al-brooks-course
48H - Trading the Middle of the Day
Raw transcript and slide notes for 48H - Trading the Middle of the Day.
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- Slides: 12
- Transcript segments: 367
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Transcript 001
Time: 00:02
Bilingual Transcript
00:02 - 00:03
EN: This is Al Brooks.
00:03 - 00:05
EN: Thank you for watching the Brooks Trading Course.
00:05 - 00:09
EN: This is the second of two videos on trading in the middle of the day.
Slide 001
Time: 00:11
Bilingual Transcript
00:13 - 00:18
EN: There’s often a late test of support and resistance about two-thirds
00:18 - 00:21
EN: of the day through the day with a couple hours to go,
00:21 - 00:25
EN: and that often leads to a trend up or down at the end of the day.
00:25 - 00:31
EN: And then remember my 80% rule: 80% of the time, a trend reversal will fail.
00:31 - 00:34
EN: 80% of the time if the market’s in a Trading Range,
00:34 - 00:36
EN: a breakout attempt will fail.
Slide 002
Time: 00:37
Bilingual Transcript
00:40 - 00:44
EN: This is a Trading Range, and it lasted about 5 and a half hours.
00:50 - 00:52
EN: One of the important functions of the middle third of the day
00:52 - 00:57
EN: is to test some support or resistance, and then the reaction up or down
00:57 - 01:01
EN: from that test often leads to a trend in the final third of the day.
01:01 - 01:02
EN: Again, when I talk about “thirds,”
01:02 - 01:04
EN: I’m not talking about an equal number of bars.
01:04 - 01:06
EN: I’m talking about portions of the day.
01:06 - 01:09
EN: Traders tend to look for a swing on the open
01:09 - 01:12
EN: or in the first couple of hours, and they tend to look for a swing
01:12 - 01:14
EN: at the end of the day, the final couple of hours.
01:14 - 01:16
EN: Everything in between is the middle.
01:23 - 01:27
EN: Any type of support and resistance, like a prior day’s high or a low,
01:28 - 01:31
EN: last week’s high or a low, a trend line, Measured Move target
01:31 - 01:34
EN: - any type of support or resistance could get tested
01:34 - 01:36
EN: at the end of the middle third of the day
01:36 - 01:40
EN: and lead to a trend up or down at the end of the day.
01:43 - 01:46
EN: In this particular chart, I’m going to use the open of the day
01:46 - 01:49
EN: as an example of important support or resistance.
01:56 - 01:58
EN: When you have a day that’s a Trading Range day
01:58 - 02:01
EN: - trades below the open, trades above the open
02:01 - 02:04
EN: - the open of the day is often a magnet at the end of the day,
02:04 - 02:06
EN: which means that if the market’s above the open,
02:06 - 02:09
EN: it will very often sell down and test the open.
02:09 - 02:13
EN: If it’s below the open, it will very often rally up and test the open.
02:14 - 02:17
EN: It’s more common if the open of the day is in the middle third
02:17 - 02:20
EN: of the prior day, but it often happens as well
02:20 - 02:23
EN: even if the open’s at the low of the day or the high of the day.
02:24 - 02:26
EN: Here, the bulls got a breakout.
02:26 - 02:28
EN: They have a Higher Low, hoping to get a trend up,
02:29 - 02:31
EN: and when the market got near the high of the day,
02:31 - 02:34
EN: traders sold it, expecting one more test down to the open.
02:34 - 02:37
EN: It did not quite get there, but it was still a selloff
02:37 - 02:39
EN: that tested the open of the day.
02:44 - 02:47
EN: Three things that can happen after the test of the open.
Slide 003
Time: 02:45
Bilingual Transcript
02:47 - 02:50
EN: The Trading Range can continue for the remainder of the day.
02:50 - 02:54
EN: The market can reverse up from support and close on the high
02:54 - 02:56
EN: and become a bull trend day, like today.
02:56 - 03:00
EN: Even though when you look at the 5-minute chart it’s not much of a bull trend,
03:00 - 03:03
EN: on the daily chart the day opened near its low
03:03 - 03:07
EN: and closed at its high and was a bull trend day.
03:07 - 03:10
EN: The third possibility is it could fall below the open
03:10 - 03:12
EN: and close on the low of the day and be a bear trend day.
