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 of day forms early 7 ▪ Early BO: Breakout Mode or 18 Bar BO 14 ▪ Failed BO of yesterday’s H or L 20 ▪ Trend resumption after failed reversal 31 BrooksTradingCourse.com BrooksPriceAction.com Slide 1

BO on Open: 50% Reverse, No Matter How Strong Market looks for direction early in day Test of support or resistance can be very strong Tries one way Still will reverse 50% of time 50% of time, decides it is the wrong way Strong selloff on open Strong rally on open Became L of day Became H of day /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 2

Early BO: What Is Chance H or L of Day Already Formed? The 1 st bar has 20% chance of At the close of any bar, what is the chance that either the being either the H or L of the day Bar 7 H or L of the day has already formed? By the close of the bar, Bar 12 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 1 st hour (bar 12), 70% chance the day has already made either the H or L /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 3

Early BO: What Is Chance H or L of Day Already Formed? By the close of bar 18 (90 min) Nothing magical about the number 18 90% chance the day has already Bar 16 has a slightly lower % chance made either the H or L Bar 23 has a slightly higher % chance Traders just need an approximate time when the probability is high 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 Bar 18 /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 4

BOM on Open: 2 Types, But Often The Same BO of range of 1 st 18 bars Breakout Mode (BOM) Here, also 18 bar BO Here, not BOM since never went above H of bar 1 Look for BO and then Bear BO, so about a Measured Move (MM) 90% chance of either bear day or TR day Bar 18 BO Mode After 10 th bar: Reversal down from new H Bar 18 and up from new L Today, bull BO, so 90% chance of either bull day or TR day /16 BrooksTradingCourse.com BrooksPriceAction.com Slide 5

Main Points: H or L of Day Forms Early Slide ▪ 50% chance 1 st BO will reverse 2 ▪ H or L of day forms early 7 ▪ Early BO: Breakout Mode or 18 Bar BO 14 ▪ Failed BO of yesterday’s H or L 20 ▪ Trend resumption after failed reversal 31 BrooksTradingCourse.com BrooksPriceAction.com Slide 6

BOM on Open: Bull BO, Then MM Up BO Mode After 10 th bar: Reversal down from new H and up from new L Bulls got MM up Bull BO of opening range OK to buy early /16 BrooksTradingCourse.com BrooksPriceAction.com Slide 7

BOM on Open: Sell BO below Reversal up for MM Down BO Mode: TR Open, about half of 50% chance of BO up or down average day’s range Then, look for MM (here, fell much more) After at least 5 - 10 bars Buy above the H with stop at new L of day Reversal down from above 1 st bar, Sell below the L with stop at new H of day Reversal up from below 1 st bar Either can come 1 st 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 Today had bear BO, so 90% chance of either bear day or TR day /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 8

BOM on Open: Sell BO below Reversal up for MM Down 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 /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 9

BOM on Open: If Pattern Is Small, Wait for Follow-Through BO Mode, but too few bars BO Mode B, but ok to wait to buyfollow-through bar Became bigger BO Mode pattern, since higher probability when buying BO of Tight TR but still only 9 bars and Tight TR Tight TR means Limit Order Market, not good BOM Got BO Mode sell Higher probability of MM down if wait to sell bear follow-through bar /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 10

BOM with Bull BO: 90% Chance of Bull Trend or TR Buy BO and PB 90% chance of bull trend or TR Today was mostly TR After 1 st bar: Reversal down from new H and up from new L Range is about half of average day /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 11

BOM on Open: Buy BO above Reversal down for MM Up BO Mode since after 1 st bar: Sometimes swing traders have to take Reversal up from new L, several trades before there is a trend then down from new H BOM traders buy bull BO Before BO, bears sell DT at MA (Opening Reversal down) Bulls buy HL MTR /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 12

Main Points: Early BO - Breakout Mode or 18 Bar BO Slide ▪ 50% chance 1 st BO will reverse 2 ▪ H or L of day forms early 7 ▪ Early BO: Breakout Mode or 18 Bar BO 14 ▪ Failed BO of yesterday’s H or L 20 ▪ Trend resumption after failed reversal 31 BrooksTradingCourse.com BrooksPriceAction.com Slide 13

18 th Bar: Look for BO or Reversal between Bars 16 - 20 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 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 Bar 18 so look for either strong BO or reversal OK to buy DB PB to MA /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 14

BO below 18 Bar Range: TR Day If no clear trend by bar 18, trend will probably start soon Look to trade BO or reversal Sell failed BO above H since now around 18 bars into day Bear sell signal bar, 2 nd entry sell, so higher probability of swing down Bar 18 Late new H Most reversal days do not go very far above H Sell BO to new L Buy HL MTR after bar 18 2 big bear bars so strong 90% chance the H will remain the H of the day momentum down or for most of day /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 15

BOM on Open: Many New Highs and Lows 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 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 3 rd failed break below yesterday’s low Buy BO above opening range and buy PB from BO so Wedge Bottom Range has 21 bars so 90% chance Buy reversal up that L will remain L of day Getting close to bar 18 so possible L of day Bar 18 /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 16

BOM of 1 st 18 Bars: Often Goes Sideways 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 Between Bars 15 -25, traders will buy reversal up from near low If near H, they will sell reversal down Bar 18 /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 17

BTC: Deep PB so TR Day Likely Bar 18 Buy failed BO below 18 bar range, especially since TR day Got rally, but not new H of day 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) 1/17 BrooksTradingCourse.com BrooksPriceAction.com Slide 18

Main Points: Failed BO of Yesterday’s H or L Slide ▪ 50% chance 1 st BO will reverse 2 ▪ H or L of day forms early 7 ▪ Early BO: Breakout Mode or 18 Bar BO 14 ▪ Failed BO of yesterday’s H or L 20 ▪ Trend resumption after failed reversal 31 BrooksTradingCourse.com BrooksPriceAction.com Slide 19

Failed BO of Yesterday’s H or L: 2 nd Signal Failed BO above yesterday’s H Failed BO below yesterday’s L 2 nd entry sell so higher probability of profit 2 nd entry buy so higher probability of profit /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 20

2 nd Failed BO H of Yesterday: Micro DT On the open, if the market reverses down from above yesterday’s high, it might be making the H of the day Micro DT so Higher probability is 2 nd signal L2 Opening Reversal down from H of yesterday Wedge Bull Flag after gap up HL MTR, Micro DB Too late to also call it an Opening Reversal up /16 BrooksTradingCourse.com BrooksPriceAction.com Slide 21

2 nd Failed BO above Yesterday’s H: Strong Bear Sell failed BO above yesterday’s high 2 nd entry sell, below bear bar closing on low, L2 and from higher H All create higher probability sell L1 /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 22

ORV: 2 nd Reversal down from Yesterday’s High Failed BO above yesterday’s high Sell 2 nd reversal down (Opening Reversal) Want bear signal bar Stop /17 BrooksTradingCourse.com BrooksPriceAction.com Slide 23

Failed BO above Yesterday’s H: 2 nd Sell Signal 2 nd entry sell, Wedge rally Sell failed BO above yesterday’s H, Yesterday had a small range so possibly 2 nd entry sell outside down day Rallied to back above yesterday’s H H1 after strong reversal up Parabolic Wedge Bottom HL MTR Buy reversal up from Micro DB Might get back above 2 nd failed BO below yesterday’s low yesterday’s high 2017 BrooksTradingCourse.com BrooksPriceAction.com Slide 24