Breakouts and Reversals Al Brooks How to Trade Price Action - - PowerPoint PPT Presentation
Futures.io October 17, 2017 Trading Opening Breakouts and Reversals Al Brooks How to Trade Price Action Brooks Trading Course BrooksTradingCourse.com BrooksPriceAction.com Main Points Slide 50% chance 1 st BO will reverse 2 H or L
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Al Brooks
How to Trade Price Action
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 1
Main Points
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BO on Open: 50% Reverse, No Matter How Strong
Strong rally on open Became H of day Strong selloff on open Became L of day
Slide 2
Market looks for direction early in day Tries one way 50% of time, decides it is the wrong way Test of support or resistance can be very strong Still will reverse 50% of time
/17
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Early BO: What Is Chance H or L of Day Already Formed?
Slide 3
/17
At the close of any bar, what is the chance that either the H or L of the day has already formed? The 1st bar has 20% chance of being either the H or L of the day Bar 12 By the close of the bar, 50% chance the day has already made either the H or L There is often a 7 am report at the close of bar 6 that is catalyst By the close of the 1st hour (bar 12), 70% chance the day has already made either the H or L Bar 7
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Early BO: What Is Chance H or L of Day Already Formed?
Slide 4
/17
By the close of bar 80, 99.9% chance the day has already made either the H or L Knowing this does not help trading Nothing magical about the number 18 Bar 16 has a slightly lower % chance Bar 23 has a slightly higher % chance Traders just need an approximate time when the probability is high By the close of bar 18 (90 min) 90% chance the day has already made either the H or L Bar 18
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BOM on Open: 2 Types, But Often The Same
BO of range of 1st 18 bars Breakout Mode (BOM) Look for BO and then about a Measured Move (MM)
Bar 18 Bar 18
Slide 5
Bear BO, so 90% chance of either bear day or TR day Today, bull BO, so 90% chance of either bull day or TR day Here, also 18 bar BO Here, not BOM since never went above H of bar 1
/16
BO Mode After 10th bar: Reversal down from new H and up from new L
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 6
Main Points: H or L of Day Forms Early
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BOM on Open: Bull BO, Then MM Up
Slide 7
Bulls got MM up
/16
BO Mode After 10th bar: Reversal down from new H and up from new L OK to buy early Bull BO of opening range
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BOM on Open: Sell BO below Reversal up for MM Down
Slide 8
BO Mode: TR Open, about half of average day’s range After at least 5 - 10 bars Reversal down from above 1st bar, Reversal up from below 1st bar Either can come 1st Sell PB, which is often deep, since early TR Can even be Always In Long and still continue down if no new H of day 50% chance of BO up or down Then, look for MM (here, fell much more) Buy above the H with stop at new L of day Sell below the L with stop at new H of day Today had bear BO, so 90% chance of either bear day or TR day
/17
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BOM on Open: Sell BO below Reversal up for MM Down
Slide 9
/17
When initial range is less than 10 bars, some computers will wait to see if bigger opening range forms, then sell the BO Another reversal up so new BOM range
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BOM on Open: If Pattern Is Small, Wait for Follow-Through
Slide 10
BO Mode, but too few bars
/17
Higher probability of MM down if wait to sell bear follow-through bar BO Mode B, but ok to wait to buyfollow-through bar since higher probability when buying BO of Tight TR Tight TR means Limit Order Market, not good BOM Became bigger BO Mode pattern, but still only 9 bars and Tight TR Got BO Mode sell
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BOM with Bull BO: 90% Chance of Bull Trend or TR
Slide 11
After 1st bar: Reversal down from new H and up from new L Range is about half of average day
/17
Buy BO and PB 90% chance of bull trend or TR Today was mostly TR
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BOM on Open: Buy BO above Reversal down for MM Up
Slide 12
/17
BOM traders buy bull BO BO Mode since after 1st bar: Reversal up from new L, then down from new H Before BO, bears sell DT at MA (Opening Reversal down) Bulls buy HL MTR Sometimes swing traders have to take several trades before there is a trend
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 13
Main Points: Early BO - Breakout Mode or 18 Bar BO
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18th Bar: Look for BO or Reversal between Bars 16 - 20
Slide 14
Buy above bull bar after failed BO below L After BO to new H, 90% chance Emini will stay above L of day Therefore either bull trend day or TR day
/17
Bar 18 so look for either strong BO or reversal OK to buy DB PB to MA After early reversal down from new H, pay attention if then get new L Buy reversal up Bulls will buy early, hoping for BOM and bull BO
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BO below 18 Bar Range: TR Day
Slide 15
/17
90% chance the H will remain the H of the day
Bar 18
Late new H Most reversal days do not go very far above H If no clear trend by bar 18, trend will probably start soon Look to trade BO or reversal Sell BO to new L after bar 18 2 big bear bars so strong momentum down Sell failed BO above H since now around 18 bars into day Bear sell signal bar, 2nd entry sell, so higher probability of swing down Buy HL MTR
