Price Action
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  • Brooks Trading Course
  • 01-Getting Started
    • Video 01: Terminology
      • 1. Common Abbreviations
      • 2. Every Market: always in either Trend or Trading Range
      • 3. Support and Resistance
      • 4. Breakout
      • 5. Candles and Bars
      • 6. Two Types of Candles
      • 7. Technicals and Fundamentals
      • 8. ABC Pullback in Bull Trend: 2 Leg Sideways to Down
      • 9. ABC Pullback in Bear Trend: 2 Leg Sideways to Up
      • 10. Minor Trend Reversal: Usually Leads to Leg in TR
      • 11. Major Trend Reversal: Bear to Bull
      • 12. Major Trend Reversal: Bull to Bear
      • 13. Inside and Outside Bars
      • 14. Scalps and Swing Trades
      • 15. On Daily Charts
      • 16. Chart Price Increments
      • 17. Moving Average
      • 18. Entry Bar and Signal Bar
      • 19. With Trend and Counter Trend
      • 20. Context: All of the Bars to the left
      • 21. Always In Direction
      • 22. Example: Always in Short, then Long
    • Video 02A: Chart basics and price action
      • 1. Candle Charts: Most Day Traders: use candle charts
      • 2. Candle Charts: 3 types of bars
      • 3. Candles: 2 parts
      • 4. Example of Doji Candle: Trading Range Bar
      • 5. Market: Purpose of Market
      • 6. Market: Goal of All Markets: find fair price
    • Video 02B: Chart basics and price action
      • 1. Volume: Market Needs More Sellers
      • 2. Volume Divergency Often Leads to Rally
      • 3. Should Traders Watch Volume?
      • 4. Depth of Market?
      • 5. News?
      • 6. Risk On and Risk Off?
      • 7. FOMO Trading
      • 8. Momentum Traders: Ignore Fundamentals
      • 9. Value Traders: Buy When Cheap
    • Video 02D: Chart basics and price action
      • 1. Candlestick Patterns?
      • 2. Market Inertia: 80% chance of more of the same behaviour
      • 3. Inertia In Trends: 80% Rule
      • 4. Inertia in Trading Ranges: 80% Rule
      • 5. Trading: Difficult
      • 6. Candlestick Patterns: False Gods
      • 7. Main Points: What Traders Talk About?
      • 8. Two Forces Control ALL Markets: Context and Momentum
      • 9. Pressure: Early Sign of Strength
      • 10. Indicators: useless
      • 11. Any Type Chart is Good
    • Video 04: My Setup
    • Video 05: Program trading
    • Video 06: Personality Traits of Successful Traders
    • Video 07A: Starting Out as a Trader
    • Video 07B: Starting Out as a Trader
  • 02-Charting Analysis
    • Video 08: Candles, Setups, and Signal Bars
      • Video 08A: Candles, Setups, and Signal Bars
      • Video 08B: Candles, Setups, and Signal Bars
      • Video 08C: Candles, Setups, and Signal Bars
      • Video 08D: Candles, Setups, and Signal Bars
    • Video 09: Pullbacks and Bar Counting
      • Video 09A: Pullbacks and Bar Counting
      • Video 09B: Pullbacks and Bar Counting
      • Video 09C: Pullbacks and Bar Counting
    • Video 10: Buying and Selling Pressure
      • Video 10A: Buying and Selling Pressure
      • Video 10B: Buying and Selling Pressure
    • Video 11: Gaps
      • Video 11A: Gaps
      • Video 11B: Gaps
      • Video 11C: Gaps
      • Video 11D: Gaps
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On this page
  • Reversal bars
  • 1. Buy Reversal Bar
  • 2. Sell Reversal Bar
  • 3. Conclusion
  • Multi bar reversals
  • 1. Breakout on the next bar
  • 2. Breakout Reverses 2 or more
  • 3. Treat 2 Bar Reversal like 1 Signal Bar
  • 4. Multi Reversal Bar on HTF
  • Inside and outside bars
  • 1. Inside Bar (IB)
  • 2. IB: Buy Signal Bar (with good context)
  • 3. Outside Bar (OB)
  • 4. Big OB in 1st Hour: start of a swing trade
  • 5. Big OB: Breakout and Entry Bar
  1. 02-Charting Analysis
  2. Video 08: Candles, Setups, and Signal Bars

Video 08B: Candles, Setups, and Signal Bars

PreviousVideo 08A: Candles, Setups, and Signal BarsNextVideo 08C: Candles, Setups, and Signal Bars

Last updated 1 year ago

Reversal bars

1. Buy Reversal Bar

Minimal Requirement

Buy signal bar: to buy pullback in bull trend, is a buy reversal bar. Minimum requirements:

  • Bear bar: close above its midpoint.

  • Bull bar: close above its open. (If it closes above its midpoint, it increases higher probability).

Placing a buy stop above the signal bar, to bet the market will continue up.

A bear bar, could also be a buy reversal bar, because it is reversing an attempt to reverse the bull trend. It means, the bulls are reversal the market back up again.

Buy Reversal Bars NOT always have bull bodies

Buy Reversal Bars don't have to be Bull Reversal Bars.

  • Buy Reversal Bar has a bull body, always has better probability leading to a better trade than that does NOT have a bull body.

