Video 09A: Pullbacks and Bar Counting
What is a pullback?
1. What is a Pullback
In Bull Trend, the first pullback is when the low of a bar, goes below the low of the prior bar.
In Bear Trend, the first pullback is when the high of a bar, goes above the high of the prior bar.
2. Implied Pullback: In Bull Trend
On a smaller timeframe chart, it probably has a pullback. (lower low)
This is important, because Pullback is telling you, the Trend probably going to resume soon. And it gives you opportunity to enter.
Traders may choose to buy at the close of that bear bar, betting that trend will resume.
3. Implied Pullback: In Bear Trend
The tail on the bottom implies a pullback for the bear, in 5 min chart.
It is an actual pullback on the 1 min chart.
4. Pullback: Trend Usually Resumes
Purpose of Pullback in Trend, is to give traders Traders can buy stop 1 tick above
Traders can buy limit order below the low of that bar, or buy close.
In general, when you buy in a trend, you are taking higher probability trade. But you will also sacrifice your R/R ratio. i.e. you need place your Stop Loss at the beginning of the Bull Trend.
5. Pullback: can grow into TR
A pullback is a higher probability bet, that the trend will resume.
However, at some point, the pullback can turn into a Trading Range, after it grows to 20 bars or more. The probability of resuming drops down to the same probability of reversal.
Typically, 20 bars or more, will become a Trading Range. The more bars added into the pullback, the lower probability will resume.
6. Strong Trend: why does it pullback?
Your stop is independent to where you buy, you stop is dependent on the price action.
If you buy a bull trend, your stop goes below the bottom of the most recent bull leg.
You have to reduce your trade size, once your stop is too far.
The bulls take profits, the market will go sideways. Once the bulls confirm the bears can not reverse the trend, they will buy again.
Once they see continuous bull bars after the pullbacks, they place their stops just below the pullback, not the prior stop.
7. Deep Pullback: if premise still good, trend continues
As long as the premise is still valid, the trend is still good, it is OK to be in your position.
But you have to rely on your stop.
Some traders exit early, thinking it is a deep pullback. They exist early, once they see there's a success reversal, and the bull trend started, they will buy it again.
minor high和minor low，minor的R/S没什么意义，经常会被打破。
一旦是Major High/Low，就必须保证hold住那个低点。因为那个Major Low后面有个强Bull Trend，跌破那个Major Low是任何Bulls都不愿意看到的。
8. 50% Pullback: most important
Because at 50%, the Risk and Reward are equal to the bulls and bears.
50% is more rational than Fibonnacci 61.8%. Because it is based on Rational Equal mathematics.
Buy stop at 50% of pullback, betting the reversal will fail.
Buy stop at the close of the Bear Bar, is the same, betting the bear reversal will fail.
9. Pullback: sometimes falls below Bull Breakout if in TR
The parabolic wedge top, bears start to sell at the top, and bulls are also taking profit at there.
In the pullback after the parabolic wedge top, you can see the bulls gave up.
假跌破，做多。小止损。
10. Bar Counting: help to find PB entries
Bar counting is one way to enter into a pullback.
In higher time frame chart, it will be only two legs.
11. Bar Counting: count number of legs in PB
Two leg pullback: ABC correction
Triangle leg pullback: 3 legs in one direction (5 or more total legs)
Wedge is the same as triangle, just slop a bit of more.
As long as it is a 3 push, wedge and triangle are both valid.
There's no "perfect" trace, or perfect entry, because it does NOT exist.
If it exist, means everytime, the institution will pay you.
That's not possible, they will quickly find it, and adjust it, to stop paying you everytime.
Buy one tick above the last leg down.
ABC: buy 1 tick above the high of Leg C.
Triangle: buy 1 tick above the high of Leg 5.
12. In Bull Trend, How PB Ends: Bar goes above high of prior bar
Buy 1 tick above the high of prior bar. (H1)
Especially, it is a very tight bull trend.
it is a 9 bull bars micro bull trend.
every low is at or above the low of the prior bar.
every high is at or above the high of the prior bar.
It's a very strong bull trend.
Traders will either buy the market, or buy at close, or 1 tick below the low, or 1 tick above the high of the prior bar.
13. In Bear Trend, How PB Ends: bar goes below low of the prior bar
In a Bear Trend, a pullback will fail, as soon as a bar goes below of the prior bar.
Most of the time, Low 1 will be profitable.
Bear trend will end, if get 4 or more legs up.
It's not a PB anymore, it is a reversal.
Here are 5 bull bars close near their highs. It's probably a reversal and always in long.
What is bar counting?
