Al Brooks · 第一文件夹 知识点精华卡

The signal bar is the reason to take the trade.

The better the context, the less important the signal bar.

You need more than just a sell signal bar because a lot of times sell signal bars will occur in the middle of a trading range and they're not reversing anything.

It does not have to be a reversal bar to be a sell signal bar, and the opposite is true here.

It's better if the bar after the signal bar is also a strong signal bar in the direction that you want to take the trade, preferably not a doji bar, not an inside bar, not a reversal bar.

Whenever there's any kind of a reversal up, there's always a good buy signal bar on some time frame and on some kind of chart.

Every bar on every chart is either a trend bar or a trading range bar, just like every part of every chart is either a trend or a trading range.

And I call it a trend bar because it's a one bar trend.

And if the tails are more prominent relative to the size of the bodies, I tend to say that's not a trend bar.

If you're not certain whether a bar is a trend bar or a trading range bar, look to the left.

Remember, every bull trend bar is a breakout.

In fact, the biggest bull trend bar in probably 20 bars usually is an exhaustive end of the trend and not the start of a new leg up.

Whenever I see a reversal attempt, and I think it will not get very far and the trend will resume, I call it a pullback.

When I refer to an attempt at a reversal as a pullback instead of a trading range, that means I believe the trend will resume instead of reverse.

A pullback, remember, pullback is a small trading range and a pullback often is made up of trading range bars.

As soon as you start hoping for a pullback, that's the time to buy at least small.

If you feel like the market is racing up or down, and you're waiting for a pullback to enter, there's a sense of urgency, then you have to trade small and enter at the market.

So whenever a trading range is small and it's occurring in a trend, chances are it's simply a pullback in that trend.

And when the price action favors the bulls, it's buying pressure.

When you get signs that the bulls are strong, buying pressure or signs when the bears are strong is selling pressure.

I want to see more bull bars than bear bars when I'm looking for buying pressure, I want to see consecutive bull bars.

And that's a sign of good buying pressure, and usually means that the market will go higher.

It simply means that more dollars are on the buy side, there's more buying pressure than selling pressure.

On the other hand, if you have a bear channel and you're starting to get conspicuous buying pressure, you're probably soon going to get a breakout above the top of the channel, and the channel will probably evolve into a trading range.

When you get signs that the bulls are strong, buying pressure or signs when the bears are strong is selling pressure.

One sign of selling pressure is a significant break below the bull trend line, which we have here.

You look back and say, well, not much selling pressure, but it tends to accumulate.

Usually, you need some selling pressure first, and it usually comes during the formation of a trading range.

The bears begin to accumulate selling pressure, and at some point, they're strong enough to take control of the market.

And you're looking for a bear trend, it usually will not become a bear trend until there is some accumulation of selling pressure.

A gap is simply a space between any support and resistance.

And I always think of a gap as any space on the chart, it's usually a space between support and resistance.

And therefore, a gap in a trading range has no predictive value.

Gaps often lead to measured moves, even when there's a negative gap.

Exhaustion gap does not mean trend reversal.

Late in a bull trend, usually the gap will close, the gap between the close of the big bull trend bar, which will end up as the exhaustion bar, and the high of the prior bar.

The market's always in long, if you had to be in the market long or short, you would only pick long.

If I had to be in the market this instant, if I had to be always in the market and it's right at this instant, I want to be short.

At some point, the market becomes always in long for everybody, which means that traders can buy for any reason, expecting that the market will be higher as more bars become visible.

But beginners should only be looking to buy as long as the market is always in long.

And sometimes the pullbacks are so deep the market, at least temporarily, becomes always in short.

The market's making higher highs and higher lows, so it's a bull trend, but sometimes the pullbacks are so strong, the market becomes always in short and traders can make money buying and selling.

Only 10% of the bars on the chart have really high probability, a strong breakout.

And when the market is in a strong breakout, it's better only to trade in that direction.

When you see a strong breakout, it's good to enter as early as possible.

The breakout can be to the upside, in which case you're getting a resumption of the prior bull trend, or it could be to the downside and you can get a reversal of the bull trend.

Every tail on the top of a bar is an attempt at a breakout that fails.

Chances are in a trading range, if we go to a new low, below that low, the bear breakout will fail.

90% of the bars on the chart are either in a channel or trading range, and the probability that the market will go up or down fluctuates between 40 and 60%.

Eventually, a channel typically evolves into a trading range.

