The elusive “Mid Week Reversal” in Forex.
If you are present in any of our Forex Communities, you may have heard the term “Mid-Week Reversal” or “Wednesday Reversal”.
In this post we are going to cover exactly what the mid-week reversal concept is, if it exists and how to use it to benefit your trading strategy.
The concept is just as it sounds, a reversal of the defined trend during the middle of the week.
However, although the concept sounds simple, there are many different confirmations that we need to process before we jump into a position.
The mid week reversal is only a concept and is not intended to be a strategy as a whole, but rather to help boost the effectiveness of a strategy you already use.
Above is an example of the Mid-week reversal concept with real market data.
The “mid-week reversal’ is a fact and happens on almost every forex pair that exists.
To understand the mid-week reversal concept, we have to reverse engineer the retail trader mindset and determine how a retail trader may react when the concept is put into play.
The average retail traders “traditional” education plays a massive role in the way the market works. If retail traders (dumb money) were never taught to trade trends, would the market create trends?
Now don’t get me wrong, trend trading is a very valid strategy when understood. Trends on higher timeframes like the 4hr and up, are often respected for extended periods of time. Trends on smaller timeframes however are intended to induce retail traders in the opposite direction to which the market actually moves.
This intended induction is for smart money to gain the necessary liquidity to move the market.
The Induction Trend – S/M/T
“The trend is your friend” – How many times have we heard this saying?
The trend is a double edged sword. On the macro the trend may be your friend, meanwhile the micro trend will eat you alive.
The start of the week Sun, Mon, Tue is considered the “induction trend” , which dumb money follows.
The mid-week reversal follows directly after the induction has finished. The induction trend the beginning of the week can be prolonged to Thursday. The mid-week reversal is most prominent Wednesdays and Thursdays.
The “What the Fuck” trend – W/T/F
Following the Sun/Mon/Tue trend is the Wed/Thur/Fri trend. Otherwise known as the “What The Fuck” trend to retail traders. As most retail traders that were induced by the S/M/T trend are saying this to themselves Wed/Thur/Fri.
So, S/M/T induces the retail herd in an intended direction, then W/T/F, reverses the directional induction trend to hit the stop losses of the retail trading herd.