03:13 - 03:17
EN: The opposite’s true if the market was below the open
03:17 - 03:19
EN: in the middle third of the day.
03:19 - 03:22
EN: It would then typically try to test back to the open,
03:22 - 03:25
EN: and same thing, it could break through and close on the high.
03:25 - 03:27
EN: It could reverse back down, close on the low.
03:27 - 03:31
EN: Or it could stay sideways, and the day could be a doji day on the daily chart.
03:35 - 03:37
EN: Tested the open here, sold off.
03:37 - 03:40
EN: Traders sold it, expecting the test of the open.
03:40 - 03:41
EN: It’s a Trading Range day.
03:41 - 03:43
EN: Open is in the middle third.
03:43 - 03:45
EN: The rally is not that far above the open.
03:45 - 03:48
EN: Traders will sell, looking for a test of the open,
03:48 - 03:50
EN: and then one of three things will happen.
03:50 - 03:52
EN: Either it goes sideways,
03:56 - 04:01
EN: or it’ll reverse up from support and close on the high, like it did today,
04:05 - 04:08
EN: or it will break below the support of the open
04:08 - 04:11
EN: and close near the low and create a bear trend day.
04:16 - 04:17
EN: Sometimes you’ll get a trend day.
04:17 - 04:23
EN: The close is on the high, the open is near the low, but the day is small.
04:23 - 04:24
EN: A small bull trend day.
04:24 - 04:28
EN: For example, if today closed right here, it would be a bull bar
04:28 - 04:31
EN: on the daily chart – open here and then the close above
04:31 - 04:33
EN: - but it would not be a big bull trend day,
04:33 - 04:36
EN: and it would not increase the day’s range that much.
04:37 - 04:38
EN: Here we rallied some.
04:38 - 04:40
EN: Not all that much.
04:40 - 04:42
EN: It did increase the day’s range.
04:46 - 04:50
EN: Rarely, if you have a very small trend for the first two-thirds of the day,
04:50 - 04:54
EN: you can get a very big breakout into a big trend up or down.
04:55 - 04:58
EN: Very often it’ll rally or sell off for a Measured Move
04:58 - 05:00
EN: based upon the height of the range.
Slide 004
Time: 05:05
Bilingual Transcript
05:14 - 05:18
EN: Near the high of a Trading Range day, open of the day in the middle third.
05:18 - 05:21
EN: Traders expect a selloff, and you can see everyone sold here.
05:21 - 05:25
EN: The bulls gave up, the bears sold, looking for a test down to the open.
05:25 - 05:28
EN: We have 2 very big bear trend bars,
05:28 - 05:31
EN: but bad follow-through here, weak follow-through here.
05:31 - 05:33
EN: Reversing up from just above the open.
05:38 - 05:41
EN: Here the market is in a Small Pullback Bull Trend,
05:41 - 05:43
EN: but it failed to get above the high.
05:43 - 05:47
EN: Even if it got a little bit above the high and not much above the high,
05:47 - 05:49
EN: you have to be aware that the open is a magnet
05:49 - 05:55
EN: and the day is mostly a Trading Range day, and the bulls often finally give up
05:55 - 05:57
EN: and they can create big bear trend bars like this.
05:57 - 06:01
EN: However, they could simply be bulls giving up
06:01 - 06:05
EN: and a sell vacuum down to support, where the bulls will try to buy again.
06:13 - 06:17
EN: The bulls bought around support – in fact, just above support.
06:17 - 06:21
EN: They were so eager to buy, instead of placing a limit order at the open,
06:21 - 06:24
EN: they started placing their limit orders 2 or 3 ticks above.
06:24 - 06:27
EN: You don’t know that when the market’s falling; however,
06:27 - 06:31
EN: once it reverses up you realize that the bulls were very eager.
06:31 - 06:32
EN: They were buying above the open.
06:32 - 06:35
EN: They were so confident that it might not get to the open
06:35 - 06:39
EN: or below the open that they placed limit orders to buy above.
06:40 - 06:42
EN: The result was these very 2 big bear bars
06:42 - 06:47
EN: were simply a sell vacuum test of support, and support held.
06:47 - 06:50
EN: The bears gave up and the bulls bought.