And don't look for wedge bottoms and double bottoms when a channel is as tight as this, because any reversal is almost certainly going to be minor, which means it'll become a bear flag and you'll make more money by looking to sell than looking to buy.

Trying to buy in a very tight bear channel, the chance of you making money is small.

The probability at this point after an 8 bar, 9 bar, 10 bar bear micro channel, probability is first reversal attempt will fail and will go lower.

So I view a bull channel as a bear flag because most of the time, you get a bear breakout and a transition into a trading range.

Every market at all times is either in a trend or in a trading range.

If the market's not going to go too far up and not going to go too far down, then traders expect a trading range.

Bull and uncertainty, confusion, disappointment, bad follow through, those are all signs that the market's in a trading range.

Uncertainty and disappointment, if that's what you're feeling, that tells you that you believe the market is in a trading range.

On the other hand, if you're feeling uncertain or confused, the market is probably in a trading range, so you should trade like a trading range.

And in a trading range, you want to be buying low.

Support is some price below the current price, where a sell off is likely to pause or reverse.

One of the most important concepts in trading is that you want to be buying at support and selling at resistance.

You want to buy at support, but you want to make sure that the market is starting to base, it's starting to show some signs of buying pressure.

Because of the computers buying at support, selling at resistance, you often get very abrupt reversals.

Support or resistance, it can be the high, low, open, or close of any bar, the current bar or prior bars, any moving average, trend lines, trend channel lines.

There's always news taking place all of the time, and news is one of many variables, but a more important variable is support and resistance.

And resistance is the opposite, it's a price above the current price and a rally to that level is likely to stall or reverse.

In a strong bull trend where the pullbacks are very small and you have a lot of bull bars, very few bear bars, the odds are the market's going higher, all resistance will fail.

Whenever you see resistance and you see the market trying to reverse, you should look to do the exact opposite.

And the more resistance that the market breaks above, the more likely the breakout will have follow through and a second leg up or multiple legs up.

First of all, the high of the prior bar is always resistance.

If you have a stop here, that means you believe it's resistance and the market will not get above it.

In general, when I see a double top, I call it a low two.

Every double top in a bear trend is a low 2 sell setup and therefore, an opportunity to get short.

If I see a double top in a bull trend, I think of it as a double top reversal.

You trade it the same way, whether it's a double top reversal or a double top bear flag.

Maybe we'll break below the neckline of the double top and fall for a measured move down.

And if a trader is looking to short, it's better to short below a double top.

In a bull trend, if I see a double bottom, I call it a double bottom bull flag.

In a bear trend, if I see a double bottom, I call it a double bottom, reversal attempt, double top.

Anytime the market forms a double bottom bull flag, it's a high 2 buy setup.

And if the market then breaks below the double bottom, you look for a measured move down.

Anytime I see a bull breakout in a reversal below that bull breakout, I think of it as a failed double bottom and I look for a measured move down based upon the height of the bull breakout.

It's a type of double bottom and slightly higher low, which makes it even higher probability buy setup.

If it was more angled down, I would call it a wedge is just a triangle that's slope down a little bit or slope up a little bit.

So high 2 and high 3, functionally it's the same as a wedge.

All wedge bear flags are low 3 bear flags or low 3 sell setups.

Now, all wedge bottoms and wedge bull flags are high threes.

And Al says it's always good to sell wedge tops.

No, I'm gonna go to the highest time frame that has this wedge pattern and then look for 10 bars on that time frame.

This is a major trend reversal, which means the bear trend is becoming a bull trend.

And if they do, they have a 40% chance of actually getting a bull trend, 60% chance the major trend reversal will result in either a trading range or a bear flag.

Most of the time when you get gap bars late in a bull trend, 20 more bars into a bull trend, you get an attempt at a major trend reversal after the bull trend resumes.

A gap bar in a bull trend, it usually leads to the final leg of the bull trend before the bears create an attempt at a major trend reversal.

Very often when you have an attempt in a major trend reversal and it does not look right, too many bull bars or not enough bars in the legs?

60% chance the major trend reversal will lead to another bear flag and another leg down or a trading range.

You always pay for high probability with bad risk reward.

Great risk reward, but terrible probability.

You'll probably lose money because if you have a great risk reward ratio, chances are the probability of making money is very small.

Whenever you get a setup that offers you higher probability of success, your risk reward profile is always going to be worse.

But whenever you increase your probability, you're always going to have a worse risk reward, which usually means the stop is further away.

