Al Brooks is a technical analysis contributor to Futures magazine and an independent day trader. Called the trader’s trader, he has a devoted following, and provides live market commentary and daily chart analysis updates on his website at www.brookspriceaction.com. After changing careers from ophthalmology to trading 25 years ago, he discovered consistent trading success once he developed his unique approach to reading price charts bar by bar. He graduated from the University of Chicago Pritzker School of Medicine and received his BS in mathematics from Trinity College.
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Index
AB=CD
ABC pullback
Algorithms
Ascending triangle
Bands
Barbwire
with an ioi pattern
and limit order entries
as low
reversal
stop entries in
Bar counting See also High/low patterns (1, 2, 3, 4)
ABC corrections
basics of
chart and bar analysis
difficulties in
goal of
Bear breakouts:
characteristics of
characteristics signaling failure
characteristics signaling strength
probability of success
Bear channels See also Bull flags
Bear entry bar highs
Bear flag
Bear pullbacks
Bear reversal bar characteristics
Bear signal bar lows
Bear trap
Bear trends
new lows in
sequence for signs of weakness in
tight trading range in
Beginning trader mistakes
Breakeven stops
Breakout bar
Breakout/breakaway gaps
chart and bar analysis
Breakout entries
Breakout failures
Breakout mode setup
Breakout points
Breakout pullbacks
in absence of actual breakout
buy setup for
chart and bar analysis
probability of success
at a top
Breakouts See also Bear breakouts; Bull breakouts; Gaps
assessing
barbwire failed breakout
bear breakout
bull breakout (see also Bull breakouts)
chart and bar analysis
defined
double bottom
emotions and risk in trading
entries in direction of breakout
entries in existing strong trends
entries in opposite direction of breakout
example of how to trade
failed double bottom
failure of
final flag breakout
and follow-through
initial
late
likelihood of failure
and limit order entries
micro channel
with multiple consecutive trend bars
to new lows
into new trend
probability of success
pullbacks on
and reversals
risk/reward in
setup times for
signs of strength in
small trading range withing larger trading range
in tight markets
in tight trading ranges
and triangles
types and frequency of
volume and
Breakout spikes
Breakout tests
chart and analysis
and double bottom bull flag
and micro gaps
probability of success
purpose of
Bull breakouts:
areas commonly tested after
in bear trend
characteristics
characteristics signaling failure
characteristics signaling strength
Bull channels
scaling into
Bull entry bar lows
Bull flags See also Bear channels; Double bottom bull flags
chart and bar analysis
double bottom bull
with-trend
Bull pullbacks
and bar counting
Bull reversal bar characteristics
Bull signal bar highs
Bull trap
Bull trend line
Bull trend pullbacks
Bull trends
buying pullbacks in
limit order entries in
sequence for signs of weakness in
tight trading range in
Buy climaxes
Buy stops:
on pullbacks
worst-case
Candle pattern traps
Channel fading
Channel lines
Channels See also Tight trading ranges
bear channel (see also Bull flags)
bull channels
directional probability within
evolving into trading ranges
fading
scaling in during
steep
Characteristics:
of bear breakouts
bear reversal bar
of bull breakouts
of bull reversal bars
of strong trends
Cherry-picking
Chess
Climactic reversal
Climaxes:
buy
probability of success
sell
Commissions, and profitability of trades
Computer-generated trading See also Algorithms
Consecutive losers, waiting for
Continuation patterns
tight trading range as
trading ranges and
Contracting triangle
Countertrend entries
Countertrend scalping
Countertrend trades
and limit order entries
scaling into
Crashes
Cup and handle. See Breakout pullbacks
Daily pivots
Day trading, background of
Descending triangle
Directional certainty
Directional probability
advantages of, for beginning traders
chart and bar analysis
in scalping
Discretionary traders
Dodgson, Charles Lutwidge
Doji
Dollar cost averaging
Double bottom bull flags
chart and bar analysis
Double bottom pullback
Double bottoms
Double top bear flags
Double tops and bottoms
Down pullback
Dueling lines
chart and bar analysis
pullbacks
variant
Edges, acting on
Edwards and Magee
Elliott Wave traders
Emotions
Entering on limits
and breakouts
useful situations for
Entering on stops
Entries. See also Limit order entries; Scaling in/out
breakout entries
countertrend
Entry bar
Entry/signal bar protective stops
Exhaustion gaps
Exit strategies
Expanding triangles
chart and bar analysis
Fades
Fading extremes
Fading magnets
Failed breakouts
