V-shaped reversals at the London open, and why they're so hard to trade

[Fairman]

V-shaped reversals at the London open, and why they're so hard to trade

You know the move. Price drops hard in the first fifteen minutes of London, takes out the Asian low, and then rips straight back up without stopping. By the time it looks like a reversal, it's already halfway back.

The problem with V shapes is that there's no second chance built into them. A normal reversal gives you a lower high to sell or a higher low to buy. A V doesn't. It just goes. So anyone waiting for confirmation either misses it or chases.

I've stopped trying to catch the bottom of these. Guessing where the drop ends is a coin flip with a bad stop. What I look at instead is what happens after the V completes. If price gets back to where the drop started and stalls, there's often a pause or a shallow pullback, and that gives an actual structure to work with. If it blasts through, fine, it's gone, I let it go.

The other thing: a V on the first push often means the drop was mostly stops being run, not real selling. That's useful context for the rest of the morning even if you never trade the V itself.

Missing them is just part of trading the open.

[Fairman]

A thing I'd look at is the candle that turns it. On a lot of V shapes, the turning candle on M5 has a long lower wick and closes back in the top half, and the next candle confirms by closing above it. That's not a signal to buy blindly, but it does tell you the low got rejected hard. If the turn is slow and messy instead, with a few overlapping candles at the bottom, it's more of a rounded bottom, and those tend to give a proper retest you can actually trade.