The ZoneTraderPro Reversal trade is a low risk high reward trade. In a typical reversal a trend trade will trade to the opposing intermediate zone and the market will reverse.

The example below is the perfect setup into a reversal trade. The TICK strategy and the web site statistics from the web site will make the trade setup a low risk trade. The TICK strategy for this trade starts with the counter trend trade that has a lower high TICK of 614, which is why the trend trade failed and had 5 ticks of adverse excursion. When the trend trade made its' low, the TICK was a -705, which was lower than the previous -629.

The next important point of this setup comes from the web site statistics. If there is a 4 tick adverse excursion, there is less than a 9% chance the trend trade will succeed. Five ticks have less than a 6% chance, and 6 ticks or more have less than a 4% chance of success. A successful winning trade is defined as 6 ticks. The thin red line (drawn where the TICK is reading 510) represents where the trend trade would be a 6 tick winner.

So as the market trades to the red intermediate resistance zone, where the Reversal trade is indicated, the risk is 4 ticks, and the statistics indicate that in about 5-6% of the time, this stop will be hit. An additional positive indicator of this trade is that as you make your decision to trade, the TICK can only reach a 510, which is lower than the previous 614.

Another very common pattern, and very profitable pattern, is the reversal trade that follows an Exhaustion pattern. Because an Exhaustion pattern normally marks a market top or market bottom, this trade is a test of the top or bottom.

In the example below, we first have the Exhaustion pattern marking the high. Any Trend trade that follows an Exhaustion trade is, by definition, a High Risk Trend trade, and that is identified on the chart below. The high risk trend trade has 5 ticks of adverse excursion. Your stop would have been 4-5 ticks away, and your profit target over 2 points away. Then a third short trade is good for an additional 2 points of profit. In all 3 of these trades you had no adverse excursion.