al-brooks-course
03 - Trading the Final Hour
Raw transcript and slide notes for 03 - Trading the Final Hour.
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- Slides: 22
- Transcript segments: 587
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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 a bonus video on how to trade the final hour.
Slide 001
Time: 00:12
Bilingual Transcript
00:13 - 00:17
EN: I want to begin by talking about how smart money, theoretically at least,
00:17 - 00:19
EN: trades heavily in the final hour,
00:19 - 00:23
EN: so the final hour has a greater influence on what will take place tomorrow.
00:25 - 00:30
EN: If there’s a Tight Trading Range after 12:45 Pacific Time,
00:30 - 00:32
EN: usually it’s better not to trade
00:32 - 00:35
EN: because the market will probably stay mostly sideways into the close.
00:36 - 00:39
EN: Next I want to talk about a Buy The Close bull trend
00:40 - 00:44
EN: and then a Sell The Close bear trend occurring in the final hour.
00:45 - 00:50
EN: Next, after that, I want to talk about magnets that are important in the final hour.
00:50 - 00:54
EN: The most important is the open of the day and then the high
00:54 - 00:57
EN: and low of today and the high and low of yesterday.
00:58 - 01:00
EN: Finally, I want to talk about how to exit the positions
01:00 - 01:02
EN: that you take in the final hour.
01:05 - 01:08
EN: I want to begin with talking a little bit about smart money.
Slide 002
Time: 01:09
Bilingual Transcript
01:10 - 01:15
EN: Smart money institutional investors, they pay a lot of attention
01:15 - 01:20
EN: to trading in the final hour because they have an entire day of information,
01:20 - 01:23
EN: and they feel like the probabilities are somewhat better
01:23 - 01:26
EN: in terms of deciding what will happen tomorrow.
01:27 - 01:29
EN: Here is a series of days.
01:29 - 01:31
EN: This is the end of a day, that’s the end of a day,
01:31 - 01:34
EN: the start of another day, and there are 7 days here.
01:34 - 01:36
EN: This is volume.
01:36 - 01:38
EN: What do you notice about the volume?
01:38 - 01:43
EN: That heavy volume at the end of the day represents institutional trading,
01:43 - 01:44
EN: and they’re trading for any reason.
01:44 - 01:47
EN: They might be hedging positions, they may be closing positions,
01:47 - 01:49
EN: they may be starting positions.
01:49 - 01:50
EN: You just don’t know.
01:50 - 01:54
EN: But what you do know is there is very heavy trading toward the end of the day
01:55 - 01:59
EN: in the final hour, especially right before the close and therefore,
01:59 - 02:01
EN: there is the potential to make money.
02:01 - 02:05
EN: If there’s a lot of interest, a lot of trading being done by the institutions,
02:05 - 02:08
EN: there’s an opportunity for a move at the end of the day.
02:13 - 02:17
EN: The general theory is that the majority of traders are emotional,
02:17 - 02:19
EN: and they pay a lot of attention to news,
02:19 - 02:22
EN: and they tend to overreact in the first 30 minutes.
02:22 - 02:26
EN: But smart investors trade much more intensely in the final hour,
02:26 - 02:29
EN: after seeing what the day has been doing.
02:32 - 02:34
EN: As I said, you can look at the big volume spikes
02:34 - 02:35
EN: that occur right before the close.
02:36 - 02:39
EN: The close is 1 p.m. California Time, Pacific Time.
02:43 - 02:48
EN: Because the institutions are trading heavily, you often get reliable patterns
02:48 - 02:50
EN: - but the moves are often very quick,
02:50 - 02:53
EN: and the stops have to be far because the bars can be big.
02:53 - 02:55
EN: So, you have to be extra careful.
02:58 - 03:02
EN: On a 5-minute Emini chart, there are 81 bars in the day.
03:02 - 03:05
EN: Bar 78 is the 1 p.m. bar.
03:05 - 03:07
EN: There are 3 bars that follow.
Slide 003
Time: 03:09
Bilingual Transcript
03:11 - 03:14
EN: Here’s a daily chart in a bull trend, and what do you notice?
03:14 - 03:16
EN: Well, it’s obviously a bull trend.
03:16 - 03:18
EN: Most of the days are bull days.
03:18 - 03:22
EN: That means they close above the open, and a lot of them are closing near their high.
03:22 - 03:26
EN: If you look at a 5-minute chart at a couple of these days, what do you notice?
03:26 - 03:32
EN: The days are closing high, and also the final 8 or 10 bars rally.
03:32 - 03:36
EN: That means that there’s an opportunity to make money at the end of the day.
03:36 - 03:42
EN: If the market’s in a bull trend, most of the days will have bull bodies.
03:42 - 03:43
EN: They’ll close above the open,
03:43 - 03:48
EN: and therefore you should look for a possible rally into the close.
03:55 - 03:58
EN: At the end of the day, look for a bull bar closing on its high,
03:59 - 04:03
EN: a breakout of a bull flag or a reversal, and buy above that bull bar
04:03 - 04:07
EN: and try to hold until the trend ends or until the day ends.
Slide 004
Time: 04:10
Bilingual Transcript
04:10 - 04:12
EN: Bear trend, just the opposite.
04:13 - 04:16
EN: Most of the bars on the daily chart are bear bars,
04:16 - 04:18
EN: and a lot of them close near their lows.
04:18 - 04:23
EN: A lot of these days are not bear bars until the final hour or so,
04:23 - 04:26
EN: and then you get a selloff into the close, and therefore you should be looking
04:26 - 04:30
EN: on the 5-minute chart for a selloff at the end of the day.
04:31 - 04:33
EN: If you see a bear bar closing near its low,
04:33 - 04:37
EN: especially a second sell signal like this, a Double Top,
04:37 - 04:39
EN: you sell below the bear bar closing near its low,
04:39 - 04:43
EN: trying to capture several bars of selling at the end of the day.
