Reversal strategy for Option buyers (Option buying series)

[Music] hi guys welcome back to my YouTube channel as a part of option buying series I'm coming out with a new video that is reversal strategy for option buyers if you remember in the first video I said for option buyers when you buy a call option you need a immediate momentum on your side that mean you buy a call option immediate Market has to go in your side then only you can make profit if you buy a put option immediately Market has to go down then only you can make profit so that mean most of the time you should take breakout trades and if that breakout is real breakout then you can make big profit because momentum is very strong when breakout happens but in this video I'm going to discuss about a reversal strategy that mean it's not a breakout but a reversal strategy especially for option buyers and when I back tested it and you know that normally I back test it manually and I've seen that almost 70% win rate in this strategy and another good point about this strategy is you'll see very frequently this strategy on your chart after this video when you do the back testing about this strategy you'll see that this strategy works most of the time and it happens very frequently so now without wasting much time let us see what is this reversal strategy is all about okay this is the reversal strategy for option Biance first I'll discuss about the criteria which should be on your chart and the first criteria is applicable only when this first five minutes candle is a big bearish candle candle on 5 minutes time frame that mean the first candle of the day first 5 minutes candle of the day should be a big red candle it could be B candle like this without wig it could have a Wix on one side or it could have wick on both side it doesn't matter which side is the wig what matters most is the body of the candle if you see the body of the candle bigger than wig then this is the candidate for our strategy now let us see what is the next criteria next criteria once the first candle made a big bearish candle then you see price going up on higher side instead of going down price starts going up so what you should do is you should wait patiently for the retest of first red candle high at somewhere in midafternoon that mean this strategy is not applicable at the opening this strategy is most applicable at the midafternoon preferably with the series of bullish pin bars at the high of the red candle if you see this kind of setup on your chart that mean huge bearish candle after that there is no follow up on the downside rather Market is going up and when price comes near the high of the red candle you will see series of this kind of bullish pin bar if you see on the chart then that is the second criteria and now the third criteria is short entry once consolidation range breaks what is the consolidation range this is the consolidation range right so once that series of Pinar which I said you have to wait till the series of Pinar near the high of the red candle and Mark that range where it made a consolidation and your entry comes once big red candle comes and takes the and closes below the low of this entire range of the pin bar that is the entry so that mean next time when you see this kind of price action days first is a red candle then series of bullish candle and when price comes and start making a consolidation near the red candle high but doesn't break it okay it doesn't break the first candle High makes only consolidation then you will wait patiently for this kind of candle red body candle or a BAL candle this kind of candle which broken the range of this spin bar that is your entry okay so now before we go and see some real charts now let us see what is the psychology behind this price action you should remember that price action is not random there is always a psychology behind price action because Market goes up and down because of the buyers and sellers right when there are more buyers Market goes up when more sellers Market goes down so now what I'm going to explain here listen it carefully so that so that this strategy makes sense for you and next time you will also understand how to read price action on the charts okay first one days first big red candle signal of big players are bearish that day big players having the stop loss above that big red candle that mean whenever you see day opens with a big red candle that mean this red candle is formed by big players big players are bearish on that current day but big players can't fill millions of order quantity at one go due to liquidity so they silently keep accumulating at the higher price where they get better feel what I mean by that for example assume that bank Nifty opened at 42,500 okay assume that bank Nifty when opened 42,500 okay they shorted at the 42,500 and first candle only made say around 300 points down first candle only fell by 300 points okay remember when big players are buying or selling they don't buy or sell like in few hundreds or few thousands like a retail Traders do they don't buy and sell in few Lots like 10 Lots 100 Lots 50 Lots no they buy and sell in millions okay that mean they always Place big big orders that's why they can take market up or down so that mean assume that suppose this big players have a 10 million order he has to place sell order okay 10 Millions has to place sell order just remember that if you sell all 10 million here what happens it makes a huge red candle it makes a huge red candle maybe in the single candle only you will see almost 700 points down right and another thing is that entire 10 million will not get at this price since price is going down his 1 million get here is next 1 million get filled here next 1 million get filled here next 1 million get filled here next 1 million get filled here next 1 million get filled here like that he will not get at the best price what is the best price for him best PR price is when he get this price when Market over 42,500 that was the best price for him now he has to buy at 42,1 42,000 so that mean he has to buy here right so that what he should do to get his orders filled because if there is no liquidity his order will not get filled at the best price so he is interested only in filling around this rate right now what he will do along with the operator he will manipulate the charge that mean he will manipulate the price action along with the operator in such a way that price looks like it is making a reversal okay it looks like price is going up rather than going down that's what I mentioned in point three as price going higher retailers believe it's a bullish structure and they start buying aggressively you know when price is going up instead of going down retailers start aggressively buying here they aggressively buying why they start aggressively buying here because of the greed and fear what is the greed greed if you look at this price action it gives you an impression that in the live market eventually it is going to make a breakout it is making a consolidation and finally breakout happens right this is how it looks like in the real Market that's why retail Traders they become greedy they don't wait for the price to make a breakout rather they will start entering here only they'll start entering here only before the breakout before the Breakout because of the grid second thing is that because of the retailers suffer from fomo fomo mean fear of missing out so that mean the think that if I don't enter here and finally when breakout happens if candle makes like this then I have to buy here after the breakout if I buy here I'll get best price they will think in that way that mean before the breakout only they think that it is going to make a breakout and that is what big players also want you to believe that that mean they will manipulate the price action in this way making this kind of bullish can bullish Pinar candles to make you believe that market is going to make a breakout and same time what they do