How it Works

The reversal levels offer a systematic approach to investing and trading that is effective and easy to use. Because it is based on end of day data you can enter your orders before markets open and you don't need to sit in front of a trading monitor all day. This is not a get rich quick method, but you can use it to get rich slowly.

Reversal levels are not ordinary moving averages. They are calculated quite differently, using a proprietary algorithm. The levels are designed to keep us in trending moves longer without getting stopped out too frequently. In practice this method rarely misses out on big trending moves. The price we pay for that is in the small losses we take when a stock keeps chopping sideways.

Basic concept.
A stock is considered bullish as long as it keeps closing above its reversal level. Conversely a stock is bearish as long as it keeps closing below its reversal level. The reversal levels are recalculated at the end of every day and week, and sent out to our subscribers well before the market opens.

The color codes in the tables indicate the current weekly Trend (Tr) and daily Mode as follows:
* Green: bullish with upward momentum (MoM). Stock is above its reversal level and rallying.
* Pale Green: weak bullish with downward momentum (MoM). Stock remains above its reversal level, but is starting to pull back. Consolidation or start of a correction.
* Red: bearish with downward momentum (MoM). Stock is below its reversal level and moving lower.
* Pink: weak bearish with upward momentum (MoM). Stock remains below its reversal level, but is trying to bounce back. Sideways range or start of a rebound.

What to expect in practice?
A standard buy signal occurs when mode changes from red (or pink) to green, and then the stock is held as long as the mode stays green (or pale green). That can be days, weeks, months... as long as the stock stays above its reversal level. So, the idea is not to buy any stock that shows in green mode in our tables. We need a crossing of the reversal level (on a closing basis) for a Buy (or Sell) signal to be triggered.
The advantage of this method is that it captures almost every big trending move in any stock or index. The reason is clear: a stock will usually not embark on a big up move without crossing above its reversal level (which triggers a Buy signal). The only way a big move might be missed is when a stock makes a jump overnight (for example on take-over news).
The second advantage of this method is that it will help us avoid most significant bear markets in a stock or index. The reason is the same: a stock will usually not have a big decline without crossing below its reversal level (which triggers a Sell signal). The only way we can get caught in a big drop is when a stock we own crashes overnight. Fortunately that doesn't happen very often.

By riding out the big moves while avoiding most big declines we are putting the odds in our favor, but this comes at a price. Sometimes we will take a series of small losses when a stock is hovering sideways and not making any trending moves. Then the moves are too small and the method cannot lock in any profits. So, that's something to be ready for with this method of investing. Trading for fewer (but bigger) wins always requires a certain level of mental toughness and the patience to wait for those favorable periods when the trending moves come. We keep taking our chances and over time we are rewarded. Most of the gains for a year will often come in just two or three months.

This standard strategy generates approximately two losses for every win, but the average win is much bigger than the average loss. You can check out our weekly and daily tables to see what kind of profits and losses you can expect. This is as transparent as we can make it for our readers.

Shorter term trading.
Traders who prefer quicker action with a higher % of winning trades can use our speculative Buy signals (spBuy) and trade for the QuickTargets that are given in the tables. That gives smaller but more frequent winners and can give up to 70% winning trades if you follow our instructions. The speculative Buy signals can also be used to pick up stocks near major bottoms with the aim of holding them longer term. Our strategy articles provide instructions for this type of "bottom fishing".

Are reversal levels for me?
Generally speaking this service is for investors and traders who know which stocks they want to own or trade, but are looking for a practical way to improve the timing of their buying and selling. Reversal levels can be used by different types of investors and we give strategies for each type. Further details about strategies can be found here: http://www.reversallevels.com/p/strategies.html.

We use a "convince yourself" approach instead of spending money on aggressive marketing. The weekly reversal levels are posted on this blog every weekend. You can use them for longer term market orientation. Our daily blog post gives the reversal level signals for a small demo portfolio. Watching our calls and results over a period time is the best way to figure out what this method can do for you.

If you are trading a very small account then it will not make sense to pay $200 per year for any kind of subscription. Then it is better to trade the free signals we post on this blog until you have a bigger account.

The daily reversal levels for more than 2700 stocks and etf are available by monthly subscription. Once a month we give out a free sample of the file that gets sent to our subscribers. They can be found at the bottom of this page.

If you have any questions or remarks, please post them in the comments section below.

10 comments:

  1. It's not clear what the $1.50 charge is for. A day, week, month or year?

    ReplyDelete
    Replies
    1. Hi,

      $1.50 is for one day. Some people want to pick up the daily reversals levels once a week and we give them the chance to do so.
      There is also a monthly subscription, which can be found here: https://gum.co/JDpA

      Danny

      Delete
  2. Hi,

    would you have any indications of the past performance of your model?

    Thanks,
    Johan

    ReplyDelete
    Replies
    1. Hi Johan,

      Past results can be fabricated. Even if they are real, there is no guarantee that they can be repeated in the future. So I would never rely on past results that are published on websites.
      That's why we make everything transparent. You can see our current results on a daily and weekly basis in the "P/L%" column in the reversal level tables. You can verify the tables we post every day for major indexes and for a selection of popular stocks. That should give you a good idea of how it works in practice.

      Danny

      Delete
  3. What is your average return per year? Mine is 20,000% in Q1

    @msblockbuilders

    ReplyDelete
    Replies
    1. Results achieved with this method will depend on which stocks you chose to trade, which strategy you chose, and how much leverage you use.
      The signals for selected stocks are posted every day free, so people can always check the current results whenever they want.

      20000% in 1 quarter is only possible with leverage and probably rather concentrated positions with high risk. Anybody who makes 20000% per quarter would rise to the top of Forbes wealthiest person list within a year, even if he starts out with only $1000. But somehow it are Gates and Buffett that keep topping that list year after year and no stock traders are even coming in top 100. Even with "only" 1000% per year one would surpass gates within a few years, but nobody seems to be doing it.

      Delete
  4. Hi again,

    tried to send you an email on this but so far no reply.

    I wonder primarily about how important the partial profits are for performance and drawdown, can they be skipped altogether, or are they very important? If so how big a chunk would you recommend unloading when pP happens?

    Thanks,
    Johan

    ReplyDelete
    Replies
    1. Hi Johan,

      I was on the road today. My answer should be in your mailbox now.
      Basically, whether to use the partial profit signals or not depends on investing timeframe (swing trading or long term investing) and on the type of stock you buy.
      Will explain this topic in more detail when time permits.

      Danny

      Delete
  5. Dear LunaticTrader, I have some questions. There is no problem for me to subscribe (for 1 month) to your system, I like it. May I ask my (I believe simple) questions to understand how can I use the system? Thank you in advance

    ReplyDelete
    Replies
    1. Hi Valentin,

      Yes, you can always post your questions. Either here, or as a comment to my daily post.
      I would even say it is better to ask your questions first and then subscribe later when you understand how to use it in your trading.

      Danny

      Delete