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3 New Books Trading Price Action TRENDS

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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)
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What Can The Market Do?
y The Market is in a never ending Cycle
• Trend
• Trading Range
• Breakout in Either Direction
• Trend
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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
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What is Price Action?
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How To Draw Channels
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Channels Get Broader and Flatter
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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
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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
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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
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Channels = Weak Trend
A Channel is a hybrid between
a Spike (Strong Trend) and a Trading Range
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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
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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
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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
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Brookspriceaction.c
om
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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)
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Stop Entry = Breakout Entry
but, Tails = Failed Breakouts
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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
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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.
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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)
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Failed Bull Breakout of Bull Channel:
Target = Bottom of Channel
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Bull Breakout of Bull Channel
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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
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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
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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
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Tight (Strong) Bull Channel:
Diagnose Early, Then Buy!
Will act more like Spike than Channel
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Tight (Strong) Bull Channel
Buy For Any Reason (and Don’t Sell)
y How Do I Get Long?
y Where is My Protective Stop?
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Tight (Strong) Bull Channel
Buy For Any Reason (and Don’t Sell)
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Strong Bull Channel
Buy on Stops Above Bars
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Strong Bull Channel
Buy With Limit Orders Below Bars
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Strong Bull Channel
Buy At The Market
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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
•
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Strong Bull Channel
Protective Stops
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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
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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
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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
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Weak Bull Channel in Bull
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Weak Bull Channel in Bull:
Protective Stops
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Weak Bull Channel in Bear
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Shrinking Stairs
(Buyers Getting More Eager)
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Broad Channel
Trade Like a Trading Range:
Buy Low, Sell High, Scalp
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Broad Channel
Here, a Wedge. Trade Like a Trading Range.
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S&P Cash Index, Month
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S&P Cash Index, Week
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S&P Cash Index, Day
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10 Year Notes, Month
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10 Year Notes, Day
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GLD, Week:
Channels Evolve into Trading Ranges
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AAPL, Month
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AAPL, Week
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Additional Information on
Price Action
Free examples of 5 min Emini charts that are analyzed bar by bar
BrooksPriceAction.com
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