06:55 - 06:58
EN: This selloff ended the middle third of the day.
06:58 - 07:00
EN: You don’t know that until you get the reversal up.
07:00 - 07:04
EN: Once you start to get the reversal up, by the third or fourth bar
07:04 - 07:07
EN: you know the market is back to Always In Long, and that tells you
07:07 - 07:11
EN: that the market is beginning an attempt at a trend for the remainder of the day
07:11 - 07:15
EN: – which means the final third of the day began here,
07:15 - 07:18
EN: and that means the middle third of the day ended here.
07:20 - 07:23
EN: For me, this was the initial rally,
07:24 - 07:26
EN: and then this is the middle third of the day,
07:26 - 07:29
EN: and then this is the end of the middle third of the day.
07:29 - 07:32
EN: The bears tried to get a bear trend starting here.
07:32 - 07:36
EN: They wanted the final third of the day to begin here, and they failed.
07:36 - 07:38
EN: So the final third of the day instead began here.
Slide 005
Time: 07:45
Bilingual Transcript
07:49 - 07:53
EN: Once you get that rally, traders decide that we’re going to close
07:53 - 07:55
EN: above the open and we’ll get a bull trend.
07:55 - 07:57
EN: They don’t know how big a bull trend, but they’re confident
07:57 - 08:01
EN: that the market is going to trend up into the end of the day.
08:12 - 08:16
EN: Some bulls, as I said, would place limit orders at the open of the day,
08:16 - 08:19
EN: betting that if it falls below, it’ll only fall a tick or two
08:19 - 08:22
EN: below and maybe form a Double Bottom here.
08:22 - 08:24
EN: Especially after such a strong reversal up here,
08:24 - 08:27
EN: the market is likely to form a Double Bottom
08:27 - 08:29
EN: when it tests back down here – and it did.
08:29 - 08:31
EN: This is a Double Bottom with that low.
08:31 - 08:35
EN: It’s a Higher Low Double Bottom, but it’s still a Double Bottom.
08:35 - 08:39
EN: Bulls will place limit orders just above support or at support.
08:39 - 08:43
EN: Here, we know after the rally that there were
08:43 - 08:45
EN: a lot of buy limit orders just above the open of the day.
08:46 - 08:50
EN: Some traders buy after they see the reversal up,
08:50 - 08:52
EN: or they wait until they see 3 or 4 bull bars
08:52 - 08:55
EN: and then they buy at the market or they buy closes.
08:55 - 08:57
EN: Other traders will put a smaller timeframe chart up
08:57 - 09:01
EN: and buy on a reversal up on a 1-minute, 2-minute, or 3-minute chart.
09:06 - 09:10
EN: Traders who buy with this limit order, they’ll have their stop below here,
09:10 - 09:14
EN: betting that if it’s going to trend up at the end of the day,
09:14 - 09:15
EN: it should not fall below this low.
09:15 - 09:17
EN: It should form a Double Bottom.
09:17 - 09:19
EN: Other traders will keep their stop below the bottom
09:19 - 09:23
EN: of this initial bull reversal because sometimes it’ll fall a little bit
09:23 - 09:25
EN: below this low, and they don’t want to get stopped out.
09:25 - 09:28
EN: If you did use the tight stop and the market fell
09:28 - 09:33
EN: below that low and reversed up, traders would buy again on the reversal up.
09:39 - 09:40
EN: High 2 bull flag.
09:40 - 09:42
EN: Two legs down – one, pullback, two.
09:42 - 09:47
EN: It went above this bar, a High 1 buy, but that bear bar is so big,
09:47 - 09:50
EN: most bulls are not going to buy above that bull bar.
09:50 - 09:52
EN: Especially when there’s a magnet pulling the market down,
09:53 - 09:57
EN: this bear bar is likely to have at least a small second leg down – which it did.
09:57 - 09:59
EN: This became a High 2 buy signal bar.
09:59 - 10:02
EN: Bear body, not good, but location is good.
10:03 - 10:05
EN: Some traders prefer to buy above a bull bar,
10:05 - 10:09
EN: and they would’ve bought above this bull bar and got filled here.
10:15 - 10:19
EN: Other traders prefer to buy closes after there are 3 or 4 bull bars
10:19 - 10:21
EN: closing at or near their highs.
