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TradingPriceActionTRENDS
TradingPriceActionTRADINGRANGES
TradingPriceActionREVERSALS
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Freedetailedanalysisof5minEminiforseveralmonths
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WhatCanTheMarketDo?
y TheMarketisinaneverendingCycle
Trend
TradingRange
BreakoutinEitherDirection
Trend
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WhatCanTheMarketDo?
y Trend
Strong=Breakout=Spike
Weak=Channel
y TradingRange
y Small=Pullback =pauseinaTrend
y Big=BreakoutinEitherDirection
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WhatisPriceAction?
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HowToDrawChannels
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ChannelsGetBroaderandFlatter
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IsaTrendStrongorWeak?
y AllTrendsbeginwithaSpike (Strongtrend)
y MomentumslowsandaChannel begins
(WeakTrend)
y ChannelsevolveintoTradingRanges
y AstheMomentuminoppositedirection
increases,aTradingRangeforms
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Channels
Channel:WeakTrend containedbetweenacoupleoflines
BullChannel
yWeakbulltrendwithabulltrendlinebelowand
abulltrendchannelline above
BearChannel
yWeakbeartrendwithabeartrendlineaboveand
abeartrendchannelline below
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Channels
ChannelsOfferTradingOpportunities
y WhentheMarketTeststheToporBottom,itthenEither
BreaksOutorReverses
y ThisCanCreateTradesWherethe
Reward isMuchGreaterthantheRisk
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Channels=WeakTrend
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Channels=WeakTrend
Channelscanbe:
y
Strong(Tight)andbehavemorelikeaSpike
Weak(BigSwings)andbehavemorelikeaTradingRange
Botharetrends,butweakerthantheSpikePhase
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Channels=WeakTrend
StrongChannel
y
Steepandtight
BehavesmorelikeaSpike
SpikeonaHigherTimeFrame
Tradeinthedirectionofthetrend
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Channels=WeakTrend
WeakChannel
y Lotsofswings,likeaWedgeoraStairsPattern
y BehavesmorelikeaTradingRange
y Tradeinbothdirections
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Brookspriceaction.c
om
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com
EnterWithStopsorLimitOrders?
y BuyingonaStop=BuyingaBreakout
y EveryTail=FailedBreakout
y Ifmostbarshavetailsandoverlappriorbartoomuch,
thenmostbreakoutswillfail
y Tails=Bettertobetonfailedbreakouts
y enterwithlimitorders(Buybelow,Sellabove)
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StopEntry=BreakoutEntry
but,Tails=FailedBreakouts
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WhyareChannelsDifficult?
y Uncertaintyishigh
y Rewardcanbelowcomparedtorisk
y AlwaysTryingtoReverse
y SometimesTrendAcceleratesandhasBreakout:
BullBreakoutaboveBullChannel
BearBreakoutbelowBearChannel
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EdgesareFleetingandSmall
y Thisisazerosumgameandyouaretryingtotake
moneyfromverysmartpeople,whoaretryingvery
hardtotakemoneyfromyou.
y Alltradingissubjectiveandhard.
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MARKETINERTIA
y Alwaysbetthatthemarketwillcontinuetodowhatit
hasbeendoing
y WhenthemarketisTrending,80%ofattemptsto
reversewillfail(sotradeinthedirectionofthetrend)
y WhenthemarketisinaTradingRange,80%of
attemptstobreakoutintoatrendwillfail(sotradein
theoppositedirectionoftheincipienttrend)
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FailedBullBreakoutofBullChannel:
Target=BottomofChannel
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BullBreakoutofBullChannel
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StrongBullTrend(NotChannel)
SpikePhase:Getlong!!
y Buyatthemarket
y Buycloseofanystrongbullorbeartrendbar
y Buyabove(andbelow!)priorbar
y Pressbetsandbuybreakoutsaboveswinghighs
y Buysmallpullbacks
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TightBullChannel
(StrongChannelButaWeakBull
Trend)
y ItisaSpikeonahighertimeframe,soonlylook
toBuy
y SwingingisBetterthanScalping
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TightBullChannel
(StrongChannelButaWeakBull
Trend)
y Buyatandbelowlowofpriorbar
y Buyclosesofbothstrongbullandbearbars
y Buybreakoutsofbullflags
y Buyatsupport
y Takeprofitsatnewhighsandresistance
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Tight(Strong)BullChannel:
DiagnoseEarly,ThenBuy!
WillactmorelikeSpikethanChannel
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Tight(Strong)BullChannel
BuyForAnyReason(andDontSell)
y HowDoIGetLong?
y WhereisMyProtectiveStop?
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Tight(Strong)BullChannel
BuyForAnyReason(andDontSell)
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StrongBullChannel
BuyonStopsAboveBars
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StrongBullChannel
BuyWithLimitOrdersBelowBars
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StrongBullChannel
BuyAtTheMarket
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TightBullChannel
(StrongChannelButaWeakBull
Trend)
y ProtectiveStopsWhenSwinging
TrailStopbelowmostrecenthigherlow
ProtectiveStopsWhenScalping
Dontallowpullbacks
Getoutbelowanybearbarorstrongbullbar
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StrongBullChannel
ProtectiveStops
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WeakBullChannel
Bull impliesTrend
Channel impliesWeakTrend
y TheWeakeritis,themorelikelytradesinboth
directionswillbeokay
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WeakBullChannel
y Overlappingbars
y Weakfollowthoughafterbulltrendbars
y Manybarswithtailsontop
y Manybarswithbearbodies
y Obviouspullbacksandoftensmallswings
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WeakBullChannel
(ItisstillaBullTrend)
y Tradableswingsinbothdirections
y BehaveslikeaTradingRangethatisTiltedUp
y BuyLow,SellHigh,Scalp,likeinaTradingRange
y Buyatsupport
y Takeprofitsorevenshortatnewhighsandresistance
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WeakBullChannel
y ProtectiveStops
Bettertoscalpmosttrades,likeinaTradingRange
IfonlyScalping,dontallowpullbacksandgetout
belowanybearbarorstrongbullbar
InitialStopisBelowtheSignalBar
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WeakBullChannelinBull
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WeakBullChannelinBull:
ProtectiveStops
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WeakBullChannelinBear
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ShrinkingStairs
(BuyersGettingMoreEager)
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BroadChannel
TradeLikeaTradingRange:
BuyLow,SellHigh,Scalp
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BroadChannel
Here,aWedge.TradeLikeaTradingRange.
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S&PCashIndex,Month
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S&PCashIndex,Week
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S&PCashIndex,Day
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10YearNotes,Month
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10YearNotes,Day
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GLD,Week:
ChannelsEvolveintoTradingRanges
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AAPL,Month
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AAPL,Week
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AdditionalInformationon
PriceAction
Freeexamplesof5minEminichartsthatareanalyzedbarbybar
BrooksPriceAction.com
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