The beginner sees this and knows that the chances of reversal are small, but all he thinks about is risk reward, small risk, big reward.

In fact, a protective stop is the single most important order that you'll ever use whenever you're in a trade.

A protective stop is a stop that protects you.

As soon as you enter any trade, always place a protective stop.

There are often several choices for a protective stop, one that is too small or too wide is usually a losing strategy.

Big gaps in stocks are common, especially after earnings reports, and a protective stop can get filled at a much worse price than you ever expected.

Simply get out and wait for the next signal, knowing that losing is part of trading and the protective stop keeps you from losing too much.

Bull trend typically begins with the Bull Breakout, which is a big bull trend bar, a white bar, bear bars are black bars.

Every bull trend bar is a breakout.

If a bull trend just goes sideways and the bull trend resumes, it's a minor reversal.

In a strong bull trend where the pullbacks are very small and you have a lot of bull bars, very few bear bars, the odds are the market's going higher, all resistance will fail.

Once you get three or four consecutive bear bars in a bull trend, you're probably going to go at least a little bit lower, even though these bars are small, they are trend bars.

And since we have a bull trend here, chances are the bull trend is going to resume.

Here's a bear trend and anytime there is a pullback or a pause, traders look at it as an opportunity to go short.

In a bear trend, traders are looking for the exact opposite.

Market is going higher in a bear trend, the market is always in short at this moment, do I want to be long or short?

The opposite is true in a bear trend, here, we're getting lower lows, lower highs.

So strong bear trend buying is a bad idea.

If it's a bear trend, the probability favors the bears.

A minor reversal is going to be usually a bear leg in a trading range or a bear flag.

Usually when you get a big bar late in a trend, it's more likely to be an exhaustive end of the trend than the start of a new leg up.

When you're in a trading range buying at the top, even if the leg up is strong, selling at the bottom even if the leg down is strong, is a low probability bet.

And if you're buying in a bull trend, your stop goes below the bottom of the most recent bull leg.

And I said a few minutes ago that if sometimes you get a second or third leg down, but if you start to get 4, five legs down, you're probably not in a pullback, you're probably in a bear trend.

Chances are even after a pullback, you'll get at least a second leg up.

One of the common things that all beginners do is they get excited and they ignore the third variable, probability.

Only 10% of the bars on the chart have really high probability, a strong breakout.

90% of the bars on the chart are either in a channel or trading range, and the probability that the market will go up or down fluctuates between 40 and 60%.

Losses are inevitable, even though some things are relatively high probability.

Remember, you're looking for a big reward relative to risk means the probability is less in general when you take a swing trade.

Most buys, most sells have between 40 and 60% probability of being profitable.

So I view a bull channel as a bear flag because most of the time, you get a bear breakout and a transition into a trading range.

A minor reversal is going to be usually a bear leg in a trading range or a bear flag.

You should assume that the reversal attempt will be a bull flag and look to buy.

Every signal bar in a pullback or in a flag is a reversal bar.

However, whenever you have a tight trading range relatively late in a bull trend, it often becomes the final bull flag.

So a final flag reversal can lead to a reversal and not simply an end of the bull trend.

They look at that bear bar and say, I don't want to buy above a bear bar.

So it's a bear bar, but it is a buy reversal bar.

When that's the case, it's usually better to wait for a second entry short, which would be below this bear bar.

Remember, in general, I don't buy above the bear bar.

Selling below this bear bar, especially a weak looking bear bar, is a low probability bet.

You sell just below the low of that bear bar, that bear close on the second bar increases the probability that the short would be profitable.

No, I might buy on a stop above the bull bar because in general, if I'm buying with stops, I want to buy above bull bars.

Usually it's better to buy above the high of the bull bar.

A lot of bulls will buy closes, but if they buy this close of this strong bull bar, they know it's a second leg up and therefore, it could possibly lead to a trading range or a reversal.

Now I talked earlier about ioi patterns and if you're looking to buy, it's higher probability if you're buying above a bull bar.

So it's still a bull trend, buying above a bull bar, above the moving average is a reasonable buy and the ioi is a pause in the bull trend.

The Bears got a breakout below the low of the past 40 bars or so, and then it was immediately followed by a bull inside bar closing near its high, buying above this ioi setup, above this bull bar, it's a higher probability.

Anytime I see double top bear flags, here's a double top bear flag in a bear trend or a double bottom bull flag in a bull trend, I'm always thinking about a measured move.

Maybe we'll break below the neckline of the double top and fall for a measured move down.