  • Not ideal bar (those two bars above) still lead to a profitable trade.

Bull Reversal Bar is the strongest Buy Reversal Bar

  • Context:

    • very strong bull break out (prior)

    • double bottom with slightly higher low.

  • Bar:

    • it has bull body.

    • it has big body.

    • it closes above its open.

    • it closes near its high. (Small/None upper tail)

    • Lower tail is 1/3 -- 1/2 height of the bar.

    • It did NOT overlap the bar before

    • Good entry bar (after the Signal Bar)

    • Good follow-through after the entry bar.

These things increase the probability of a profitable trade.

Place a buy stop above the high of the signal bar to go long.

2. Sell Reversal Bar

Minimum requirement

Sell signal bar: to sell pullback in bear trend is a sell signal bar.

Minimum needed either:

  • Close below its midpoint

  • OR close below it's open (bear body)

Sell reversal bar reverses the attempt of bull reversal.

Sell Reversal Bar: Not all are bear bars

  • Context:

    • The bull trend is very strong.

      • More bull bars with little bear pullbacks.

      • Bear bars in the context are doji bars.

    • The Sell Reversal Bar is not quite strong (highlighted). Not much sell pressure at the top.

    • The better to wait until 2nd Entry Short. (micro double top with lower high)

      • Two Legs up One Pullback.

  • Bar

Place sell limit order:

  1. Sell Reversal Bars are contextually not strong, the bar itself is also not quite strong. So usually wait for 2nd Leg Up 1 Pullback (micro double top with lower high) and sell limit below the prior bear bar.

  2. OR, wait for 2 Bar Reversal, place a sell limit order below the 2nd bear bar. Because in the higher time frame, two bars becomes one Bear Reversal Bar.

  3. OR, wait for Consecutive Bear Bars after the Sell Reversal Bar, which has completely reveresd the strong bull bar at the front.

Best Sell Signal Bar: Bear Reversal Bar

  • Context:

    • Bear trend

    • Bull trend with buy climax

    • Double top with slightly lower high

    • Two legs up in the Trading Range (2nd Leg Trap)

      • multiple consecutive bear bars on top of the trading range.

  • Bar:

    • Open new or above close of prior bar.

    • Close well below prior bar's close

    • Upper tail 1/3 -- 1/2 height of the bar.

    • Small or No lower tail

    • Not much overlaping with prior bar, or bars

Sometimes, the signal begins with small sell reversal bar, but after several bear bars, the bull traders fianlly give up.

Place a sell limit below the close of the signal bar to go short.

3. Conclusion

If you are looking for an early entry, early entry, the risk is small. But so is the probability.

A later entry after you've seen the reversal happening (e.g. Bulls give up, or Bears give up), enter after the reversal attempt, there is a much higher probability lead to a profitable trade. But the trade off is risk. Your stop is the same.

Multi bar reversals

1. Breakout on the next bar

Sometimes, the reversals take place over more than one bar.

Multi Bar Reversals: Every signal bar in a pullback or a flag, is a reversal bar. When reversal takes place over 2 or more bars, it's a 2 Bar Reversal, or Multi Bar Reversal.

  • This is not always happening, on lower time frame, two bars becomes a single reversal bar on a higher time frame.

  • It's a good buy after the higher buy after that bar.

2. Breakout Reverses 2 or more

  • It does not have to be consecutive. Just think of it as a reversal.

    • Going up, then going down -- the market reversed.

    • There were a strong bull breakout.

    • Then there were a strong bear breakout (reversal)

  • On higher time frame chart, all these bars forms a single Signal Reversal Bar.

    • You don't have to find the timeframe chart.

    • You just think of it, and focus on the current timeframe chart.

  • Likewise, if you look at a strong reversal bar in HTF, you know that on a LTF, there is a Multi Bar Reversal.

3. Treat 2 Bar Reversal like 1 Signal Bar

4. Multi Reversal Bar on HTF

Focus on the chart, all you care about is "ah, it's a reversal". No need to care about which time frame.

Inside and outside bars

1. Inside Bar (IB)

Current bar is "inside" the prior bar.

  • High is at or below the prior bar high.

  • Low is at or above the prior bar low.

2. IB: Buy Signal Bar (with good context)

  • It's not much reversal of prior bar, however, it is a start of reversal.

  • IB needs a good context to be a Buy Signal Bar.

    • Strong breakout (the strong bull bar)

    • AND a pullback stay above prior low

    • AND creating a Double Bottom with a higher low

3. Outside Bar (OB)

Current bar is "outside" prior bar.

  • High is above or at H of prior bar.

  • Low is below or at L of prior bar.

  • It can be Breakout and Entry Bar.

Place a buy stop order above the bull bar, in this chart. Not buy stop above the bear bar.

4. Big OB in 1st Hour: start of a swing trade

Place buy stop limit at close price of the follow through bar.

  • The follow through bar has a non-top tail. Very strong.

  • After that bar, there's a small Trading Ranging, seems bearish.

  • But the pullback was not strong, and then breakout again.

  • The measure move is about 1:1.

5. Big OB: Breakout and Entry Bar

Place order:

  1. Sell limit at break out the Trading Range

  2. Sell limit at close (because it closes over 30 bars in prior)

  3. Sell limit at pull back when it break out again

  4. Sell limit after another strong bear bar (after the pullback)