04:50 - 04:54
EN: You exit either at the end of the day or on a late reversal up,
04:54 - 04:56
EN: like a bull bar closing near its high.
04:56 - 04:58
EN: You get out above the bull bar.
Slide 005
Time: 05:00
Bilingual Transcript
05:02 - 05:03
EN: It looks pretty easy.
05:03 - 05:06
EN: You’ve got a bunch of bear bars closing near their lows at the end of the day.
05:06 - 05:07
EN: You’ve got very big volume.
05:07 - 05:10
EN: 55,000 contracts on that bar.
05:10 - 05:12
EN: Another 55,000 on that bar.
05:12 - 05:14
EN: But there are some important problems
05:14 - 05:18
EN: that take place at the end of the day that can make trading difficult.
05:18 - 05:20
EN: For example, here you’re in a bear trend.
05:20 - 05:22
EN: The market went up and went down.
05:26 - 05:27
EN: But what you don’t realize
05:27 - 05:32
EN: when you look at this chart is how fast it went up and down.
05:32 - 05:36
EN: You have 3 bars closing near their lows – a reasonable Sell The Close trend.
05:36 - 05:39
EN: You sell the close or you sell on a stop below the low of the bar.
05:39 - 05:42
EN: If you take this sell below the low of this bar,
05:42 - 05:46
EN: your stop is above here or above here, so your stop is far above.
05:46 - 05:49
EN: If you used a tight stop, you would’ve been stopped out,
05:49 - 05:51
EN: yet the market would’ve continued lower.
05:56 - 05:58
EN: At the end of the day, you tend to be tired.
05:58 - 06:01
EN: You’re physically tired, you’re mentally tired.
06:01 - 06:04
EN: You don’t think as clearly, you don’t react as quickly,
06:04 - 06:06
EN: and you’re more likely to make mistakes.
06:07 - 06:09
EN: You can make mental mistakes, you can make judgmental mistakes,
06:09 - 06:11
EN: and you can also make physical mistakes.
06:11 - 06:13
EN: When you’re clicking on orders, you can make a mistake.
06:14 - 06:16
EN: The bars are bigger, so the risk is bigger.
06:16 - 06:20
EN: The stop is further away, and the reversals can be very quick,
06:21 - 06:24
EN: and therefore you don’t have time to process information.
Slide 006
Time: 06:25
Bilingual Transcript
06:27 - 06:29
EN: For example, look at this 5-minute bar
06:29 - 06:31
EN: and look at the 5-minute bar that followed it.
06:32 - 06:37
EN: This bar was a big bull bar until the final 15 seconds, and it sold off.
06:37 - 06:39
EN: And not only did it sell off,
06:44 - 06:47
EN: but that selloff continued down to here,
06:47 - 06:50
EN: all in the course of less than a minute,
06:50 - 06:53
EN: and therefore very little time to make a decision.
06:58 - 07:02
EN: Very common at the end of the day for a bar to be a bull bar
07:02 - 07:06
EN: and then become a doji or a bear bar in the final seconds of the bar,
07:06 - 07:09
EN: or to be a bear bar and then reverse up and become a bull bar.
07:09 - 07:14
EN: It makes it difficult to anticipate where the high or low of the bar will be,
07:15 - 07:18
EN: and it does not give you much time to place your orders.
07:18 - 07:20
EN: So, order placement can be difficult.
Slide 007
Time: 07:20
Bilingual Transcript
07:24 - 07:27
EN: Here, although you cannot tell on this 5-minute chart,
07:28 - 07:33
EN: the market fell 8 points from this high to that low in 45 seconds.
07:39 - 07:42
EN: This is a chart where every bar is 15 seconds.
07:42 - 07:49
EN: This blue box is this blue box, so from here to there,
07:49 - 07:52
EN: it took 45 seconds to go from that high to this low.
07:52 - 07:53
EN: 8 points.
07:53 - 07:58
EN: There were multiple reversals in this final pair of bars.
07:58 - 08:01
EN: We went down, we went up, we went down, and then we stalled.
08:01 - 08:06
EN: My point is that at 1:00 you can get a very big move.
08:06 - 08:11
EN: Looks easy on the 5-minute chart, but it’s not because you don’t have much time,
08:11 - 08:15
EN: and you should not be trading a 15-second chart, each bar 15 seconds.
08:16 - 08:18
EN: I guarantee you will lose money.
Slide 008
Time: 08:21
Bilingual Transcript
08:22 - 08:24
EN: So, the bars are bigger, the moves are faster,
08:24 - 08:26
EN: you have less time to make decisions.
08:27 - 08:31
EN: Here we are late in the day and we’re starting to get bars that go sideways,
08:31 - 08:35
EN: bars with prominent tails, and we’re reversing every bar or two.
08:35 - 08:38
EN: That is not a good environment for stop entries.
08:41 - 08:43
EN: You might think, okay, Head and Shoulders Bottom
08:43 - 08:46
EN: - left shoulder, head, and right shoulder,
08:46 - 08:49
EN: and now we have a good bull bar closing on its high.
08:49 - 08:51
EN: Maybe you could buy on a stop above the high of that bull bar.
08:52 - 08:53
EN: But look to the left.
08:53 - 08:57
EN: The past several hours have been reversing every few hours,
08:57 - 08:59
EN: and here you are at the end of the day,
08:59 - 09:03
EN: betting that this is going to convert into a bull trend.
09:04 - 09:06
EN: That’s a low probability bet.
09:06 - 09:08
EN: You’re taking a trade with low probability.
09:09 - 09:12
EN: Not much time left in the day, so there’s not much reward.
09:12 - 09:16
EN: So, the risk is big – stop is down here – the reward is small
09:16 - 09:20
EN: because you do not have much time, and the probability is low
09:20 - 09:23
EN: because you’re buying in the top half of a Trading Range.