10:21 - 10:26
EN: That’s a sign that the bulls are controlling the market for time.
10:26 - 10:27
EN: 3 bars, 15 minutes.
10:27 - 10:29
EN: 4 bars, 20 minutes.
10:29 - 10:31
EN: That’s a sign of strong bulls.
10:35 - 10:37
EN: Other traders like to buy pullbacks.
10:37 - 10:40
EN: Once they see this strong reversal up, they’ll look to buy a pullback.
10:40 - 10:43
EN: This is about a 50% pullback of this rally.
10:43 - 10:46
EN: It’s also a test of the 20 bar Exponential Moving Average,
10:46 - 10:49
EN: and it’s also two small legs down – one, pullback, two.
10:49 - 10:53
EN: A bear bar, not great, but we’re Always In Long
10:53 - 10:57
EN: and it’s testing support, the Moving Average and a 50% pullback.
10:57 - 10:58
EN: Same here.
10:58 - 11:03
EN: Two legs down – one, pullback, two – so this is a High 2 buy signal bar
11:03 - 11:06
EN: for a small rally for the remainder of the day.
Slide 006
Time: 11:10
Bilingual Transcript
11:15 - 11:20
EN: Very strong bull trend, very little overlap, and then it entered a Triangle.
11:20 - 11:22
EN: We have a bull bar.
11:22 - 11:24
EN: Traders will buy above the bull bar looking for trend resumption up.
11:24 - 11:27
EN: So bull trend, Trading Range, trend resumption up.
11:27 - 11:30
EN: We have a breakout and a pullback from the breakout.
11:30 - 11:32
EN: Other traders will buy above that doji.
11:32 - 11:35
EN: Some traders prefer to buy above a bull bar; they’ll buy above that bar.
11:36 - 11:39
EN: Whenever you have a Triangle late in a bull trend,
11:39 - 11:43
EN: it’s often the final bull flag, which means if you get a strong breakout,
11:43 - 11:46
EN: the market will try to get back to the apex of the Triangle.
11:47 - 11:51
EN: Then we have an added magnet here, the big round number – 2,000.
11:51 - 11:54
EN: If we get above it, the market will try to get down to it.
11:54 - 11:57
EN: If we get below it, the market will try to get up to it.
12:03 - 12:04
EN: Look what happened here.
12:04 - 12:07
EN: We opened here, we sold off, and we rallied.
12:07 - 12:09
EN: The high of the day is around a Measured Move up
12:09 - 12:11
EN: based upon the height of this selloff.
12:11 - 12:14
EN: A lot of times the high will be a Measured Move up
12:14 - 12:16
EN: from the low of the day to the open of the day.
12:16 - 12:19
EN: If it goes above that Measured Move target – which would be about here
12:19 - 12:23
EN: - I then look at a Measured Move target based upon the low and the high,
12:23 - 12:24
EN: and the market went a little bit above it.
12:24 - 12:28
EN: The reason why that’s a Measured Move target is theoretically
12:28 - 12:32
EN: when the market gets back to the high, the bears want to form a Double Top
12:32 - 12:35
EN: and then break below the neckline and fall for a Measured Move down.
12:35 - 12:37
EN: If instead it breaks above this high,
12:37 - 12:41
EN: traders will assume that the Double Top failed.
12:41 - 12:43
EN: Here there was no obvious attempt at a Double Top,
12:43 - 12:45
EN: but there was a theoretical Double Top,
12:45 - 12:47
EN: and traders will look for a Measured Move up.
12:49 - 12:53
EN: Strong rally, relentlessly up, but the open of the day
12:53 - 12:56
EN: is in the middle third of the day and therefore a magnet.
12:56 - 13:00
EN: We have a Triangle late in a bull trend, and therefore a magnet.
13:00 - 13:01
EN: Potential final bull flag.
13:01 - 13:05
EN: And we also have a big round number below where we are up here.
13:05 - 13:08
EN: So traders will look to sell a reversal down.
13:16 - 13:19
EN: Once the market sells off, traders conclude that we’re
13:19 - 13:21
EN: into the final portion of the day.
