Futures traders: Identify reversal scalp opportunities from these three components 

For futures traders, one popular practice is identifying reversals, which can lead to short-term scalping opportunities. In the recent webinar “Identifying Reversal Scalp Opportunities Using Footprint Charts,” SuccessFutures.com’s Calvin Harris explained three essential principles for consistently identifying reversal scalp trades.

A reversal scalp trade can last from one to 30 minutes, and traders who take advantage of them can focus on specific moves they want to capture. Traders must pick their spots, however, as they don’t want to take every reversal center that unfolds before them, Harris explains. The move and opportunity must fit within the current market context as well as the trader’s personal business plan.

“Scalping is recognizing the different interactions between buyers and sellers and using that information to make short-term moves in the market,” Harris said.

Identifying a reversal for futures traders

Harris named three components in identifying a reversal opportunity: Exhaustion, absorption and aggression.

Traders can spot reversals and scalp a trade by using order flow from their footprint charts. Footprint charts are just like candlesticks, Harris said, displaying transactions that have taken place with buyers on one side of the chart and sellers on the other.

When interpreted properly, these “aggressive” transactions can give traders a competitive edge in the market.

“Look at the imbalance ratio between buyers and sellers,” Harris said. “Those interactions are never the same. That’s where order flow in footprint charts can give you an edge in the market. It allows you to spot clues of exhaustion, absorption, and aggression when the market is unfolding for a reversal opportunity.”

Harris goes in-depth in recognizing when a move is potentially exhausted, as well as the other two components in identifying a reversal opportunity: absorption and aggression.

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