Only in hindsight do you know that this was a measuring gap when you see the market reverse up at just about a perfect measured move target, you know this was a measuring gap.

At a minimum, traders will look for a measured move based upon the open of the first bar of the breakout to the close of the final bar of the breakout.

And when you reach a measured move target, you get some profit taking by the bulls.

It's probably going to reach the measured move target, so traders will look to buy and then take partial profits or full profits at the target.

This is a major trend reversal, which means the bear trend is becoming a bull trend.

Every major trend reversal top is a double top.

Exhaustion gap does not mean trend reversal.

And when that happens, the probability of trend resumption up drops to 50% and the probability of trend reversal down increases to 50%.

If the bull trend does resume, the resumption will probably attempt to form a major trend reversal.

And you can argue higher high, major trend reversal, bull trend bear breakout, higher high, really not enough bars for a major reversal, but it might still be a major reversal.

A swing trade means I'm planning to hold onto my position as long as the trend is going in my direction.

If you're holding through pullbacks and for a lot of bars, that is a swing trade.

And the simplest definition of a swing trade is a trade where the reward is at least twice the risk.

Remember, you're looking for a big reward relative to risk means the probability is less in general when you take a swing trade.

And because scalping is a very difficult way to make a living, most traders should focus on swing trades.

When you start out, I think it's better to be pretty selective and look for only the one or two or three best swing trades of the day, buying low, maybe selling high, buying low, selling high, buying a 50% pullback.

You should assume that the reversal attempt will be a bull flag and look to buy.

However, whenever you have a tight trading range relatively late in a bull trend, it often becomes the final bull flag.

Anytime you see a tight trading range late in a bull trend, you always have to be thinking about a final bull flag.

And that's one of the reasons why high 2 bull flag, just above the moving average with a bull buy signal bar is a high probability trade.

Bull flag, traders will buy either above the bear bar or above the bull bar.

So it's a wedge bull flag, where the top of the pullback is above the top of the bull trend.

Chances are even after a pullback, you'll get at least a second leg up.

Now the probability is this is strong enough selling, first reversal up will be sold and there'll be at least a second leg sideways to down.

A second leg trap in a trading range is you have a leg up, a pullback in a second, even stronger leg up, it's a breakout and it looks like the start of a new trend, but it's still in the trading range and it traps bulls into buying high in a trading range.

Therefore, when you see a strong breakout near the top of a trading range, it's probably a second leg trap.

Strong enough momentum so that there's going to be at least a second leg down.

Sometimes the second leg is above the first leg and it's just a sideways pullback.

If you prefer high probability, you wait for a big breakout and good follow through.

The follow through bar is the bar immediately after the entry or the sell signal bar.

So sometimes the follow through does not come immediately after the strong bear reversal bar, but as long as it comes soon, the odds are the market will go lower.

In other words, the entry bar and the follow through bar, they're not bear bars, they're not doji bars, they do not have big tails on top.

If you get a follow through bar with a bear body, you have to wonder if the breakout will fail.

But here we got a breakout and the follow through bar has a bull body that increases the chances that the market is going higher.

So I view a bull channel as a bear flag because most of the time, you get a bear breakout and a transition into a trading range.

A minor reversal is going to be usually a bear leg in a trading range or a bear flag.

Bull reversal bar and a good follow through bar, it's more likely the reversal will fail and this bull reversal will end up as a bear flag.

The attempt to reverse up will probably fail and lead to a bear flag and another leg down.

Each leg in a bear flag usually has one or more bull bars.

So you're only going to get a minor reversal, which means a bear flag.

Even though you don't see an actual space, every trend bar is a climax.

Any bull bar, any series of bull bars is a breakout, it's a climax and it's a gap.

But a climax can go a long way before there's a pause buy climax and it turned out to be the end of a swing up.

An exhaustive sell climax does not mean a reversal into a bull trend, most of the time, it means conversion into a trading range.

Every big bull body is a breakout, a spike, but it's also a buy climax.

Sometimes a climax just gets more climactic and the market just keeps going up.

A major higher low is a higher low that has a strong breakout, usually to a new high.

These are major higher lows, major higher low, major, followed by a strong bull breakout, usually to a new high, not always, but usually to a new high.

If it's a trend, bulls tend to raise their stop to just below the most recent major higher low.

And if it falls below a major higher low, bulls will start getting stopped out and the bull trend probably has evolved into a trading range, possibly into a bear trend.

