Traders watch for volume confirmation at key reversal points.  This is what the Volume Reversal trade setup is all about.  Wait for the big players to move the market, and then pounce on the trade.

The Chart

Open a 1 Minute Chart for the S&P 500 E-Mini Futures.  Configure the chart with the following set of indicators: ToTheTickZones, Volume, and Volume 30 EMA.
These settings are not necessarily "the best" or "exclusive".

The Setup

We are looking for a key bar to occur in the zone.  This bar must be a reversal bar and it must have high volume.  Reveral bars are also known as a dojis.  A bar has high volume if volume is at least 1.5 times that of the volume moving average.  Once there is a qualifying bar, we are trade ready.  Here is the entry process:
These instructions are not necessarily "the best" or "exclusive".

For a long trade:

1. Price is moving down, enters the zone and a key reversal bar forms on high volume.  Now, we have reason to believe that the buyers might be gaining control.
2. As price moves higher, we wait patiently.
3. As price moves lower, we want the volume to be low, indicating that the sellers are weak.
4. Place a buy order 1 to 3 ticks in front of the pivot low.

For a short trade:

1. Price is moving up, enters the zone and a key reversal bar forms on high volume.  Now, we have reason to believe that the sellers might be gaining control.
2. As price moves lower, we wait patiently.
3. As price moves higher, we want the volume to be low, indicating that the buyers are weak.
4. Place a sell order 1 to 3 ticks in front of the pivot high.

Check out this screenshot:

The market sold off hard in the morning, but as usual, it reversed at one of our zones.  Hopefully this screenshot emphasizes the importance of using volume to confirm a reversal in the zone. The two highest volume bars of the day contained lots of buying.  This foreshadows as washout and a reversal.  The initial entry had 6 ticks of heat; the second trade only had 2 ticks of heat.  Both trades produced at least 8 ticks of profit!  Other traders might think you are catching a falling knife.  But, if you can combine the ability to read volume and reversal bars, along with the power of our zones, you can execute some incredibly accurate countertrend trades!

Profit Targets

Most trade setups are best traded with a multiple profit target strategy.  Profit Target 1 should be between 4 and 8 ticks, depending on market condition.  It is smart to set Profit Target 1 at a previous pivot high for a buy, or a previous pivot low for a short.  With Profit Target 2, one can use a trailing methodology or wait to exit until the next zone is hit.  There are many different options; study the charts and determine what is suitable for you.

Stop Loss

Our general guideline for a stop loss for this trade setup is between 6 and 12 ticks.  However, there is no best answer.  It is good to tighten your stop as soon as you get some movement in the direction of the trade.  Overall, you should do your own backtesting and homework to determine how much risk is appropriate for these trades.