数K线的本质是：数尝试延续当下趋势的次数。
牛市趋势，数高一、高二、高三
熊市趋势，数低一、低二、低三
高一 / 低一 是被后面一根K线所触发的。（信号K）
高一：被后面一根超过其高点的K线，触发。
低一：被后面一根低于其低点的K线，触发。
后面的那一根K线，变成入场K。
如果牛市趋势创出新的高点，那么高一就需要重新开始数。
如果熊市趋势创出新的低点，那么低一就需要重新开始数。
1. Bar Counting: Count Trend Resumption Attempts or Legs
Bar counting, we count the number of attempts a trend tries to resume.
In Bull Trend, we count High 1, High 2, ...
In Bear Trend, we count Low 1, Low 2, ...
Each resumption in a Bear Trend usually has a Bear Bar.
Each resumption in a Bull Trend usually has a Bull Bar.
In the chart, it is a 3 push Wedge flag. It has 3 bull pullbacks (Leg Up), but followed by 3 bear bar resume attempts also.
2. High 1 Bull Flag: sideways to down in Bull or TR
In a Bull Trend, if the high of the next bar goes above the high of the current bar.
The current bar becomes High 1 Buy Signal Bar.
The next bar becomes High 1 Entry Bar.
Traders should place a Buy Stop Order 1 tick above the high of the current bar (High 1 Buy Signal Bar).
The High 1 Entry Bar is the 1st immediate resume bar, after the 1st reverse down.
3. Bar Counting: High 1 Might be 1st of 2 -- 3 Legs Down
H1 bar, (when it is triggered by its next bar), it ends the 1st leg of sideways, or the down trend move.
It may be the only leg down, it also can be the 1st leg down.
If there's a new Breakout, we need to count from H1 again.
4. Bar Counting: 2nd Leg Down is High 2
You looking for buy here. So any attempt to resume up is a good sign of trend resumuption.
5. Strong Bull Trend: many H1 and H2 buys setups
The whole purpose of bar counting, is to look for reasons to enter a trade.
Triangle and Wedge are same 3 push, just different sloped down.
Every double bottom is a High 2.
6. Strong Bull Trend: raise stop after each new high
Sometimes you see High 4~5, or you see 4~5 High 1 in the same bull trend.
This is unusual.
Because every trend tend to weaken, as the time goes on.
If you see 5 or 6 consecutive H1, it is very unusual.
After each strong breakout to a new high, you raise the stop.
Everytime you see a new breakout , you raise your Stop.
7. Don't Lose Sight of the Goal: looking for reason to buy
In the chart, it is a pretty good Bull Trend. It has 8 ~ 9 consecutive bull bars.
When you see a "big-up, big-down, big-confusion", probably it will go Sideways.
Then it will get a Double Bottom.
The High 2 does NOT have to be deeper than the low of High 1.
Sometimes, it can be above the High 1 bar. Because it is just a Sideways Pullback.
High 1 is also the 2nd leg of a double bottom, compare to prior bars.
But because there are three consecutive Bear Bar, they are pretty strong.
So it's better to wait for a 2nd Entry. (i.e. another Double Bottom, with High 2 bar)
Entry 1 tick above High 2 is a good bet on Bull Trend resume.
Triangle is just a 3 push down.
It can be a pullback with sideways.
It can be a wedge with sloped down.
The key is the same: 3 push down/up.
Don't lose your goal: your goal is to find a way to enter.
8. Bar Counting: May acceptable ways to label the counts
Other ways for Bar Counting:
Count number of bear bars which followed by Bull Bar or Doji Bar.
The bear bar is High 1.
The following Bull Bar or Doji Bar is entry 1.
Count number of Buy Signal Bar.
Buy stop after the signal bar.
Count the number of legs down.
Same as "3 push wedge".
But need to avoid strong bear channel.
Wait until it becomes to at least sideways.
You want to buy at pullback, and bet the trend is going to reverse back up.
9. Bar Counting: Look for bigger patterns
10. Bigger PB in Bull Trend or TR: then High 2, 3, or 4 Bull Flag
When you count High 5, you are probably in a Bear Trend now. It's not a Bull Trend pullback anymore.
Instead of buying Pullback in the Bull Trend, you should Sell Rallies in the Bear Trend.
11. Sideways to up in Bear or TR: Signal and Entry Bars
12. Sideways to up in Bear or TR: Sell Low 1, 2, and 3
It can be a 2nd pullback in the Bear Trend.
It also can be a Bull Leg up in the Trading Range.
Either of the two scenario, it is a sell signal bar. (L3 Bar)
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