The Oops! Reversal Setup, and Why it Still Works | Larry Williams

One of Larry Williams’ best-known setups is called Oops!: We are waiting for the market to open. We take as a reference the daily bar of yesterday, with its open, evolution and close. When the market opens, suppose a gap up occurs. A gap up takes place when the open is higher than the highest point that was reached on the previous day; a gap down occurs when the open is lower than the lowest traded point of the previous day.

When a market opens at a very high level and there is a gap up, it is very strong. So, we obviously suppose that it goes up. It will probably do it but, if for some reason it starts to fall and then reaches the highest level of yesterday, it is as if it said: "Oops!, I was wrong. I’m not strong, but weak." In this case, we open a short position at this level. We enter short because we imagine that the market (and the players in the market) realizes it isn’t that strong. Actually, the market is weak, so it will go down. 

To use this setup, we obviously need a stop-loss whose size depends on the market we are trading. How do we close this position? Larry Williams proposed a bailout exit he called "first profitable open". This consists in staying in the position until, on the following day or days, the market opens somewhere below the entry level (because we are short). When that happens, we close the trade. So, we keep the position until we get the profit or, obviously, when we are stopped out. We can also close the position at the end of the same day. The one suggested by Larry Williams is however the best one, although it sounds quite weird. Believe me, the first profitable open is a very effective close of the position.
 

How to Trade Larry Williams’ Oops.

 

This is the basic version of the Oops! Anyway, I know Larry Williams made some tweaks to it. The Oops! works, but today this specific setup is quite rare. The reason is that many markets trade for 23 hours a day now. So, it’s quite hard to have a heavy gap in just one hour. Maybe, you can have one after the weekend, but normally it’s not there.

 

Reference:
Andrea Unger (2017) - How to Trade Larry Williams’ Oops!

 

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Andrea Unger, a multiple-time World Trading Champion and systematic trading educator, has extensively analyzed and promoted the Oops! pattern: Today the "Oops!" setup performs relatively better in the German DAX (and similar European markets with session breaks) compared to US indexes primarily due to differences in trading hours and the resulting quality and frequency of gaps. In his explanations and backtests (particularly on DAX futures), he highlights the following reasons why it remains more viable there than in highly continuous US markets like the S&P 500 (ES futures):

■ Session Breaks Create Genuine Gaps: The DAX traditionally operated (and Unger often tests using) an 8:00 AM to 10:00 PM CET session. This overnight close provides a meaningful window (roughly 10 hours) for news, events, positioning, or sentiment shifts to accumulate, leading to clearer, larger gaps at the open relative to the prior session's high/low. In contrast, US index futures trade nearly 23 hours a day with only short daily maintenance breaks, which minimizes such gaps during regular weekday sessions.

■ Gap Quality and Filter Effectiveness: Unger notes that applying a minimum gap size filter (e.g., 15-20 ticks/points) significantly improves the setup's performance on the DAX. Larger gaps driven by the session break increase conviction in the "overreaction" and subsequent reversal, yielding higher average trades and better risk-reward. Historical tests from around 2010 onward showed positive equity curves for years on the DAX, even if performance weakened in recent years (post-2022).

■ Market Structure and Liquidity Dynamics: European equity index futures like the DAX historically exhibited stronger mean-reversion behavior at opens due to less continuous participation. US markets, with global 24-hour liquidity (including Asian and European sessions overlapping), see more efficient price discovery and fewer "pure" failed gaps.

Unger acknowledges that even on the DAX, extended trading hours (introduced later) and post-pandemic liquidity shifts have reduced the pattern's edge over time, but it has held up better than in US equivalents due to the retained session structure in testing and practice. 

 

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Jarrod Goodwin details an empirical test of Larry Williams' "Oops!" trading strategy applied to 14 different Forex pairs. The strategy focuses on exploiting price gaps that occur between the opening of a new session and the previous day's high or low.

Strategy Overview & Rules:

■  Concept: The strategy bets that the price will revert into the previous day's trading range after a gap.
■  Entry: If the open is below yesterday’s low, the trader buys at 18:30 EST. If the open is above yesterday’s high, sell short at 18:30 EST. This specific time was chosen to avoid wider spreads typically seen at the market open.
■  Exits Tested: Three different exit strategies: end of the session (16:30 EST), after three days, and after six days.

Key Findings & Results: 

■  1-Day Exit: The portfolio generated 8,600 Pips, with 10 out of 14 pairs being profitable.

■  3-Day Exit: Performance degraded significantly, resulting in 3,000 Pips and more losing pairs.
■  6-Day Exit: Highest net profit at 20,500 Pips with NZD/USD, showing a particularly consistent equity curve.