13:21 - 13:25
EN: The beginning of the day was a rally, middle of the day was a Triangle,
13:25 - 13:30
EN: an attempt at trend resumption, and now the end of the day is here.
13:30 - 13:35
EN: If this rally lasted all day, I would’ve said the end of the day began here.
13:35 - 13:38
EN: But because it reversed, I would say the end of the day,
13:38 - 13:41
EN: the final third of the day, began up here.
13:44 - 13:49
EN: If a trader does sell below that bear bar, it’s reasonable to put a stop
Slide 007
Time: 13:45
Bilingual Transcript
13:49 - 13:53
EN: just above the high of that bear bar looking for a swing down to support,
13:53 - 13:55
EN: the apex of the Triangle, the big round number,
13:55 - 13:58
EN: and maybe all the way down to the open of the day.
13:58 - 14:00
EN: The day closed back at the open.
14:00 - 14:03
EN: Even though it was a bull trend for most of the day,
14:03 - 14:07
EN: the selloff late in the day testing the open made the day a doji bar
14:07 - 14:12
EN: on the daily chart: a close near the open, a tail on the bottom,
14:12 - 14:13
EN: and then a tail on the top.
14:14 - 14:19
EN: The tail on the top is from the close to the high of the day in this case.
14:25 - 14:31
EN: Is this a Wedge? Is it one, two, three? Some computers would say that.
14:31 - 14:34
EN: Other computers would say maybe it’s a Parabolic Wedge.
14:34 - 14:37
EN: Up and then a bear bar, Leg 1 – and then up again
14:37 - 14:41
EN: and then a doji bar, Leg 2 – and then up and a reversal.
14:41 - 14:45
EN: So Parabolic Wedge and a potential Final Flag reversal.
14:45 - 14:46
EN: A decent sell signal bar.
14:46 - 14:51
EN: Reasonable to take that short, and you could even use a tight stop 1 tick
14:51 - 14:55
EN: above the high of that sell signal bar, hoping for a test back down
14:55 - 14:56
EN: to the open of the day.
14:56 - 15:00
EN: We’re around a Measured Move up; we have a Final Flag
15:00 - 15:03
EN: and we have a magnet of the big round number all below.
15:12 - 15:15
EN: Some traders don’t like to sell when the risk is small
15:15 - 15:18
EN: because they know small risk means low probability.
15:18 - 15:22
EN: They want higher probability, and they wait until they see 3 or 4 bear bars,
15:22 - 15:25
EN: especially if 1 or 2 of the bear bars is closing on their lows,
15:25 - 15:27
EN: and then they sell the close.
15:27 - 15:31
EN: When the market closes, they either sell a second before the close
15:31 - 15:34
EN: or they sell the market and get filled on the open of the next bar.
15:34 - 15:36
EN: This is a higher probability sell.
15:36 - 15:41
EN: The stop is further away, the risk is greater, but that’s always the tradeoff.
15:41 - 15:43
EN: Whenever you take a higher probability trade,
15:43 - 15:45
EN: the risk/reward ratio is going to be worse.
15:45 - 15:48
EN: Usually the stop is further away.
15:48 - 15:50
EN: That means the risk is usually greater.
Slide 008
Time: 15:55
Bilingual Transcript
15:56 - 15:59
EN: If a trader did sell here and the market rallied above his stop
15:59 - 16:02
EN: and then it reversed down a second time, he would sell again.
16:08 - 16:11
EN: Other traders are pretty confident that we’re going to test back down
16:11 - 16:13
EN: because of all the magnets below.
16:13 - 16:16
EN: Open of the day, Triangle, big round number,
16:16 - 16:18
EN: and then we’re at a Measured Move target.
16:18 - 16:21
EN: Rather than getting stopped out, they’ll use a wider stop,
16:21 - 16:23
EN: maybe based upon some kind of a Measured Move up,
16:23 - 16:26
EN: and they’ll scale in higher if it goes higher.
16:29 - 16:34
EN: For example, maybe a Measured Move up based upon this final leg of the rally.
16:34 - 16:36
EN: Here’s the Measured Move, and put a stop just above it.
Slide 009
Time: 16:40
Bilingual Transcript
16:42 - 16:45
EN: I want to talk a little bit about my 80% rule.
