Wisdom

“To take a trade, you must believe that the probability of success times the potential reward is greater than the probability of failure times the risk.”

Trading Price Action: Trading Ranges

“If you are looking at an equidistant move up and down, it hovers around 50 percent most of the time, which means that there is a 50–50 chance that the market will move up by X ticks before it moves down X ticks.”

Trading Price Action: Trading Ranges

“Mathematics dictates that your belief (that the strategy will be profitable when the probability is 60 percent) will be true only if the reward is at least as big as the risk.”

Trading Price Action: Trading Ranges

“A setup with a positive trader's equation. The trader has a mathematical advantage if he trades the setup. Edges are always small and fleeting because they need someone on the other side, and the market is filled with smart traders who won't allow an edge to be big and persistent.”

Trading Price Action: Trading Ranges

“A bar with no tail at either end in a strong trend is a sign of strength, and traders should enter with trend on its breakout.”

Trading Price Action: Trends, Fig 6.14

“As a trend wears on, the bulls typically will want deeper pullbacks before looking to buy again.”

Trading Price Action: Trends, Fig 6.14

“When the trend is this strong, you have to believe that the market will soon be higher.”

Trading Price Action: Trading Ranges, Fig 31.4

“Outside bars in new trends often trap traders out of great trades because they happen so quickly.”

Trading Price Action: Trends, Fig 6.14

“Doji bars are never good signal bars for shorts in strong bulls, but they are acceptable signal bars for shorts in trading ranges, depending on the context.”

Trading Price Action: Trends, Fig 6.14

“Small reversal bars are rarely good, and when one forms in a tight trading range, it should not be looked at as a reversal bar because there is nothing to reverse.”

Trading Price Action: Trends, Fig 6.14

“The market rarely reverses very far on the first attempt, especially when the signal bar has a close in the middle instead of at its low.”

Trading Price Action: Trends, Fig 6.14

“Second legs are often reversals.”

Trading Price Action: Trends, Fig 6.14

“A two-legged Lower Low is usually good for at least a scalp.”

Reading Price Charts Bar by Bar, Fig 1.18

“A bear spike can be a buying opportunity.”

Trading Price Action: Reversals, Fig 9.16

“Whenever there is a trading range just below the moving average, the odds favor a downside breakout.”

Trading Price Action: Trends, Fig 6.14

“A tight trading range below the moving average usually breaks out to the downside.”

Trading Price Action: Trends, Fig 6.14

“There are always sellers on any test of the moving average from below.”

Trading Price Action: Trends, Fig 6.14

“If you are going to take a trade in a tight trading range, you have to give it a little room.”

Trading Price Action: Trends, Fig 6.14

“All breakouts are spikes and climaxes.”

Trading Price Action: Trends, Fig 6.14

“A breakout spike often leads to a measured move down.”

Trading Price Action: Trends, Fig 6.14

“Whenever there is a strong spike down, it is usually followed by a measured move down based on some aspect of the spike, usually the distance from the open or high of the first bar to the close or low of the last bar of the spike.”

Trading Price Action: Trends, Fig 6.14

“When a climax occurs after a trend has been going on for many bars, the odds of a two-legged sideways to down correction lasting at least 10 bars increase.”

Trading Price Action: Trends, Fig 6.14

“A second consecutive buy climax usually results in at least a two-legged correction that penetrates the moving average and lasts at least an hour.”

Trading Price Action: Trends, Fig 6.14

“A second consecutive sell climax usually leads to at least a two-legged pullback.”

Trading Price Action: Trends, Fig 6.14

“The first pause in a strong trend is usually a successful short scalp, even in a strong bear trend, but it might become a final flag and lead to a correction up.”

Trading Price Action: Trends, Fig 6.14

“A moving average gap bar often leads to the final leg of the trend before the market has a larger pullback and even a reversal.”

Trading Price Action: Trends, Fig 6.14

“A bear channel should be thought of as a bull flag.”

Trading Price Action: Trends, Fig 6.14

“When a channel is strong, you should never scale in against the trend.”

Trading Price Action: Trading Ranges, Fig 31.4

“When the moving average is steeply up, traders will buy a pullback to the moving average and scale in lower.”

Trading Price Action: Trading Ranges, Fig 31.5

“When there is a possible reversal, many traders don't buy the first touch of the moving average. Instead, they will start to buy below the moving average.”