same time I told you that they may have 10 Millions order right 10 million order they don't want to sell it here right they don't want to sell it here they don't want to sell it here they will get better price here as retailers are buying here they silently accumulating here okay big players are silently accumulating at a higher price and all the 10 Millions order get filled now they get a very good price at the top now what they will do they will sell off all 10 million lots and that what leads to big bearish candle and it leads to panic in the market that mean buyers who went long here at the opening they all are getting trapped now right they all got trapped because they had the stop- loss here there there was a big stop loss here there was a big stop loss here all buyers retailers got trapped here and what happens when there's a big sell order here when there's a big sell orderers stop loss here Market keeps going down and who makes profit big players makes profit how because big players was not buying here he was just selling silently when retail Traders were buying and once his all 10 Millions order got filled he punched all sell order at one go at higher price and Market started going down because retailer got panicked because their stop loss started getting hit and they forcefully exiting by squaring of their position which leads to Big Move On the downside so that is the psychology behind this strategy so if you have not understood what I discussed about the psychology rewind the video and see it again and again until you understand because if you understand this kind of psychology then reading the charts reading the price action becomes very easy and that is what I discuss in my new course that is the 25 day trading strategy Nifty Bank Nifty which I launched recently you can check the details below this video in the description section in that video I discuss similar 25 strategies with how to read charts price action on the basis of buyers and sellers and now we'll see some real life charts that mean we'll go back and see some historical charts where this similar setup happened and let us go and see how this priz action work how big players trap retail traders to make profit okay now let us see couple of chart examples to understand this strategy better so this is 9th April chart where similar setup happened first criteria is Da opens with a huge bearish candle you can see that day opens with a huge bearish candle that mean sellers are in control they want to take the market down on this day that is 9th April after that you can see that there was no followup big players have a sell order here around this price they want to sell 10 million quantity what is the price that time 22765 okay that was the open of the day so assume that big player have a 10 million sell order today he has a plan to sell at around 22765 he want to sell 10 million order okay but if he sell all 10 million at one go you can you can see that there will be huge bearish candle because of the selling pressure you will see that price PR will go like this and price will go he will make profit but will all 10 million will get filled here no all 10 million will not get filled here because he needs when he's selling he need buyers also who will buy from him right when there is no liquidity maybe 1 million will get filled here next 1 million here next 1 million here next 1 million like that he will not get entry all 10 million at 22765 his all 10 Millions will not get filled here it may get filled in different prices maybe all the way till here right so what is the objective of when you sell you will sell at the high right when you sell high and Buy Low you make profit when you are a short seller same thing when you want to buy you want to buy low and when Market goes High you want to sell that is how you make profit same thing if he wants to make good profit on 10 million quantity he has to sell at around this price so he needs liquidity so that mean he has to push market up and what retailers thinks oh Market is going up that mean Market will make a breakout so what they will do they start buying here and when price comes near the high of that red candle price will go and get stuck why it can't go and immediately break it because seller will not allow you to break that level because he has a big stop loss here right so he has to keep the price below this stop loss but same time he wants to give you bullish view also so what happens here there are retail Traders are buying here expecting Market to make a breakout even before the breakout happens they're aggressively buying when they are buying where is the stop loss the stop loss maybe below this range right big sell order and when price is making consolidation in this range what this big player is doing he is silently accumulating okay when buyers are buying here he silently accumulating at this price now he getting good price around this region right around this region and once his all 10 million quantity got filed now he started selling now he started selling so that he got all 10 million got filled around this price and Market started coming down why Market started coming down because there is a big sell order here many sell orders here because there are many stop losses because there are many retailers who took a long position at the opening now that TR right all the stop loss getting hit there's a panic in the market and price kept on going down and big player who sold here he must have squared off when Market is going down and made a big profit and the next example is Bank Nifty on 6th May they opened the huge bearish candle right immediately there was a reversal his stop loss was above this candle but you look at this he did not allow price to go up right that big seller did not allow price to go up he reversed from that position because if Market start going up his all stop loss going to hit right so he will not allow you to go up so easily and after that what happened after that same price action it started going up and then it started making a accumulation here with the pin bars and giving you impression that market is going to make a breakout and many retail Traders started aggressively buying here thinking that sooner it is going to make a breakout because in the live market if you look at only this much price action only this much price action in the live market what it gives you impression that impression that price is going up and it's going to make a breakout and you are going to take a long position so that is what happens and what big players will do big players silently accumulating here and once his all quantities are filled and he will start aggressively selling and which leads to Big down move right so retail Traders are aggressively buying here and this big players he is getting the liquidity because big players are buying he's selling silently at the top he will not sell all 10 L quantity at one go because he silently accumulate maybe 1 million half million like this so that he doesn't want to show you big candle immediately until his all order got filled once his all order get filled he will offload his position and makes profit and all the liquidity stop losses which are there below this range all the stop- loss started getting triggered and all this buyers got panicked and big players make profit at the cost of retailers stop losses okay guys that's about today's video about reversal strategy for option buyers when I back tested it I seen that almost 70% win rate so I highly recommend you that you also do some back testing because the strategy have a high win rate and also good risk reward trade and that's all from my site if you are interested to learn more about price action more about day trading strategy go below this video in the description section and check my new course that is 25 day trading strategy Nifty Bank Nifty if you are interested you can purchase that course so that's it guys I see you soon with a new video Until then bye and take care