16:45 - 16:48
EN: If the market’s in a trend, 80% of reversal attempts will fail.
16:49 - 16:53
EN: If it’s in a Trading Range, 80% of breakout attempts will fail.
Slide 010
Time: 16:54
Bilingual Transcript
16:57 - 16:59
EN: Markets resist change.
16:59 - 17:02
EN: They tend to continue to do what they’ve been doing.
17:13 - 17:15
EN: When the market’s in a clear bull trend,
17:16 - 17:18
EN: most reversal attempts are going to fail.
17:18 - 17:21
EN: Once it’s in a clear bear trend, you only want to sell
17:21 - 17:25
EN: because 80% of reversal attempts up will fail.
17:25 - 17:27
EN: You should sell at least a small position
17:27 - 17:31
EN: as soon as you believe the market is Always In Short.
17:36 - 17:38
EN: If you think it’s in a bear trend,
17:38 - 17:43
EN: to have that confidence you have to be at least 60% certain.
17:43 - 17:46
EN: So whenever you say “Oh, I think the market’s probably going down,”
17:46 - 17:50
EN: what you’re saying is you’re at least 60% certain
17:50 - 17:52
EN: that the market is going at least a little bit lower.
17:52 - 17:56
EN: When that’s the case, you have to sell, and you only sell
17:56 - 18:01
EN: until there’s some kind of reversal back up or a strong bull breakout.
18:08 - 18:12
EN: Strong selloff, but – open of the day, middle third of the day.
18:12 - 18:16
EN: The bears who sold will take profits, and then bulls,
18:16 - 18:20
EN: once they see a good bull bar like this, they’re going to wonder
18:20 - 18:23
EN: if the open of the day is going to be support that will lead to a rally.
18:23 - 18:25
EN: Now we have a Micro Double Bottom.
18:25 - 18:29
EN: Although I don’t have it drawn in here, this is a bigger bear bar breaking
18:29 - 18:33
EN: below this Tight Channel, and therefore it’s climactic.
18:33 - 18:35
EN: That increases the chances of a bounce.
18:35 - 18:37
EN: 2 good bull bars closing near their highs
18:37 - 18:41
EN: - a lot of bulls would buy above the Micro Double Bottom,
18:41 - 18:43
EN: hoping that we get back up to the high of the day.
18:44 - 18:46
EN: Not likely after this many bear bars in a Tight Channel,
18:46 - 18:50
EN: but we’ll probably bounce enough at least for a scalp.
18:50 - 18:54
EN: Some bulls will say, huh, this bull bar is a pullback in a bear trend,
18:54 - 18:58
EN: but we’re at support and this bigger bear bar,
18:58 - 19:01
EN: biggest bear bar in about 15 bars, a climax.
19:01 - 19:03
EN: This is a bad sell signal bar.
19:03 - 19:07
EN: Therefore, there’ll be more buyers than sellers at the low of this bull bar,
19:07 - 19:10
EN: and they’ll place a limit order to buy at that low and get filled right here.
Slide 011
Time: 19:14
Bilingual Transcript
19:20 - 19:23
EN: The bears have a strong selloff and then a rally to about 50% up.
19:23 - 19:25
EN: Moving Average Gap bars.
19:25 - 19:28
EN: You expect some attempt at trend resumption down.
19:28 - 19:32
EN: Bears expecting trend resumption down, but were disappointed
19:32 - 19:35
EN: by the appearance of that trend resumption down.
19:35 - 19:37
EN: Bear bar, bad follow-through.
19:37 - 19:38
EN: Tail on the bottom.
19:38 - 19:39
EN: Bar not big.
19:39 - 19:43
EN: Where are the consecutive big bear bars? Consecutive bear bars here, but small.
19:44 - 19:48
EN: Therefore, this looks like a bear leg in what will become a Trading Range.
19:55 - 19:56
EN: Trying to reverse up here.
19:56 - 19:58
EN: You can call it a Wedge bull flag.
19:58 - 20:01
EN: Three pushes down – one, pullback, two, pullback, three.
20:01 - 20:03
EN: You can call it a Micro Double Bottom.
20:03 - 20:06
EN: You can call it a big Double Bottom Higher Low Major Trend Reversal.
20:06 - 20:09
EN: You could simply call it a Higher Low Major Trend Reversal.