09:23 - 09:27
EN: So that’s a terrible entry for a stop entry trader.
09:27 - 09:29
EN: If it’s bad for a stop entry trader,
09:29 - 09:33
EN: it’s probably good for a limit order trader doing the opposite.
09:33 - 09:37
EN: So instead of buying above that bar, you probably have a better chance
09:37 - 09:42
EN: of making money selling above that bar because if it’s bad for a stop order trader,
09:42 - 09:45
EN: theoretically the institution taking the other side
09:45 - 09:47
EN: of your trade is a limit order trader.
09:47 - 09:51
EN: You’re buying with a stop up here, he’s selling with a limit order up here,
09:52 - 09:54
EN: and the math is better for limit order traders
09:54 - 09:56
EN: when the market’s in a Tight Trading Range,
09:56 - 10:00
EN: especially when there’s not much time left for a big reward.
10:00 - 10:04
EN: If this was earlier in the day, you can take a low probability trade
10:04 - 10:07
EN: because you can make so much money on the reward side
10:07 - 10:10
EN: that you offset the low probability.
10:10 - 10:13
EN: You do not have that advantage late in the day.
10:18 - 10:21
EN: If a trader were to buy this Head and Shoulders Bottom,
10:21 - 10:24
EN: hoping that the Trading Range would become a bull trend,
10:24 - 10:26
EN: he’d buy on a stop above that bull bar
10:26 - 10:29
EN: and he’d put a protective stop below this low.
10:29 - 10:31
EN: But the math is bad.
10:31 - 10:34
EN: In this particular case, you can see there were clearly more sellers
10:34 - 10:36
EN: than buyers above that bar,
10:36 - 10:39
EN: and you would have been immediately stopped out for a big loss.
10:39 - 10:42
EN: That’s the biggest bar that we’ve had all day,
10:42 - 10:45
EN: and here you are buying on the top of it,
10:45 - 10:47
EN: and you’re getting stopped out below that low.
10:47 - 10:48
EN: So, not a good trade.
10:48 - 10:53
EN: If the market is sideways into the close, you don’t want to be buying
10:53 - 10:56
EN: with a stop near the top, especially above a big bull bar.
10:56 - 11:01
EN: Even if a big bull bar looks good and even if you can argue it’s a buy setup,
11:01 - 11:03
EN: you cannot get enough reward.
11:03 - 11:06
EN: Buying a Head and Shoulders Bottom is a swing trade.
11:06 - 11:08
EN: There’s not enough time left for a swing,
11:08 - 11:13
EN: and therefore you cannot capture enough reward to offset the bad probability.
11:15 - 11:16
EN: Do not buy.
11:16 - 11:17
EN: Wait for tomorrow.
11:24 - 11:28
EN: You could also, as an alternative, trade a smaller timeframe chart,
11:28 - 11:31
EN: like a 1-minute chart, and then the bars will be smaller,
11:31 - 11:33
EN: and you might be able to buy down here.
11:33 - 11:34
EN: Your risk is less.
11:34 - 11:38
EN: However, you will lose money if you’re trading the 1-minute chart
11:38 - 11:41
EN: at the end of the day because everything happens very quickly.
11:41 - 11:45
EN: You will not have enough time to make decisions and to place your orders.
11:45 - 11:48
EN: You will make too many mistakes, and you’ll lose money.
11:49 - 11:51
EN: You may not lose as much as you would on this trade,
11:51 - 11:56
EN: but if you do it often enough, all the little losses add up into a big loss.
11:56 - 12:00
EN: So do not trade the 1-minute chart, especially in the final hour,
12:00 - 12:03
EN: and do not buy with stops in the top of a Trading Range,
12:03 - 12:06
EN: and do not sell with stops at the bottom of a Trading Range.
12:08 - 12:10
EN: This is a limit order market.
12:10 - 12:14
EN: You should be only trading with stops, especially in the final hour,
12:14 - 12:18
EN: and therefore you do not trade when the market looks like this.
12:21 - 12:25
EN: Sometimes you get a good trend, but then the market just gets very quiet
12:25 - 12:29
EN: at 12:45 California Time, Pacific Time.
Slide 009
Time: 12:28
Bilingual Transcript
12:30 - 12:35
EN: So, for example, if we’re trending up like this, pretty good breakout,
12:35 - 12:40
EN: but then we’re getting 4 or 5 sideways bars, smaller bars, smaller bodies,
12:40 - 12:42
EN: more prominent tails, that’s a Tight Trading Range.
12:43 - 12:46
EN: That is also a bad environment for stop order traders.
12:47 - 12:49
EN: You can argue, well, it’s a bull flag.
12:49 - 12:50
EN: We’ll go higher.
12:51 - 12:56
EN: If the market is in a Tight Trading Range at 12:45 – right here, this is 12:45
12:56 - 13:01
EN: - if it’s been sideways for 4 or 5 bars or more, it’s better to wait for tomorrow
13:01 - 13:05
EN: because it’s probably going to stay sideways for the rest of the day.
13:11 - 13:13
EN: Sideways at 12:45.
13:13 - 13:15
EN: Small bodies, overlapping bars.
13:15 - 13:16
EN: Prominent tails.
13:17 - 13:18
EN: Tight Trading Range.
13:18 - 13:20
EN: Not good for stop orders.
13:20 - 13:25
EN: Wait for tomorrow, because you’re probably not going to get a big move.
13:25 - 13:28
EN: Even if you were to win 60% of the time,
13:28 - 13:31
EN: your reward on average will be less than your risk.
13:31 - 13:33
EN: In other words, your losses will be bigger than your wins,
13:33 - 13:35
EN: and you’ll end up losing money.
13:38 - 13:40
EN: This is what you’re looking for.
