
Price action: Hammer candlestick

Execution:
Entry: 1.0838 (break of reversal high)
Stop: 1.0828 (10 pips below reversal)
Target: 1.0858 (range top, 20 pips)

Result:
Target hit in 35 minutes
Profit: +20 pips
Risk: 10 pips
R:R achieved: 1:2.0

Case Study 2: Medium Period Trend Continuation

GBP/USD H1 Chart:

Market Context:
- Strong uptrend from Asia session
- Pullback to H4 support zone
- Medium period reversal confirmation

Signal Development:
Time: 11:00 GMT
Medium Low Reversal at 1.2695
Confluence: Previous support, 38.2% Fibonacci
Volume: Spike on reversal bar

Execution:
Entry: 1.2702 (break of reversal structure)
Stop: 1.2675 (below support zone)
Target 1: 1.2740 (previous resistance)
Target 2: 1.2775 (trend continuation)

Management:
50% profit at Target 1 (+38 pips)
Trail remaining with 15-pip stop
Final exit at 1.2765 (+63 pips)

Result:
Average profit: +50.5 pips
Risk: 27 pips
R:R achieved: 1:1.87

Case Study 3: Large Period Major Reversal

EUR/USD D1 Chart:

Market Context:
- 3-month downtrend exhaustion
- ECB policy shift expectations
- Major support zone approach

Signal Development:
Date: Daily close
Large Low Reversal at 1.0450
Multiple confluences:
- 200-day moving average
- Major Fibonacci support
- Weekly demand zone
- Bullish RSI divergence

Execution Strategy:
Entry 1: 1.0465 (25% position)
Entry 2: 1.0475 (50% position)
Entry 3: 1.0455 (25% on retest)

Stop: 1.0420 (below all confluences)
Target 1: 1.0550 (previous resistance)
Target 2: 1.0650 (major level)
Target 3: 1.0750 (trend target)

Management:
Week 1: Consolidation around entry
Week 2: Move to Target 1
Week 3: Pullback to 1.0520
Week 4: Rally to Target 2
Month 2: Continue to Target 3

Final Results:
Average exit: 1.0680
Average profit: +215 pips
Risk: 45 pips
R:R achieved: 1:4.78
Duration: 6 weeks

Troubleshooting and FAQ

Common Technical Issues

Q: Reversals not appearing on chart? A: Check these settings:

• Feature enabled in main settings
• Correct period inputs (9, 60, 156)
• Timeframe compatibility
• History bars sufficient
• Chart refresh/reload

Q: Too many reversal signals? A: Optimization options:

• Increase period lengths
• Add confluence filters
• Focus on specific periods only
• Increase minimum distance between signals

Q: Signals appearing late? A: This is normal behavior:

• Reversals confirm after calculation period
• Use lower timeframes for faster signals
• Combine with price action for early entry
• Accept slight delay for accuracy

Performance Questions

Q: Which period is most reliable? A: Depends on trading style:

• Day trading: Small + Medium periods
• Swing trading: Medium + Large periods
• Position trading: Large periods only
• Scalping: Small periods with tight stops

Q: How many trades per day expected? A: Typical frequency:

• Small periods: 15-25 signals
• Medium periods: 3-8 signals
• Large periods: 0-2 signals
• Confluence: 1-3 signals

Q: Best pairs for Dynamic Reversals? A: Recommended pairs:

• EUR/USD: All periods work well
• GBP/USD: Excellent for all strategies
• USD/JPY: Good for medium/large periods
• AUD/USD: Medium periods optimal
• EUR/JPY: Large periods most effective

Strategy Questions

Q: Can I use reversals for automated trading? A: Yes, but consider:

• Add confluence filters
• Include time-based filters
• Set maximum daily trades
• Monitor performance closely
• Use appropriate risk management

Q: How to combine with other indicators? A: Best combinations:

• RSI for momentum divergence
• Moving averages for trend context
• Volume for confirmation
• Support/resistance for confluence
• Fibonacci for mathematical alignment

Continue to Signal Lines or explore Advanced Strategies.