The strategy has shown signs of performance degradation in recent years, which coincides with a decrease in the frequency of trade opportunities across the tested pairs.

  

See also:

Larry Williams (November 17, 2021) - The Oops Reversal Setup, and Why it Still Works in Certain Markets. (video)
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

Jarrod Goodwin (2023) - Trading Forex Gaps: Maximising Profits with Proven Techniques (Larry Williams “Oops!”). (video)

Outside Bar Trading Setups | Larry Williams

In his book, 'Long-Term Secrets to Short-Term Trading', 2nd Edition, Chapter 7, Larry Williams provides price action patterns to profit. Larry Williams says that there are two daily bars that most confuse retail traders, the Inside Bar and the Outside Bar: 

 

» What the public 'sees' on their charts as being negative is most often apt to be positive for short-term market moves and vice versa. A case in point is an outside day with a down close. The day's high is greater than the previous day's high and the low is lower than the previous day's low and the close is below the previous day's low. This looks bad, like the sky is indeed falling in. In fact, the books I have read say this is an excellent sell signal, that such a wild swing is a sign of a market reversal in favor of the direction of the close, in this case down. [..] The problem is these outside day patterns do not occur as often as we would like! The next time you see an outside day with a down close lower than the previous day, don't get scared, get ready to buy ! « 

After an Outside Day with a Down Close lower than the previous day, BUY!
After an Outside Day with an Up Close higher than the previous day, SELL!

An Outside Bar is a bar that broke the previous bar's high and the previous bar's low. For related trading setups Larry Williams specifically looked for outside bars on the daily time frame that closed below the previous daily low or closed above the previous daily high. After such a bar prints, a reversal in the price action should be expected. According to Larry Williams, Outside Bars only appear 7% of the time on the daily time frame.

This is what an outside bar with a down close looks like:

According to Larry Williams, this will be a buy set up in theory. Here we can see it looks bearish to the public eye because the close is below the low. This indeed can be a turning point. Enter long on the next daily open. The stop loss is below the low of the outside bar.
 
This is what an outside bar with an up close looks like:

 

This is a sell set up. It looks bullish to the public eye because the close is above the high. This indeed can be a turning point. Enter short on the next daily open. The stop loss is above the high of the outside bar. 

 
Targets should be logically related to buy side/sell side liquidity levels (previous highs and lows), Imbalances/Fair Value Gaps and/or 50% swing retracement levels. Consider only setups offering risk-to-reward ratios ≥ 1:2.

 

Don't expect every single Outside Bar setup to be a winner. Other setups and filters can nullify or optimize it (e.g. Oops Pattern, Smash Day, Day of the Week, trading in Premium or Discount, actual outside bar small range or large range, swing high or swing low recently broken, occurrence in 3 Day Cycle and 3 Week Cycle, close above/below 9-Day EMA, etc.). The video below shows Outside Bar Trading Setups on timeframes also smaller than the daily.

Reference:
Larry Williams (1998) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

D'onte Goodridge (February 2, 2023) - Outside Bar Model by Larry Williams. (video)

D'onte Goodridge (March 15, 2023) - Turning Points on the Higher Time Frame. (video)

Ali Casey (2022) - Larry Williams' Outside Day Strategy. (video)

How Markets Move: The Natural Cycle of Range Change │ Larry Williams

Markets typically shift from small ranges to larger trend moves. When the market is in a large trend move, wait for it to settle into smaller ranges before getting involved. This gives more reliable setups when the market trends again. Market tops generally occur when the price closes well off its low, while market bottoms happen when the price closes near its low. Most traders get emotional during these times, buying at tops and selling at bottoms. Once you understand this, it becomes easier to make smarter trades.

Small Ranges Beget Large Ranges. Large Ranges Beget Small Ranges.

Markets move from congestion to creation (expansion), transitioning from small ranges to larger, more defined trend moves. A small range signals buildup, and a large range signals an impending trend. If I see a small net change from open to close, I know a large trend move is likely coming and am prepared to act on it. Here’s an example using the NASDAQ: Notice how volume fluctuates throughout the day: heavy volume in the morning, a dip in the middle, and a surge towards the end. 

"U" shaped intraday: Heavy volume in the morning, a dip in the middle, a surge at the end.

This pattern is consistent across markets. It’s like a freeway: traffic is heavy in the morning, dies down in the middle of the day, and picks up in the afternoon. Understanding this helps day traders identify opportunities in the morning and towards the end of the day, while avoiding the midday lull. Volume drives range, and large ranges happen at the start and end of the day. This is when short-term traders make money. We need volatility and large ranges to profit.