13:40 - 13:42
EN: You’re looking for a trend at the end of the day
13:42 - 13:46
EN: - either a Buy The Close bull trend or a Sell The Close bear trend.
13:50 - 13:55
EN: Here we have a trend from the very first bar of the day, and it trended up all day.
13:55 - 13:57
EN: You’ve got a good breakout here.
13:57 - 13:59
EN: Bulls will buy closes.
13:59 - 14:01
EN: This is a Buy The Close bull trend.
14:01 - 14:04
EN: You’ve got 1 or 2 or 3 bull bars closing on their highs.
14:04 - 14:08
EN: That’s because traders are buying bars and they’re buying the next bar.
14:08 - 14:12
EN: So, they’ll buy the close, they’ll buy the high of this bar, all the way up.
14:12 - 14:17
EN: Typically, if you have a Buy The Close rally and it starts early,
14:17 - 14:22
EN: before 12:30-12:35, it’s not going to make it to the end of the day.
14:22 - 14:26
EN: The one exception is if the day is a bull trend day like this.
14:27 - 14:30
EN: Then you can get a Buy The Close bull trend starting early in the day,
14:30 - 14:31
EN: and it can last all day.
14:31 - 14:35
EN: So, you can be buying closes early in the day and just wait all day.
14:43 - 14:45
EN: In general, I’m looking for a breakout,
14:45 - 14:49
EN: which means consecutive bull bars with decent size bodies closing near their highs,
14:50 - 14:52
EN: and then traders will start buying closes
14:52 - 14:55
EN: - or I personally prefer to buy with stops
14:55 - 14:57
EN: above the highs of bull bars closing near their highs.
14:58 - 15:02
EN: You keep doing it until it stops working, until you get a reversal down.
15:03 - 15:06
EN: Or you do it once and you just hold for a swing up.
15:10 - 15:13
EN: The market became Buy The Close with these 2 bull bars,
15:14 - 15:15
EN: but it’s a strong bull trend.
15:15 - 15:17
EN: It pulls back to the Moving Average,
15:17 - 15:19
EN: you buy above bull bars closing near their highs.
15:20 - 15:21
EN: So, you could buy earlier.
15:21 - 15:23
EN: You don’t have to wait for it to be Buy The Close.
15:23 - 15:25
EN: There are other reasons to buy as well.
15:25 - 15:28
EN: You have a strong bull trend pulling back to the Moving Average,
15:28 - 15:30
EN: a bull bar closing near its high.
15:30 - 15:33
EN: You have a breakout, bull bar closing near its high.
Slide 010
Time: 15:33
Bilingual Transcript
15:33 - 15:38
EN: You buy, and then once you get 2 bull bars, it’s also a Buy The Close bull trend.
15:46 - 15:53
EN: This final leg up began at 12:05, and typically that is too early
15:53 - 15:57
EN: for a Buy The Close bull trend to last until the end of the day,
15:57 - 16:01
EN: except in one case, and that case is a bull trend day.
16:01 - 16:03
EN: Bull trend day, Buy The Close can start very early
16:03 - 16:05
EN: and make it to the end of the day.
16:05 - 16:08
EN: Any other day, if you have a Buy The Close
16:08 - 16:11
EN: rally starting at 12:00, it’s going to reverse.
16:11 - 16:14
EN: The odds are high that it’s not going to make it to the end of the day.
16:17 - 16:19
EN: Here we have a Buy The Close bull trend.
Slide 011
Time: 16:20
Bilingual Transcript
16:23 - 16:27
EN: Bulls will start buying after they see 2 or 3 bull bars closing on their highs.
16:33 - 16:38
EN: However, this is important: this bar, while it’s not huge,
16:38 - 16:41
EN: it’s the biggest bull bar in a Buy The Close bull trend,
16:41 - 16:43
EN: and it’s the sixth bull bar.
16:43 - 16:48
EN: If you get a big bull bar on the fifth or sixth bar of a Buy The Close rally,
16:48 - 16:52
EN: it’s probably going to attract profit-taking, and if anything,
16:52 - 16:55
EN: you’re going to be selling that close to take profits.
16:55 - 16:59
EN: Or if you’re an aggressive bear, you’ll sell betting on a reversal down,
16:59 - 17:02
EN: or at least enough profit-taking to make money.
17:02 - 17:07
EN: So, Buy The Close bull trend, yes, but if the fifth or sixth bar
17:07 - 17:11
EN: is a bigger bar closing on its high, it’s going to attract profit-taking.
17:11 - 17:13
EN: Do not take that buy.
17:21 - 17:25
EN: I typically would exit my longs on the close of that bar, but if I do not,
17:25 - 17:27
EN: I’ll get out below the low of a bear bar,
17:27 - 17:30
EN: especially a bear bar closing on or near its low.
17:32 - 17:38
EN: Bears will take that short, betting that the bulls will take profits at the end
17:38 - 17:40
EN: of the day and you can get a pretty sharp move down.
17:41 - 17:45
EN: All of these Buy The Close bulls, if it were earlier in the day,
17:45 - 17:50
EN: they could hold through a pullback, expecting the market to continue up.
17:50 - 17:53
EN: But late in the day, there’s not enough time.
17:53 - 17:57
EN: So, if it starts to sell off, all of these bulls will sell.
17:57 - 18:00
EN: They’ll exit, and you can get a panic move down,
18:00 - 18:02
EN: and therefore bears will take that short.
18:03 - 18:07
EN: Normally you don’t want to short when a bull trend is this strong.
18:07 - 18:09
EN: That’s maybe a 10 bar bull Micro Channel,
18:09 - 18:12
EN: no pullbacks in 10 bars, 6 consecutive bull bars.
18:12 - 18:14
EN: But this is a special situation.
18:14 - 18:17
EN: End of the day bull trend, bear bar closing on its low,
18:17 - 18:22
EN: and the biggest bull bar being the sixth bar in a Buy The Close market.