Trading Price Action: Trading Ranges, Fig 31.5

“Any trendline lasting about an hour or so is more significant.”

Reading Price Charts Bar by Bar, Fig 2.7

“Small trendlines in strong trends, even when drawn using adjacent bars, often have failure tests (failed breakouts) that set up good With Trend entries.”

Reading Price Charts Bar by Bar, Fig 2.7

“When bars are small doji bars, it is usually best to wait for bigger trend bars before taking more trades.”

Reading Price Charts Bar by Bar, Fig 2.7

“When the risk is greater, it is better to not take the trade and to wait for a strong setup.”

Trading Price Action: Trends, Fig 6.14

“If you HAD to be in the market at any one moment, it's better to be in the direction of the trend.”

Brooks course 13a · always-in

“If you're thinking that you want to buy, but you want a pullback, then you know the market's in a trend. You have to buy, at least small, because chances are, even if you buy this tick, the market's still going to go higher.”

Brooks course 13a · always-in · 3:08

“If I use the term always in short, I mean if I had to be in the market at this instant, I would choose to be short — because I believe prices are going lower.”

Brooks course 40e · entering-late-trends · 6:52

“You cannot continue to hold short if the market is telling the always-in bulls to get long.”

Brooks course 38a · always-in · 18:28

“Whenever the market pulls back from a new high into the middle third or so of the prior bull leg, that is the buy zone. That is where bulls look to buy. And they want to take profits somewhere above the prior high. 50% pullbacks are common.”

Brooks course 45e · broad-bull-channels

“When it's clearly in a bull trend, traders buy in the middle third, around a 50% pullback. When it's not so clear that it's still in a bull trend, and it looks more like a trading range, traders prefer to buy in the bottom third.”

Brooks course 45e · broad-bull-channels

“Profit taking zone at or above the most recent high. Every prior high is a profit taking area for bulls who buy the pullbacks.”

Brooks course 45e · broad-bull-channels

“A final flag IS a trading range. The trend is made of a series of flags. Some are big, some are very small. Ultimately, one flag is the final flag in the trend, and then the trend reverses.”

Brooks course 23a · final-flags

“Sometimes a final flag can be as small as a single bar.”

Brooks course 23a · final-flags

“All bull trends always end at resistance. If you have a horizontal flag forming just below some resistance level, that flag might lead to the final leg of the bull trend, a test of the resistance, and then a reversal down.”

Brooks course 23a · final-flags

“Every buy climax ends at resistance. Every sell climax ends at support.”

Brooks course 40e · entering-late-trends · 20:36

“A stop is the single most important order you'll ever use. It protects you mostly against yourself, especially if you're starting out.”

Brooks course 33a · protective-stops · 5:08

“If the price action tells you that your original premise is wrong, get out. Take the loss. Do not wait for your stop to be hit.”

Brooks course 33b · protective-stops

“After every strong breakout to a new high, raise the stop to below the bottom of that major higher low.”

Brooks course 33b · protective-stops

“The amount of money that you're willing to risk always determines how big a position you should take. If your stop is twice as far away, you have to trade a half of your normal position size.”

Brooks course 33b · protective-stops

“When a trader is scalping, it's usually easier to make money when you're trading with the trend. Beginners should never trade against a trend, even if the trend is weak.”

Brooks course 50a · scalping

“When you're scalping, you're going for a small profit. A scalper taking that much risk for this profit, in general, is better off if he's willing to scale in higher in case the market goes against him.”

Brooks course 50a · scalping

“A very strong bull breakout, probably 90% chance you're going at least a little bit higher.”

Brooks course 49b · swing-examples

“Eventually, when you have a bull channel, you think of it as a bear flag, 75% chance you are going to get a bear breakout and usually an evolution into a trading range.”

Brooks course 49b · swing-examples

“A big difference between an expert and a beginner is that an expert tends to get out very quickly when he makes a mistake. He loses less. He is not emotionally attached to a position. He does not feel a need to prove that he is right.”

Brooks course 52a · losing-when-good-trade-goes-bad

“The single most important rule to protect yourself is having a stop in the market. Not a mental stop. Not a stop in your head. If the stop is in the market, it is a guarantee that you will lose no more than an acceptable loss.”

Brooks course 52a · losing-when-good-trade-goes-bad

“I want to talk about how traders can get trapped and the importance of recognizing the trap as soon as possible and then working your way out of the bad trade.”

Brooks course 52a · losing-when-good-trade-goes-bad