 There are three key cycles in market behavior: 

(1) small range/large range, (2) moving closes within ranges, and (3) closes opposite openings. 

All three cycles work equally well in any timeframe and market.

"Do yourself a big favor: Mark off all the large-range days [in the chart above], and then study the size of the ranges just

prior to explosive up-and-down days. See what I see? We are given ample warning of virtually every large-range day 

by the shrinkage of ranges a few days earlier."

The key takeaway for short-term traders is that not every day offers a high-probability trade. You need to identify days with potential for explosive moves and not expect large profits daily. It’s about finding that opportunity.

As for market tops, they usually occur when prices close near their highs, and bottoms happen when prices close near their lows. Focus on these closing patterns to determine when to buy and sell.

Trend is a function of time. The more time in a trade, the more opportunity for trend.

The most important insight in trading is that trends are the basis of all profits. Without a trend, there are no profits. But what causes trends? Trends are fundamentally a function of time—the more time you hold a trade, the more opportunity for a trend to develop. The challenge with day trading is that trends occur only about 15% of the time. Most of the time, prices are consolidating, making it difficult to catch a big trend move. Limiting yourself to a few hours of trading only targets that small window when trends are likely to occur.

 My Day Trade Secret: HTTC - Hold To The Close.

The day trader dilemma is that they have limited time to catch trends. Holding positions overnight allows you to capture longer trends and larger profits. A small bet with the potential for a big move is the key advantage of holding positions over time. 

 

 » How you know a large trend move is coming. «

 

Many day traders are afraid to hold positions overnight. However, if you do the math, you'll see that most market moves happen between the close of one day and the open of the next. Moves within the day are often smaller and less reliable. For short-term traders, the key to success is recognizing large range days and holding positions to the close. This is how you catch a big move during the day.

 

Reference:
Larry Williams (2022) - Trading Tactics and Indicators I Still Use. (video)

 

 » Hold To The Close. « 

S&P 500 E-mini Futures (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

 

» There are only two ways a short-term high or low is broken. «

NVIDIA (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

See also:

Larry Williams (2011) - Long-Term Secrets to Short-Term Trading (2nd edition).

  Larry Williams (1999) - Long-Term Secrets to Short-Term Trading (1st edition).

Larry Williams (2000) - Swing Points as Trend Change Indication. 

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.  

Larry Williams (1998/2011) - The Oops! Reversal Setup.

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure. 

Larry Williams  (1979) - My New Reversal Day Discovery. 

Toby Crabel (1990) - The Principle of Contraction/Expansion.

 Toby Crabel (1990) - Definition of Price Patterns.

Linda Bradford Raschke (1995) - Capturing Trend Days.

My New Reversal Day Discovery | Larry Williams

The most common reversal day is simply one where prices sell off substantially, almost always down limit, only to reverse and close up for the day. Such a day appears in the following diagram [A + B].

 

 

» When prices should go lower, but don't, buy ! «

A series of top and bottom reversals are also shown for your observation. Notice, in each case, how a temporary reaction against the main trend was ended when we had the “flush-out” day with prices selling off drastically, then recovering, to close up for the day. A reversal day is even more significant the longer the correction has been in effect.

 

Our second form of reversal day, and one I’ll bet you’ve never even heard about, starts with prices heading sharply lower and closing, sharply lower prices might end up limit down, or just “off sharply” but, in any event, prices take a beating and are down handsomely for the day [C].

The trend reversal is indicated the next morning when prices open a good deal higher than the previous day's close. Such unusual strength is indicative of a key reversal for the market. What happens, in essence, is that prices fail to follow through with the previous day's slide. This type of action is most unusual since lower prices forecast lower openings about 85% of the time. Lower prices, with substantially higher openings, are a “sure thing” that a new move has begun.

It is particularly significant if prices close down the limit, and the next day open slightly up. Limit moves should beget more limit moves. A reversal of this pattern points to a market opportunity. A special point of interest here is that an extremely strong signal is generated any time you have two reversal days with the second one higher, for a buy, lower for a sale. This is an unusual display of strength. I cannot recall when such a signal did not produce profits.

Quoted from:
Larry Williams (1979) - How I Made One Million Dollars Last Year Trading Commodities.

 

See also:

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change. 

 Larry Williams (2000) - Swing Points as Trend Change Indication.

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.  

Larry Williams (1998/2011) - The Oops! Reversal Setup.