18:22 - 18:27
EN: That combination is going to attract profit-taking, and bears will sell.
Slide 012
Time: 18:30
Bilingual Transcript
18:31 - 18:32
EN: Very good rally.
18:33 - 18:35
EN: Lots of bull bars closing on or near their highs,
18:35 - 18:37
EN: so it’s a Buy The Close bull trend.
18:37 - 18:38
EN: But look to the left.
18:38 - 18:41
EN: It’s not in a strong bull trend day.
18:41 - 18:42
EN: It’s in a Trading Range day.
18:43 - 18:48
EN: If a Buy The Close bull trend starts before 12:30 and it’s a Trading Range day,
18:48 - 18:51
EN: the odds of making it to the close are small.
18:51 - 18:56
EN: The odds are like 70% that you’re going to get a reversal before the end of the day.
18:59 - 19:01
EN: The bulls can argue we have a Wedge Bottom
19:02 - 19:04
EN: and we have a good bull bar here, good bull bar here.
19:05 - 19:07
EN: Lots of bull bars closing near their highs.
19:08 - 19:09
EN: But look to the left.
19:09 - 19:10
EN: Trading Range.
19:14 - 19:18
EN: After 2 or 3 bull bars, you decide it’s a Buy The Close bull trend,
19:18 - 19:22
EN: and traders will start buying above bull bars closing near their highs.
19:22 - 19:23
EN: This is dangerous here.
19:23 - 19:25
EN: It’s a bigger bull bar.
19:25 - 19:29
EN: It’s at least 6 bars into a Buy The Close bull trend,
19:29 - 19:31
EN: and it will attract profit-taking.
19:31 - 19:34
EN: Bulls will say, “Wow, I wasn’t expecting this much money;
19:35 - 19:38
EN: I’m going to take some profits,” and it can lead to a reversal.
19:44 - 19:50
EN: 11:15 - way too early for a Buy The Close rally to made it to the end of the day.
19:50 - 19:55
EN: 70% chance we’re going to get at least a reversal down for several bars.
19:59 - 20:02
EN: First reversal down, you might not take that short.
20:02 - 20:05
EN: But if you get a second sell signal bar,
20:05 - 20:09
EN: especially a big one like that closing on it’s low, you have to get out of longs.
20:09 - 20:13
EN: I would get out of longs below that bar – and this one, it’s a second sell.
20:13 - 20:16
EN: Failed breakout, high of a Trading Range day.
20:16 - 20:17
EN: I would short that.
20:18 - 20:21
EN: So, Buy The Close bull trend, but starting too early.
20:22 - 20:23
EN: You have to expect a reversal.
20:27 - 20:30
EN: The opposite of everything that I just said is true
20:30 - 20:33
EN: for a Sell The Close bear trend in the final hour.
Slide 013
Time: 20:34
Bilingual Transcript
20:36 - 20:37
EN: We’ve got a bear trend day.
20:44 - 20:46
EN: A pair of decent bear bars.
20:47 - 20:48
EN: The market is changing character.
20:48 - 20:52
EN: Tails on the bottoms of these bars, and now closing near the low,
20:52 - 20:53
EN: bigger bar closing near the low.
20:53 - 20:55
EN: It’s a Sell The Close bear trend.
20:55 - 20:58
EN: You can sell below bear bars closing near the low,
20:58 - 21:00
EN: all the way down to the end of the day.
21:00 - 21:02
EN: We have a disappointment bar here.
21:02 - 21:06
EN: A lot of the bears will get out around breakeven,
21:06 - 21:08
EN: and that’s why the market went quiet.
21:09 - 21:13
EN: You can scalp repeatedly, or you can simply enter once
21:13 - 21:17
EN: and hold until it no longer is a Sell The Close bear trend.
21:22 - 21:24
EN: There are other reasons to sell as well.
21:24 - 21:28
EN: We have a bear trend and two legs up – one, pullback, two
21:28 - 21:33
EN: - and a second sell signal – one, two, with a decent sell signal bar.
21:34 - 21:36
EN: A lot of bears will short below that.
21:36 - 21:38
EN: Here we have a pullback from this first sell.
21:38 - 21:39
EN: They’ll sell below that.
21:40 - 21:45
EN: So, in addition to a Sell The Close bear trend, it’s also a Low 2 bear flag.
21:45 - 21:46
EN: Two legs up – one, pullback, two.
21:47 - 21:52
EN: If you’re just talking about Sell The Close, here is where it became Sell The Close.
21:52 - 21:55
EN: However, there were other reasons to sell before then.
Slide 014
Time: 21:57
Bilingual Transcript
22:00 - 22:03
EN: Okay, is this a big bear trend day?
22:03 - 22:04
EN: No, it’s a Trading Range day.
22:05 - 22:07
EN: Here we’re getting a Sell The Close bear trend.
22:07 - 22:09
EN: We have a pair of bear bars breaking below that low.
22:16 - 22:18
EN: But look what time it started: 12:05.
22:19 - 22:24
EN: If a Sell The Close bear trend begins before 12:30 or 12:35
22:24 - 22:27
EN: and the day is not a strong bear trend day,
22:28 - 22:32
EN: 70% chance the selloff is not going to make it to the end of the day.
22:32 - 22:34
EN: We’ll get some kind of reversal up.
22:42 - 22:44
EN: Here we have a Double Bottom.
22:44 - 22:47
EN: We went down and up and down and up again,
22:47 - 22:49
EN: and we have a bull bar closing near its high.
22:49 - 22:51
EN: I would buy this.
22:51 - 22:54
EN: I would get out of shorts, either 4 or 5 ticks above that
22:54 - 22:58
EN: - I definitely would get out of shorts above a bull bar closing near its high,
22:58 - 23:01
EN: especially when it’s a second reversal up, a Double Bottom.
23:01 - 23:04
EN: We have a failed breakout below this Buy Climax low.