And traders do not want to see the market fall below the bottom of a major higher low because then their premise of a resumption of a bull trend is no longer valid.

But as long as the market's holding above the prior higher low, the probability still is slightly greater for the bulls.

And it's common for the market to go above a minor lower high and then continue down to a new low.

A major lower high usually gets a breakout to a new low, usually, not always.

If it goes above a major lower high, the bear trend, most traders would look at the bear trend as being over.

So this lower high major trend reversal is also a head and shoulders top.

They'll assume that any rally attempt will not get above the most recent major lower high, and they'll hold through reversals.

We broke above a lower high, so we got a breakout here that is not a strong bull breakout.

For example, pretty tight trading range, weak bulls channel, low probability trading, mostly limit order trading.

So as soon as they see a strong bear close, a bar closing on its low, they sell at the market, or they'll place a limit order as soon as this bar closes to sell at that close.

In a tight trading range like this, instead of selling below the low, that outside down bar, you make more money buying with a limit order at its low.

To me, I find it very useful to pay attention to whether or not limit order bulls can make money in a bear trend because it tells me that the market might be transitioning into the next phase, a trading range.

And once it's clearly in a trading range, I tend to switch to limit order trading, buying below bars and scalping, selling above bars and scalping.

So you can place a market order as soon as that bar closes, buy at the market, or you can place a limit order to buy at the low of the bar and get filled on the next bar.

A lot of computers decided to take profits at that support level.

A lot of traders will take some profits here, and they'll take profits here, and that's what's causing the pullback.

This tail means bulls started to take profits right below the target.

So even in a strong bull trend, bulls have to take profits at some point to reduce their risk.

Easiest way to control risk is take profits.

And when you reach a measured move target, you get some profit taking by the bulls.

When that's the case, it's usually better to wait for a second entry short, which would be below this bear bar.

Here's a second entry buy for the ii and the second entry is ioi, doesn't matter what you call it, but it's a second entry buy, this is a higher probability buy buying above this bar.

So sell above this bar, sell more higher, gets back to this point, they get out, break even on their first entry and a profit on their second entry.

In general, you want to wait for a second entry buy.

The second entry, you want it to be at least the size of a scalp below the first so that if the market reverses back up to the first, you can scalp out on the second and make a scalp profit, get out, break even on the first.

Same here, strong rally, not high probability taking the first entry short, higher probability taking a second entry, micro double top and a lower high.

And a trading range bar or a doji is a trading range on a smaller time frame chart.

Each doji is a one bar trading range and here it's forming a pullback means that when I refer to an attempt at a reversal as a pullback instead of a trading range, that means I believe the trend will resume instead of reverse.

Sell above the high of this buy signal bar, betting that a pair of doji is not enough to reverse this big bear bar.

This doji bar was a strong bull trend bar, but the bulls lacked conviction and the bears took control.

And here we have a pair of doji bars, a weak attempt to reverse the bear breakout, more likely a bear flag than bull reversal.

Even though it's a doji, it's still a bear bar.

And at this point it's an 8 bar bull micro channel, 8 bars without a pullback.

The probability at this point after an 8 bar, 9 bar, 10 bar bear micro channel, probability is first reversal attempt will fail and will go lower.

A micro channel means no pullbacks.

During these 11 bars, every low is at or above the low of the prior bar, and therefore, it is a micro channel, which is a very special type of tight channel.

But the pullbacks are not very big on a higher time frame chart, a very tight channel like this is either a micro channel or a breakout.

Part of a micro channel, the bears controlled the market for 9 bars with no high going above the high of the prior bar, that is the definition of a micro channel. The bulls are trapped in, the bears are trapped out.

Head and shoulders top, bear flag, left shoulder, head, right shoulder.

That does not make it any more reliable, but traders commonly use the term head and shoulders top, and that's why I'm mentioning it.

Every head and shoulders, top, left, shoulder, head, right shoulder, is a trading range.

A head and shoulders pattern is always a trading range.

And most head and shoulders patterns are also triangles, rounded bottoms and tops.

Head and shoulders, top, if you want, left shoulder, head, right shoulder, every head and shoulders top is a lower high, major trend reversal, right?

And context means all the bars to the left.

Good signal bars are common, but good signal bars with good context is not common.

The better the context, the less important the signal bar.

But if the context is right, they can lead to a swing up or down.

And if the context does not support the trade, then your trade has a low probability of success.

And when both the signal bar and the context are weak, the chance of making a profit is low.