2026 Market Update: Crude, NatGas, Metals, Stocks, Cocoa | Larry Williams

Crude Oil

Larry Williams identifies a setup for potential decline, noting that commercials (via Commitments of Traders (COT) Report red line in the chart below) have ceased aggressive buying and are exiting the market, with the line declining after marking a recent bottom. 

 

The public (green line) has become heavy buyers, signaling vulnerability. His proprietary valuation indicator (gold line, based on Crude-Gold Ratio) shows overvaluation, similar to prior pullbacks. As a conditional trader, he views this as a setup but requires trend change confirmation. 

 

 Downward setup via overvaluation and commercial selling; imminent cyclical

downturn, low in March/June needing trend confirmation for shorts.

 

Cyclically (weekly charts), a downturn is imminent, with a low expected in about three months (around March or June), historically good for longs. He advises watching for sell signals in energy markets, emphasizing cycles for bias and timing.

Natural Gas

Williams was seeking a short-term buy opportunity but canceled orders due to lack of upward movement today, anticipating a possible bounce. He stresses evaluating the COT report to determine if commercials or the public are buying, cross-referenced with open interest for directional insight. While acknowledging a seasonal pattern, he deems it less significant than current buyer/seller dynamics via the COT.

Gold

Williams admits a prior bad call, expecting a cyclical high aligned with Bitcoin's peak, but Gold held firm. Currently, commercials (COT red line) are unusually buying the decline at high levels, a position not typical and reminiscent of past buy opportunities. He notes recent shorts in Silver and Copper have shifted.

 

Gold bullish from commercial decline-buys and March cycles; 

Silver similar with rally soon, upside late Feb/March on trend change.

 

Cyclically, short-term (red) and longer-term (blue) cycles converge in March, establishing a substantive buy point without implying a drop to chart lows. This timeframe warrants bullish attention, pending trend change.

Silver

Williams observes that Silver exhibits strong similarities to Gold, historically regarded as the "poor man's gold" but now akin to the "expensive man's gold." It follows a comparable cyclical pattern, indicating the onset of a rally within the ensuing couple of weeks from the time of discussion. Aligning with his year-end forecast, he anticipated initial downward pressure, followed by an upward shift around late February or early March. He emphasizes restraint in entry, requiring confirmation of an upside trend change—such as a trend line breakout or moving average signal—within that timeframe to qualify the trade.

Dow Jones, S&P 500, Disparity in Advance/Decline, and Why Dow is Stronger

Williams affirms a bull market persisting through 2025 into mid-2027, dismissing pessimists based on repeated past errors. The advance-decline line (net cumulative advances vs. declines) is at new highs while stocks are not—an anomaly he has rarely seen, historically followed by higher prices, providing a fundamental bullish rationale. 

 

 

Bull to mid-2027 via advance-decline highs; Dow stronger than

S&P on value focus, mid-March cyclical buy/rally.

Comparing charts below: Dow Jones futures show a higher low and greater strength than S&P E-minis, attributed to fewer "hot stocks" like the Magnificent Seven in the Dow, which suffered hits. 

 

The Dow better represents quality and value, with funds shifting there for protection over speculation. As a trader, Williams is long Dow contracts, not S&P, due to Dow's outperformance. 

Cocoa

Williams sees a buy setup, though not yet long, awaiting trend change. Commercials (top pane red line) are adding positions amid declining total open interest (black line)—indicating others exit, a rare bullish "bubble up." Valuation (gold line, Cocoa-Gold Ratio) shows undervaluation, contrasting prior overvalued tops. 

 

 

Rally from commercial "bubble up" buys and undervaluation; 

short-term immediate, major in June/July with trend entry patience.

 

Cyclically, short-term (red) suggests immediate rally start; longer-term (blue) aligns with short-term around June/July for ideal entry and bigger move.

 

Reference:
NinjaTrader Live (February 18, 2026) - 2026 Market Outlook with Larry Williams. (video)
 

See also:

Foundation for the Study of Cycles (February 17, 2026) - Larry Williams on Inflation and the Coming Bear Market. (video) 

Larry Wiliams (December 23, 2025) - 2026 Market Forecast: Cycles, Risks, and Opportunities.

Namzes (February 18, 2026) - 2026 Crude Oil Projection.
Vladimir A. Belkin (2024) - 2025-2027 Oil Price Decline Linked to Solar Cycle Activity.

Vladimir A. Belkin (2024) - Strong Inverse Correlation between Ap Index and Gold Price.

2026 Market Forecast: Cycles, Risks, and Opportunities | Larry Williams

Professional bears and purveyors of pessimism often emerge at this time of year with gloom-and-doom narratives. While there are indeed periods to adopt a bearish stance, currently such warnings should be approached with caution. 