23:04 - 23:06
EN: We’re in the middle of a Trading Range day.
23:06 - 23:08
EN: I’m going to get long.
23:08 - 23:09
EN: I’m going to buy above that bar.
23:10 - 23:12
EN: Now we have a big outside up bar.
23:12 - 23:15
EN: There’s still time left to the day.
23:15 - 23:16
EN: That is an okay buy.
23:16 - 23:18
EN: It might go up a little bit more.
23:19 - 23:23
EN: I would rather be buying here than there, top of a Trading Range day.
23:26 - 23:27
EN: Magnets.
23:27 - 23:29
EN: Support and resistance.
23:30 - 23:35
EN: Support and resistance draws the market to it, so every support
23:35 - 23:40
EN: and resistance level is a magnet, and magnets are important,
23:40 - 23:41
EN: especially at the end of the day.
Slide 015
Time: 23:42
Bilingual Transcript
23:45 - 23:48
EN: We sold off, we rallied, we sold off.
23:48 - 23:50
EN: We’re rallying, but it’s not all that strong.
23:51 - 23:54
EN: Whenever the day has a lot of Trading Range price action,
23:55 - 23:57
EN: you always have to be thinking that the market
23:57 - 23:59
EN: may try to test the open at the end of the day.
24:11 - 24:12
EN: Here’s the open of the day.
24:13 - 24:14
EN: What do we have here?
24:14 - 24:20
EN: We sold off, we rallied exactly to a Measured Move up based upon the open.
24:21 - 24:23
EN: That tells you that the open is important.
24:23 - 24:26
EN: The low of the day obviously is important.
24:26 - 24:31
EN: If we go up exactly for a Measured Move based upon the open,
24:31 - 24:36
EN: that tells you the market’s paying attention to the open, and therefore,
24:36 - 24:38
EN: late in the day you have to wonder if the market may come back
24:38 - 24:40
EN: and test that open again.
24:40 - 24:44
EN: We have a Wedge rally – one, two, three, so a Spike and Channel pattern.
24:44 - 24:49
EN: Breakout, spike, pullback, and then one, two, three pushes up.
24:50 - 24:53
EN: Possible candidate for a reversal back down to the open.
24:59 - 25:01
EN: I’m not going to sell below a bull bar,
25:01 - 25:05
EN: but we have a Wedge rally and now we have a second sell.
25:05 - 25:08
EN: A doji is not a great sell signal bar, either.
25:08 - 25:12
EN: However, if you get bear bars closing below their midpoints or on their lows,
25:12 - 25:14
EN: that is a reasonable sell,
25:14 - 25:18
EN: looking for the market to get drawn down to the magnet – the open of the day.
25:22 - 25:25
EN: Here we have a Trading Range day, and here’s the open.
Slide 016
Time: 25:25
Bilingual Transcript
25:26 - 25:28
EN: Look how many times the market tested the open.
25:28 - 25:34
EN: So clearly, the open of the day is important, and therefore if it’s important,
25:34 - 25:37
EN: it’ll also be important at the end of the day.
25:38 - 25:40
EN: You’ve got to be thinking that the market may try to come down
25:40 - 25:45
EN: to the open and close near the open and create a neutral bar,
25:45 - 25:47
EN: a doji bar, on the daily chart.
25:47 - 25:50
EN: So, if you’re above the open, you look for a reversal down.
25:50 - 25:53
EN: If you’re below the open in a Trading Range,
25:53 - 25:55
EN: you look for a reversal up to the open.
26:03 - 26:06
EN: We have a potential small Final Flag here.
26:07 - 26:10
EN: We have a reversal down and then a second bar, a bear inside bar.
26:11 - 26:14
EN: The first sell would be below this bull outside bar – not good.
26:14 - 26:17
EN: Better to sell below a bear bar closing near its low,
26:17 - 26:21
EN: and that would be a sell, looking for a test down to the open.
26:21 - 26:25
EN: If we get down there, we could stay there and close in the middle,
26:25 - 26:29
EN: we could go down to a new low, or sometimes we’ll test the open
26:29 - 26:31
EN: and reverse up and close on the high of the day.
26:31 - 26:34
EN: In any case, this is the sell.
26:34 - 26:37
EN: You’ve got a second sell signal – here’s the first, here’s the second
26:37 - 26:41
EN: - a good sell signal bar, and room to the open.
26:46 - 26:48
EN: The market got near the open, but did this.
26:49 - 26:54
EN: Had you taken that short and you did not scalp, you’d get out above this bull bar,
26:54 - 26:56
EN: and if you understand what’s going on
26:56 - 27:00
EN: - that this selloff was a test of the open – you would buy above that bull bar.
27:00 - 27:02
EN: It’s also a Double Bottom with this low.
27:03 - 27:07
EN: Or you’d wait for 2 or 3 bull bars, and then you would start buying
27:07 - 27:10
EN: above the high of the prior bar if the bar closes near its high.
27:10 - 27:13
EN: We ended up with a Buy The Close rally and the day closed on its high.
27:13 - 27:18
EN: Opened near the low, we tested the open repeatedly here,
27:18 - 27:22
EN: we tried to get down there here, but we got a good reversal bar here,
27:22 - 27:25
EN: a Double Bottom, and now we’re starting to get a series of bull bars.
27:25 - 27:28
EN: Traders will buy above these bull bars,
27:28 - 27:30
EN: betting that the day is going to close on the high.
Slide 017
Time: 27:35
Bilingual Transcript
27:35 - 27:37
EN: Here’s the open of the day.
27:37 - 27:38
EN: Trading Range day.
27:38 - 27:40
EN: You can see the market is testing the open.
27:45 - 27:46
EN: Trading Range day.
27:46 - 27:48
EN: We tested the open, we tested the low.
27:49 - 27:51
EN: There are a couple ways to play this.