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3rd failed break below yesterday’s low so Wedge Bottom Buy reversal up Getting close to bar 18 so possible L of day
BOM on Open: Many New Highs and Lows
/17
Sell failed bull BO of BO Mode (18 bar BO often also BOM) Only 7 bars in opening range so may not be complete yet Increased chance of failed BO Buy BO above opening range and buy PB from BO Range has 21 bars so 90% chance that L will remain L of day
Bar 18
Slide 16
Then, failed bear BO of bigger BO mode, but still only 10 bars in opening range and might need more bars BO has lower probability of trend until TR has 10 or more bars
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BOM of 1st 18 Bars: Often Goes Sideways
Slide 17
/17
Buy BO to new H of the day after bar 18 90% chance the L will remain the L of the day and day will be either bull trend day or TR day Often just goes sideways or weak channel
Bar 18
Between Bars 15 -25, traders will buy reversal up from near low If near H, they will sell reversal down
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BTC: Deep PB so TR Day Likely
Slide 18
1/17
Buy failed BO below 18 bar range, especially since TR day Got rally, but not new H of day
Bar 18
Expanding Triangle so entering on reversals is higher probability than betting on breakouts Only sell after strong bear BO and follow-through (did not get it)
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 19
Main Points: Failed BO of Yesterday’s H or L
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Failed BO of Yesterday’s H or L: 2nd Signal
Slide 20
Failed BO above yesterday’s H 2nd entry sell so higher probability of profit Failed BO below yesterday’s L 2nd entry buy so higher probability of profit
/17
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2nd Failed BO H of Yesterday: Micro DT
Slide 21
Wedge Bull Flag after gap up HL MTR, Micro DB Too late to also call it an Opening Reversal up Micro DT so L2 Opening Reversal down from H of yesterday
/16
On the open, if the market reverses down from above yesterday’s high, it might be making the H of the day Higher probability is 2nd signal
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2nd Failed BO above Yesterday’s H: Strong Bear
Slide 22
Sell failed BO above yesterday’s high 2nd entry sell, below bear bar closing on low, and from higher H All create higher probability sell
/17
L1 L2
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ORV: 2nd Reversal down from Yesterday’s High
Slide 23
/17
Failed BO above yesterday’s high Sell 2nd reversal down (Opening Reversal) Want bear signal bar
Stop
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Failed BO above Yesterday’s H: 2nd Sell Signal
H1 after strong reversal up HL MTR Might get back above yesterday’s high Rallied to back above yesterday’s H Parabolic Wedge Bottom Buy reversal up from Micro DB 2nd failed BO below yesterday’s low 2nd entry sell, Wedge rally Yesterday had a small range so possibly
2017
Slide 24
Sell failed BO above yesterday’s H, 2nd entry sell
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ORV: 2nd Reversal up from below Yesterday’s Low
Slide 25
/16
Failed BO below yesterday’s low Buy 2nd reversal up (Opening Reversal) Want bull signal bar
Stop
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2nd Failed BO below Yesterday’s L: Reversal Day, Doji Day
Close near open so doji day
/17
2nd failed BO below yesterday’s L Bear buy signal bar Ok to buy above bull bar
Slide 26
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PW Bottom: 2nd Failed BO below Yesterday’s Low
Slide 27
/17
Buy 2nd entry reversal up from below yesterday’s low Strong bull buy signal bar Parabolic Wedge Bottom
1 3 2
Rallied to back above H
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ORV Up: 2nd Failed BO below Yesterday’s Low
Slide 28
Failed BO below yesterday’s low 2nd entry buy above bull bar closing on high Big Down after Big Up Big confusion so probable TR
/17
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Gap Down: Failed BO below Yesterday’s Low, 2nd Entry
Slide 29
Wedge Opening Reversal down below MA Failed BO below yesterday’s low, 2nd entry buy
/17
HL MTR Sometimes need several entries before get swing trade, and sometimes none leads to swing DB HL MTR
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 30
Main Points: Trend Resumption after failed reversal
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Failed BO above H of Yesterday: 2nd Entry Sell Failed
Gaps after BO Possible Small PB Bull instead of Trending TR Day Only buy Disappointing follow-through Holding above MA Bears exit, or above H of day Sell 2nd failed BO
/17
Failed Buy The Close at end of day Started too early
All-Time H
Slide 31
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Failed BO above H of Yesterday: 2nd Entry Short Failed
/17
Failed BO above yesterday’s H 2nd entry sell failed
Slide 32
Wedge Top, 2nd entry sell Buy reversal up above strong bull bar
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Failed BO Low of Yesterday: 2nd Reversal Up
/17
Failed BO below yesterday’s L Bigger pattern, 2nd entry buy, Lower L Consecutive Bottoms so higher probability Buy reversal up above bull bar
Slide 33
Sell Wedge Opening Reversal down from below MA Buy HL MTR failed bear BO Buy Failed BO below yesterday’s L 2nd entry B, but failed HL, just below MA, so less reliable
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▪ 50% chance 1st BO will reverse ▪ H or L of day forms early ▪ Early BO: Breakout Mode or 18 Bar BO ▪ Failed BO of yesterday’s H or L ▪ Trend resumption after failed reversal
2 7 14 20 31 Slide
Slide 34
Review
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Al Brooks
How to Trade Price Action
Brooks Trading Course