  

The standout stock of 2025 has been Nvidia. My forecast for the first few months of 2026 suggests a decline into mid-February, followed by a strong rally into April. On a longer-term basis, indicated by the blue line representing the extended cycle, Nvidia has historically rallied approximately 75% of the time during similar periods. This pattern is expected from mid-February into May, presenting a favorable opportunity for Nvidia investors.

 

Edgar Lawrence Smith's research in the 1930s profoundly influenced Warren Buffett. Smith demonstrated that stocks outperform bonds over long periods, particularly through compounding via retained earnings in growing companies. Buffett emphasized firms with disciplined reinvestment of profits. Smith also identified a dominant 3.5-year cycle in stock prices. Out-of-sample testing from 1930 onward reveals cycle lows that marked excellent buying opportunities in 1995, 1998, 2002, 2005, 2008, 2012, 2016, 2019, and 2023. This cycle points to another potential buying opportunity in 2026. 

 

Historical data on years ending in "6," dating back to 1806, show that 85% closed higher, with only four instances of declines. Additionally, after three consecutive up years, the fourth year has been positive eight out of eleven times. These patterns suggest high odds for continued upward momentum, provided supportive fundamentals persist.

 

The M2 money supply exhibits a cycle of approximately six to seven years. Lows in this cycle have historically aligned with bull market advances, as seen from 1960 onward. The next upswing is projected for 2026, introducing a bullish bias, though not guaranteeing a straight-line rally. 

 

 

In summary, 2026 is likely to feature higher stock prices, declining interest rates, and rising inflation. I expect an historic buy point for US stocks. For detailed forecasts, visit iReallyTrade.com starting January 1.

Reference:
Larry Williams (December 23, 2025) - 2026 Market Forecast: Cycles, Risks, and Opportunities. (video)
Larry Williams (January 1, 2026) - Forecast 2026.

 

GBTC (Spot Bitcoin ETF).

Larry Williams, November 6, 2025.

 

» This is the best market to trade in 2026. «

  

See also:

Larry Williams (September 25, 2025) - US Stock Market Outlook for Q4 2025. 

Larry Williams (December 24, 2024) - 2025 US Stock Market Outlook: The Good, the Bad, and the Ugly.

2025 US Stock Market Outlook: The Good, the Bad & the Ugly │Larry Williams

My outlook on the US stock market in 2025 uses the metaphor "Clint Eastwood Market," representing a mix of good, bad, and ugly factors:

• On the positive side, there are no immediate signs of a US recession, with strong employment figures and a labor market expected to improve in early 2025. Business conditions remain stable, and historically, stock markets tend to perform well in the first year of a presidential term. 
• However, there are risks, including potential profit-taking after a strong 2024 market, the uncertainty surrounding trade policies and tariffs, and the unpredictable actions of the Fed, Congress, and business leaders like Elon Musk. 
• On the negative side, market valuations, such as high price-to-earnings and Shiller CAPE ratios, suggest that the market is overvalued, which increases the risk of a correction. Additionally, industrial production is underperforming, which could hinder economic growth, and inflationary pressures from the excessive money supply expansion since the COVID-19 pandemic may contribute to market volatility.

 

Very Long-Term Market Wave in the DJIA and US-stocks down into 2038.

 

 Shorter Long-Term view on the DJIA with major lows in 2025 and 2028.

 

2025 will be a trading range market with a bullish bias.

 

 Selling pressure in Q1 of 2025. Second half of the year strong. Overall gains.

Given the current very high valuation ratios, the 2025 forecast indicates slower growth and market underperformance compared to historical averages. Therefore I don’t foresee a runaway bull market in US stock indices in 2025, and volatility is likely to be a key characteristic, with short-term rallies and corrections. Very long-term market cycles suggest we are at the beginning of a prolonged period of sideways movement, with the next major bull market not expected to begin until around 2038. 

Regarding a major crash that some are constantly talking about, I don't see it occurring in 2025 either. While the market will be challenging, the overall bias will lean toward the upside.

Reference:
Larry Williams ( December 20, 2024) - 2025 Market Outlook: The Good, Bad, and Ugly. (video)

2025 Bitcoin forecast.

See also:

Larry Williams (December 31, 2024) - Forecast 2025.

Larry Williams (December 18, 2023) - 2024 US Stock Market Outlook.

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change.  

The S&P has traded above its 200-DMA all year. This has happened 11 other times since 1952, and the next-year move has been about half the average. Last time this happened was in 2021, and before that, 2017  — Bespoke, December 24, 2024.