27:51 - 27:54
EN: If the average range is about 10 points, 15 points,
27:54 - 27:58
EN: and you’re about 4 points below the open, you might place a limit order
27:58 - 28:03
EN: to buy 4 points below the open and a stop 4 points below that,
28:03 - 28:06
EN: betting that the probability is we’ll get up to the open
28:06 - 28:09
EN: and you’ll make 4 points instead of losing 4 points.
28:09 - 28:14
EN: Alternatively, you can buy with a stop above a strong bull bar here or here
28:14 - 28:16
EN: and then take profits near the open,
28:16 - 28:19
EN: and you can see a lot of traders sold at the open.
28:20 - 28:23
EN: Some of the selling that took place here is from bears with limit orders
28:23 - 28:28
EN: at the open, looking for a reversal down either for a scalp or a swing,
28:29 - 28:33
EN: and some of it is from bulls who bought here or here taking profits.
28:37 - 28:39
EN: A decent stop order buy.
28:39 - 28:42
EN: We have a bear channel, a bull breakout, and a pullback.
28:42 - 28:45
EN: If you want, you can call it a Higher Low Double Bottom
28:45 - 28:47
EN: or a Higher Low Major Trend Reversal.
28:47 - 28:50
EN: Two legs down – one, pause, two.
28:50 - 28:55
EN: A good buy setup, especially after an earlier decent buy setup.
29:01 - 29:06
EN: Had you bought 4 points down, you could get out at the open with 4 points.
29:06 - 29:09
EN: Had you bought with a stop up here, you could get out with,
29:09 - 29:12
EN: in this case, about 3 points.
29:13 - 29:18
EN: Sometimes it’ll get to within a couple ticks of the open and reverse down.
29:18 - 29:21
EN: If that happens, you get out on the reversal down.
29:23 - 29:27
EN: For example, if these highs did not quite reach the open
29:27 - 29:31
EN: and these bars looked like this, you would get out below these bear bars.
Slide 018
Time: 29:35
Bilingual Transcript
29:36 - 29:37
EN: Trading Range day.
29:37 - 29:40
EN: Sometimes you get a pretty sharp selloff,
29:40 - 29:43
EN: yet the market still tries to come back to the open.
29:47 - 29:49
EN: Trading Range day.
29:49 - 29:50
EN: We’re above the open.
29:50 - 29:52
EN: You look for a reversal down.
29:52 - 29:54
EN: We’re below the open.
29:54 - 29:57
EN: Look for a reversal up after 11:00, late in the day.
30:01 - 30:03
EN: You can call this a Higher High Major Trend Reversal.
30:03 - 30:08
EN: You can see, Moving Average, so we gapped up and rallied sideways.
30:09 - 30:11
EN: Broke to the up side, reversed down.
30:12 - 30:13
EN: It’s a second sell.
30:13 - 30:14
EN: Here’s the first below this bar.
30:15 - 30:18
EN: Here you get a bear bar closing on its low, a reasonable sell.
30:18 - 30:20
EN: At a minimum you’re looking for a test of the open.
30:24 - 30:27
EN: Another bear bar closing below its midpoint.
30:27 - 30:30
EN: Bear bar closing on its low, and room for a scalp.
30:31 - 30:33
EN: If you sell below that bear bar, you get filled right here.
30:33 - 30:36
EN: Room for a scalp, so you can still take that trade,
30:36 - 30:39
EN: and then we’re breaking below the open.
30:39 - 30:41
EN: This is really not a great bet.
30:41 - 30:46
EN: You have a bear flag and you’re taking a chance that you’re going to collapse.
30:46 - 30:50
EN: It could just as easily have formed a small Double Bottom and reversed up.
30:56 - 31:01
EN: Sell The Close bear trend, and this is at least 5 or 6 bars into the trend,
31:01 - 31:02
EN: and what do you have?
31:02 - 31:07
EN: You have the biggest bar in the Sell The Close bear trend in a Trading Range day.
31:07 - 31:11
EN: That will attract profit-taking from the bears.
31:11 - 31:15
EN: Bears will buy back their shorts, and bulls will start looking to buy.
31:15 - 31:19
EN: Aggressive bulls will buy that close; other bulls will buy above this bull bar,
31:19 - 31:21
EN: looking for a test back up to the open.
31:29 - 31:32
EN: The day closed almost exactly at the open.
31:33 - 31:37
EN: On the daily chart this would be a doji bar, a neutral day.
31:40 - 31:41
EN: How to exit?
Slide 019
Time: 31:42
Bilingual Transcript
31:44 - 31:48
EN: If you’re in a Buy The Close rally at the end of the day, final hour,
31:48 - 31:52
EN: and you get a bear bar, especially a bear bar closing near its low,
31:52 - 31:57
EN: you get out because the bulls who have been buying don’t want any pullback,
31:57 - 32:00
EN: and they don’t have time to sit through a pullback.
32:00 - 32:01
EN: The day will be over.
32:01 - 32:04
EN: They will get out below a bear bar.
32:04 - 32:05
EN: Bears will sell.
32:05 - 32:09
EN: So, if you get a bear bar closing near its low, you get out.
32:09 - 32:10
EN: Bears will sell.
Slide 020
Time: 32:18
Bilingual Transcript
32:21 - 32:26
EN: Another way to exit is if you’re in a Buy The Close rally at the end of the day,
32:26 - 32:31
EN: especially in a Trading Range day, you can either exit 1 tick below a bear bar
32:31 - 32:35
EN: or 4, 5, 6, 7, 8 ticks below a bull bar.
32:35 - 32:39
EN: If the bull bars are very big, exit 2 points below.
32:39 - 32:42
EN: If the bull bars are average, exit 1 point below.
32:42 - 32:46
EN: That’s because sometimes the reversal down will be so big
32:46 - 32:51
EN: that if you’re waiting for a bear bar, you may get a huge bear bar
32:51 - 32:56
EN: following a bull bar, and you’ll end up selling too far below the high.