Failed double bottom
Federal Open Market Committee (FOMC) report
Fibonacci retracement levels/projections
Final flag breakout
Final flags
Final flag slope
Final pullback of trend
First moving average gap bars
First sequence pullback
Flags
bear flag
bull flags (see Bull flags)
double bottom bull
double top bear
final
final flag breakout
final flag slope
tight trading ranges as
types of
Follow-through, breakouts and
Forced-selling plunges
Fractal markets
Fundamental analysis
Gambling
Gap bars
Gaps
between bar open and close of previous bar
breakout/breakaway (see Breakout/breakaway gaps)
and breakout points
chart and bar analysis
defined
different types, on daily chart
exhaustion gaps
intraday
measured moves based on
measuring
micro measuring gaps
moving average gaps
negative
trend bars and
twenty gap bars
and wedges
Head and shoulders bear flag
Head and shoulders tops and bottoms
chart and bar analysis
HFT Firms
Higher high breakout pullback
High-frequency trading firms (HFTs)
High/low patterns (1, 2, 3, 4)
chart and bar analysis
ii patterns
Indicators
Inertia
Inflection
Inflection area
Initial breakouts
Initial entries
Initial stops
Institutional trading See also High-frequency trading firms (HFTs)
effect on market volume
and scaling in/out
Intraday gaps
Inverse charts
Investors, vs. traders
ioi pattern
Late breakouts
Late bull trap
Late stop runs
Leg 1 = leg 2 move
Limit order entries
and barbwire patterns
and breakouts
in bull trends
chart and bar analysis
fading tests of lines with
probability of success
purpose of
on quiet days
scalping and
in tight trading ranges
and trend channel lines
useful situations for
Limit order exits
Limit order setups
Long positions:
scaling into
setups in trading ranges
Low patterns (1, 2, 3, 4). See High/low patterns (1, 2, 3, 4)
Low-probability trades
Magnets See also Measured moves; Support/resistance
big trend bar extremes as
chart and bar analysis
failed reversals
types of
Market activity spectrum
Market balance
Market crashes
Market imbalance
Market inertia
Market order trade setups
Market uncertainty
Martingale techniques
Mathematics of trading
algorithms
directional probability
overreliance on
probabilities for success
and profit taking
trader’s equation
Measured moves
based on bear spike
based on gaps and trading ranges
based on middle of trading range
based on size of first leg
chart and bar analysis
defined
and double bottom bull flag
following spike
profit taking and
pullback entries and
spike and channel trends and
uncertainty and
Measured move targets
Measuring gaps
chart and bar analysis
micro measuring gaps
trend bars and
Media reports
and breakouts
importance of ignoring
Micro channels
and barbwire behavior
micro channel breakouts
Micro gaps
Micro measuring gaps
Momentum:
in double bottoms
in trading ranges
Momentum programs
Momentum traders
Money management stops
Moving average gaps
chart and bar analysis
twenty gap bars
Moving average pullbacks
chart and bar analysis
Moving average pullback short
Moving averages
pullbacks and
pullbacks to
trading ranges and
Negative gaps
Negative measuring gaps
News reports
and breakouts
importance of ignoring
OCO orders
One-legged pullbacks
Pause bars
“Perfect” trade
Personality traits
Price action
Price action entry
Price action stops
Prior swing highs/lows
Probabilities See also Risk/reward
algorithms
and decision making
directional probability
implications of, in trading
planning strategies
in scaling in/out
for success
trader’s equation
Probability percentages for success in trading
Profit taking
and measured moves
planning for
and pullbacks
Profit targets
and scalping
and spike size
in swing trading
Protective stops
breakeven stop
with breakouts
chart and bar analysis
determination of size
entering on
entry/signal bar
initial stops
money management stops
price action stops
on pullbacks
reversing on
and scaling in/out
tightening
in trading range trades
trailing stops
wide stops
worst-case buy stop
Protracted trends
Pullback entries
Pullbacks See also types of pullback; Reversals
anticipating
and bar counting (see also High/low patterns (1, 2, 3, 4))
bear pullback
bear trend
on breakouts
bull trend
buying, in a bull trend
defined
double bottom
double bottom bull flags
double top bear flags
double tops and bottoms
dueling line pullbacks
early entry points as targets for
end of
final leg
first moving average gap bars
first sequence
growth of
head and shoulders tops and bottoms
higher high/lower low
increase in size of
and initial breakouts
late bull trap
to moving average
moving average pullback short
one-legged
probability of success
profit taking and
reversals and
scaling into
and scalp trades
stop-run
subsequent
three-legged
