3 New Books: Trading Price Action TRENDS Trading Price Action TRADING RANGES Trading Price Action REVERSALS Available on Amazon and Wiley Brookspriceaction.com Traders run it, I provide content •Free articles •Free detailed analysis of 5 min Emini for several months •Free videos of daily Emini analysis •Real‐time daily webinar ($99/month) Brookspriceaction.com What Can The Market Do? y The Market is in a never ending Cycle • Trend • Trading Range • Breakout in Either Direction • Trend Brookspriceaction.com What Can The Market Do? y Trend • Strong = Breakout = Spike • Weak = Channel y Trading Range y Small = Pullback = pause in a Trend y Big = Breakout in Either Direction Brookspriceaction.com What is Price Action? Brookspriceaction.com How To Draw Channels Brookspriceaction.com Channels Get Broader and Flatter Brookspriceaction.com Is a Trend Strong or Weak? y All Trends begin with a Spike (Strong trend) y Momentum slows and a Channel begins (Weak Trend) y Channels evolve into Trading Ranges y As the Momentum in opposite direction increases, a Trading Range forms Brookspriceaction.com Channels Channel: Weak Trend contained between a couple of lines Bull Channel yWeak bull trend with a bull trend line below and a bull trend channel line above Bear Channel yWeak bear trend with a bear trend line above and a bear trend channel line below Brookspriceaction.com Channels Channels Offer Trading Opportunities y When the Market Tests the Top or Bottom, it then Either Breaks Out or Reverses y This Can Create Trades Where the Reward is Much Greater than the Risk Brookspriceaction.com Channels = Weak Trend A Channel is a hybrid between a Spike (Strong Trend) and a Trading Range Brookspriceaction.com Channels = Weak Trend Channels can be: y Strong (Tight) and behave more like a Spike y Weak (Big Swings) and behave more like a Trading Range Both are trends, but weaker than the Spike Phase Brookspriceaction.com Channels = Weak Trend Strong Channel y Steep and tight y Behaves more like a Spike y Spike on a Higher Time Frame y Trade in the direction of the trend Brookspriceaction.com Channels = Weak Trend Weak Channel y Lots of swings, like a Wedge or a Stairs Pattern y Behaves more like a Trading Range y Trade in both directions Brookspriceaction.com Brookspriceaction.c om Brookspriceaction. com Enter With Stops or Limit Orders? y Buying on a Stop = Buying a Breakout y Every Tail = Failed Breakout y If most bars have tails and overlap prior bar too much, then most breakouts will fail y Tails = Better to bet on failed breakouts y enter with limit orders (Buy below, Sell above) Brookspriceaction.com Stop Entry = Breakout Entry but, Tails = Failed Breakouts Brookspriceaction.com Why are Channels Difficult? y Uncertainty is high y Reward can be low compared to risk y Always Trying to Reverse y Sometimes Trend Accelerates and has Breakout : • Bull Breakout above Bull Channel • Bear Breakout below Bear Channel Brookspriceaction.com Edges are Fleeting and Small y This is a zero sum game and you are trying to take money from very smart people, who are trying very hard to take money from you. y All trading is subjective and hard. Brookspriceaction.com MARKET INERTIA y Always bet that the market will continue to do what it has been doing y When the market is Trending, 80% of attempts to reverse will fail (so trade in the direction of the trend) y When the market is in a Trading Range, 80% of attempts to breakout into a trend will fail (so trade in the opposite direction of the incipient trend) Brookspriceaction.com Failed Bull Breakout of Bull Channel: Target = Bottom of Channel Brookspriceaction.com Bull Breakout of Bull Channel Brookspriceaction.com Strong Bull Trend (Not Channel) Spike Phase: Get long!! y Buy at the market y Buy close of any strong bull or bear trend bar y Buy above (and below!) prior bar y Press bets and buy breakouts above swing highs y Buy small pullbacks Brookspriceaction.com Tight Bull Channel (Strong Channel But a Weak Bull Trend) y It is a Spike on a higher time frame, so only look to Buy y Swinging is Better than Scalping Brookspriceaction.com Tight Bull Channel (Strong Channel But a Weak Bull Trend) y Buy at and below low of prior bar y Buy closes of both strong bull and bear bars y Buy breakouts of bull flags y Buy at support y Take profits at new highs and resistance Brookspriceaction.com Tight (Strong) Bull Channel: Diagnose Early, Then Buy! Will act more like Spike than Channel Brookspriceaction.com Tight (Strong) Bull Channel Buy For Any Reason (and Don’t Sell) y How Do I Get Long? y Where is My Protective Stop? Brookspriceaction.com Tight (Strong) Bull Channel Buy For Any Reason (and Don’t Sell) Brookspriceaction.com Strong Bull Channel Buy on Stops Above Bars Brookspriceaction.com Strong Bull Channel Buy With Limit Orders Below Bars Brookspriceaction.com Strong Bull Channel Buy At The Market Brookspriceaction.com Tight Bull Channel (Strong Channel But a Weak Bull Trend) y Protective Stops When Swinging • Trail Stop below most recent higher low • Protective Stops When Scalping Don’t allow pullbacks • Get out below any bear bar or strong bull bar • Brookspriceaction.com Strong Bull Channel Protective Stops Brookspriceaction.com Weak Bull Channel “Bull” implies Trend “Channel” implies Weak Trend y The Weaker it is, the more likely trades in both directions will be okay Brookspriceaction.com Weak Bull Channel y Overlapping bars y Weak follow‐though after bull trend bars y Many bars with tails on top y Many bars with bear bodies y Obvious pullbacks and often small swings Brookspriceaction.com Weak Bull Channel (It is still a Bull Trend) y Tradable swings in both directions y Behaves like a Trading Range that is Tilted Up y Buy Low, Sell High, Scalp, like in a Trading Range y Buy at support y Take profits or even short at new highs and resistance Brookspriceaction.com Weak Bull Channel y Protective Stops • Better to scalp most trades, like in a Trading Range • If only Scalping, don’t allow pullbacks and get out below any bear bar or strong bull bar • Initial Stop is Below the Signal Bar Brookspriceaction.com Weak Bull Channel in Bull Brookspriceaction.com Weak Bull Channel in Bull: Protective Stops Brookspriceaction.com Weak Bull Channel in Bear Brookspriceaction.com Shrinking Stairs (Buyers Getting More Eager) Brookspriceaction.com Broad Channel Trade Like a Trading Range: Buy Low, Sell High, Scalp Brookspriceaction.com Broad Channel Here, a Wedge. Trade Like a Trading Range. Brookspriceaction.com S&P Cash Index, Month Brookspriceaction.com S&P Cash Index, Week Brookspriceaction.com S&P Cash Index, Day Brookspriceaction.com 10 Year Notes, Month Brookspriceaction.com 10 Year Notes, Day Brookspriceaction.com GLD, Week: Channels Evolve into Trading Ranges Brookspriceaction.com AAPL, Month Brookspriceaction.com AAPL, Week Brookspriceaction.com Additional Information on Price Action Free examples of 5 min Emini charts that are analyzed bar by bar BrooksPriceAction.com Brookspriceaction.com