33:00 - 33:02
EN: For example, this.
33:02 - 33:05
EN: If you say “okay, I’m only going to get out below a bear bar,”
33:05 - 33:08
EN: that might be more than you want to give back.
33:08 - 33:12
EN: So, if you bought anywhere here, here, here,
33:12 - 33:14
EN: you’d be getting out with a loss or breakeven.
33:14 - 33:18
EN: So, as an alternative to getting out below a bear bar,
33:18 - 33:21
EN: you can get out 4 or 5 or 6 ticks below a bull bar.
33:22 - 33:27
EN: So, as it’s going up, if I bought for any reason above any bull bar,
33:27 - 33:32
EN: I’m going to have a stop to get out maybe 4 ticks, maybe 8 ticks below every bar
33:32 - 33:36
EN: - bull bar, doesn’t matter – and I will get out 1 tick below a bear bar.
33:36 - 33:40
EN: So, if I did not get out below here, if I did not get out 4 ticks below there,
33:40 - 33:42
EN: I definitely would get out below a bear bar.
33:48 - 33:53
EN: If you’re trading Buy The Close, always have a stop to exit somewhere
33:53 - 33:57
EN: between 4 and 8 ticks below the low of the prior bar.
33:58 - 34:01
EN: If the prior bar is a bear bar, you get out 1 tick below.
Slide 021
Time: 34:03
Bilingual Transcript
34:05 - 34:07
EN: Risk happens fast at the end of the day.
34:08 - 34:10
EN: Here we have a Sell The Close bear trend.
34:10 - 34:13
EN: You can get out above a bull bar.
34:13 - 34:18
EN: Alternatively, you should always have a stop to exit somewhere
34:18 - 34:21
EN: between 4 and 8 ticks above any bar, including a bear bar,
34:22 - 34:25
EN: because you can get very abrupt reversals at the end of the day.
34:29 - 34:32
EN: Sell The Close bear trend, testing the open.
34:32 - 34:36
EN: But remember, when it tests the open, it could keep going down,
34:36 - 34:40
EN: it could stay sideways, or it could reverse back up to the high of the day.
34:46 - 34:50
EN: If you take that short, I would get out 1 tick above a bull bar.
34:50 - 34:54
EN: Or if this bull bar was huge, I would be getting out
34:54 - 34:57
EN: maybe 4 ticks above the prior bar, bear bar.
34:59 - 35:00
EN: Bulls will buy this.
35:01 - 35:04
EN: They’ll view this as a sell vacuum test of the open of the day,
35:05 - 35:06
EN: and they have a decent bull bar.
35:06 - 35:11
EN: They’ll buy that and they’ll buy above this, looking for a rally into the close.
Slide 022
Time: 35:13
Bilingual Transcript
35:14 - 35:19
EN: I began by talking about smart money – how institutions trade heavily
35:19 - 35:21
EN: in the final hour, trying to position themselves
35:21 - 35:23
EN: for what will take place tomorrow.
35:24 - 35:25
EN: And because there’s so much volume,
35:25 - 35:29
EN: you can get very big moves and lots of trading opportunities.
35:29 - 35:33
EN: If the market’s in a very Tight Trading Range after 12:45,
35:33 - 35:35
EN: it’s a limit order market.
35:35 - 35:38
EN: Traders should be entering with stops most of the time,
35:38 - 35:39
EN: certainly at the end of the day,
35:39 - 35:43
EN: and therefore if it’s in a Tight Trading Range, you stop trading.
35:43 - 35:44
EN: You wait for tomorrow.
35:45 - 35:51
EN: Buy The Close bull trend – if the market has 2 or more decent size bull bars
35:51 - 35:54
EN: closing near their highs, you’re probably
35:54 - 35:57
EN: in a Buy The Close bull trend at the end of the day.
35:58 - 36:04
EN: If it starts before 12:30 or 12:35 California Time, Pacific Time,
36:04 - 36:07
EN: the trend is probably not going to make it to the close.
36:08 - 36:09
EN: You have to look for a reversal.
36:10 - 36:14
EN: Buy The Close bull trend, you either buy the close of the bars
36:14 - 36:17
EN: or you buy on a stop above the high of a bar closing near its high.
36:18 - 36:21
EN: Sell The Close bear trend, just the opposite.
36:21 - 36:26
EN: It begins with 2 or more decent size bear bars closing near their lows,
36:26 - 36:29
EN: and then traders will start to sell with a stop below the low of the bar.
36:29 - 36:33
EN: Some traders will sell at the market or sell on the close of the bar.
36:34 - 36:38
EN: At the end of the day, support and resistance are magnets.
36:38 - 36:42
EN: Traders should look for the market to move toward important magnets.
36:42 - 36:45
EN: The most important one is the open of the day,
36:45 - 36:47
EN: especially if the day is a Trading Range day.
36:47 - 36:51
EN: If the market is above, you look for a reversal down to the open.
36:51 - 36:56
EN: If the market is below the open, you look for a reversal up.
36:57 - 37:00
EN: How to exit at the end of the day – you don’t have a lot of time.
37:01 - 37:04
EN: If you’re long and the market is rallying in the final hour,
37:04 - 37:08
EN: especially the final 30 minutes, you get out 1 tick below a bear bar,
37:08 - 37:13
EN: and you also place a stop to get out 4 to 8 ticks below any bar,
37:13 - 37:15
EN: including a bull bar.
37:15 - 37:17
EN: If the market’s in a bear trend,
37:17 - 37:22
EN: you get out 1 tick above a bull bar or 4 to 8 ticks above a bear bar.
37:27 - 37:28
EN: I’m Al Brooks.
37:28 - 37:32
EN: Thank you for watching this bonus video on trading in the final hour.