three-push pullbacks
in tight trading ranges
timing and traps
as trading ranges
twenty gap bars
two-legged
wedges (see also Wedges)
Reasons for entering a trade
Reporters and pundits
and breakouts
importance of ignoring
Resistance. See Support/resistance
Reversals
barbwire
breakouts and
chart and bar analysis
entering on
failed, leading to successful
final pullback as first leg of new trend
high/low patterns and
predicting
profit taking and
in pullbacks
resulting in trading range day
setup times for
as trading ranges
and trading ranges
wedge reversal
Reversal setups
Reversal signals
Rising wedge
Risk/reward. See also Probabilities
in breakouts
for different probabilities of success
and directional probability
high/low patterns and
reward equaling risk
in scaling in/out
in trading breakouts
Round numbers
Routines
Rules in trading
“Need Two Reasons to Take a Trade,”
profit targets
for reversals
risk/reward
scaling in/out
trading ranges
Scaling in/out
all the way up
during channels
chart and bar analysis
with countertrend trades
institutional trading and
long positions
and protective stops
pullbacks
during spikes
variables of
Scalping/scalp trades
algorithms for
countertrend
defined
institutional
and limit order entries
probabilities in
probability of success
probability requirements in
profit targets and
pullbacks and
trade management for
in trading ranges
Second entries
Second moving average gap bar entries
Sell climaxes
Sell vacuum
Setups:
breakout mode setup
breakout pullback
for limit orders
long setups in trading ranges
for market orders
for reversals
short setups (see Short setups)
in swing trading
in tight trading ranges
for trading ranges
for trading range trades
Short setups
moving average pullback short
probability of success
protective stops in
in trading ranges
Signal bars
Sloping tight trading ranges
Small breakout bars
Spike and channel pattern
chart and bar analysis
Spike phase of trends
Spikes:
breakout spikes
in measured moves
measured moves based on
probability of success
and profit potential
scaling in during
and trading ranges
Stairs patterns
Steep channels
Stop entries
Stop-run pullback
Stops See also Protective stops
breakeven stop
with breakouts
entering on
money management stops
price action stops
on pullbacks
in trading range trades
worst-case buy stop
Strong bear reversal bar characteristics
Strong bull reversal bar characteristics
Strong trend characteristics
Strong trends:
breakout entries in existing
entries in
Subsequent pullbacks:
chart and bar analysis
Support/resistance
breaking through
chart and bar analysis
forms of
swing highs/lows
trading ranges as
trend reversals and
in wedge pullbacks
Swing highs/lows
Swing trading
algorithms for
chart and bar analysis
early exits in
probability of success
protective stops in
trade management in
in trading ranges
ups and downs in
Targets
Technical analysis
Television. See Media reports
Test of trend extreme
Three-legged pullbacks
Three-push pullbacks See also Triangles
Three-push top/bottom
Tight trading ranges
barbwire (see also Barbwire)
breakouts in
chart and bar analysis
defined
directional probability within
evolving into larger trading ranges
failed breakouts in
as flags
limit order entries in
negatives of
as pullback in bull and bear trends
pullbacks in
setups in
sloping
after spike up and down
as support and resistance
swing trades in
tight (see Tight trading ranges)
time frames of
traditional
vs. trending markets
trends evolving into
trends in
triangles
two-sided trading
uncertainty in
Trading range traders
Trading routines
Trading rules
“Need Two Reasons to Take a Trade,”
profit targets
for reversals
risk/reward
scaling in/out
trading ranges
Traditional firms
Trailing stops
chart and bar analysis
Transitions in sentiment
Traps
bear trap
candle pattern trap
late bull trap
Trend bars
as gaps
gaps and
Trend channel lines
Trend extreme
Trending markets
vs. trading ranges
Trend legs
Trend lines
Trend resumption day
Trend reversals
Trends:
bear trend (see Bear trends)
bull trend (see Bull trends)
determining strength of
early entry in
evolving into trading ranges
highs and lows in
missing
protracted
spike phase
trading ranges and
Trend strength
Triangles See also Wedges
ascending/contracting
chart and bar analysis
expanding
Twenty gap bars
Two-legged moves
spike and channel
two-legged pullback
two-legged sideways
Two-sided trading
Uncertainty
Urgency
Vacuum effect
Volatility
Volume:
and breakouts
effect of institutional trading on
Wall of worry
Weak traders
Wedges
chart and bar analysis
limit orders and
rising
wedge bear flag
wedge bull flag
wedge flags
wedge pullback to trend line
wedge reversal
wedge top
Wide protective stops
Worst-case buy stop