20:09 - 20:12
EN: Bear trend, bull breakout, Higher Low.
20:12 - 20:16
EN: So Wedge Higher Low and a Double Bottom Higher Low with this low
20:16 - 20:20
EN: or with this low, and a decent buy signal bar and a small Double Bottom.
20:20 - 20:22
EN: This is a reasonable buy.
20:22 - 20:26
EN: Once it starts to go up, traders are concluding that the middle of the day
20:26 - 20:30
EN: has ended and the market is trying to get a trend up at the end of the day.
20:36 - 20:38
EN: Testing the low of the day down here.
20:38 - 20:41
EN: More importantly, testing a Higher Low,
20:41 - 20:45
EN: and this therefore is a Double Bottom Higher Low Major Trend Reversal
20:45 - 20:48
EN: with a good Double Bottom and good bull bars.
20:49 - 20:53
EN: While probabilities are never 60% when you’re buying a Major Trend Reversal,
20:53 - 20:56
EN: this one is close to 50% that you’ll get
20:56 - 20:58
EN: at least a test up to the top of the range.
20:58 - 21:00
EN: This is a good buy setup.
21:00 - 21:03
EN: If you want higher probability, you wait until you get 3 consecutive bull bars
21:03 - 21:07
EN: or until you get a breakout or a breakout and a follow-through bar.
21:13 - 21:18
EN: Good bull bars closing at their highs, at support (this prior Higher Low),
21:18 - 21:21
EN: so good Buying Pressure at the bottom of a developing range.
21:21 - 21:23
EN: The market’s looking for the bottom of the range.
21:23 - 21:27
EN: Is it here, or is it here? It looks like it might be here,
21:27 - 21:30
EN: forming a Double Bottom Higher Low Major Trend Reversal.
21:35 - 21:39
EN: You can buy on a reversal up, hoping that the market gets back
21:39 - 21:42
EN: to the open of the day, which is at the high of the day,
21:42 - 21:45
EN: or you can wait for the breakout and then buy later.
21:47 - 21:50
EN: If you buy here, reasonable to put your stop below this low.
21:50 - 21:52
EN: In fact, you can even put your stop
21:52 - 21:55
EN: below this low since it’s already a Micro Double Bottom.
21:56 - 21:59
EN: A lot of times it’ll come all the way down to this low,
21:59 - 22:02
EN: and very often exactly to that low.
22:02 - 22:05
EN: Sometimes a little bit above, sometimes a little bit below.
22:05 - 22:07
EN: Here, we’re reversing up.
22:07 - 22:12
EN: Once you get a bull bar, 2 bull bars, it’s not likely to fall back below here.
22:12 - 22:16
EN: It’s okay to use a stop below that low or even below this low.
22:22 - 22:24
EN: Higher probability – we got a strong breakout.
22:24 - 22:27
EN: You can buy the breakout as it’s forming.
22:27 - 22:30
EN: You can buy the close or buy the close of the follow-through bar.
22:30 - 22:34
EN: Stop at least below here, probably down here – and that’s always the tradeoff.
22:34 - 22:37
EN: You wait until you use the strong breakout,
22:37 - 22:39
EN: the probability is higher that we’re going higher,
22:39 - 22:45
EN: but you have to pay for that with worse risk/reward (usually stop far away).
Slide 012
Time: 22:50
Bilingual Transcript
22:50 - 22:54
EN: I began by talking about how the middle of the day,
22:54 - 22:56
EN: the market likes to test support or resistance,
22:56 - 23:00
EN: and then the market will either reverse or continue,
23:00 - 23:04
EN: and that trend at the end of the day is the final third of the day.
23:04 - 23:08
EN: I also talked about my 80% rule, that 80% of the time
23:08 - 23:11
EN: the market will continue to do what it’s been doing.
23:11 - 23:14
EN: If it’s in a trend, 80% of reversal attempts will fail.
23:14 - 23:18
EN: If it’s in a Trading Range, 80% of breakout attempts will fail.
23:22 - 23:24
EN: I’m Al Brooks.
23:24 - 23:26
EN: Thank you for watching the Brooks Trading Course.
23:26 - 23:29
EN: This is the second of two videos on trading in the middle of the day.