patterns on the open - brooks trading course · brookstradingcourse.com brookspriceaction.com...

BrooksTradingCourse.com BrooksPriceAction.com

Al Brooks

How to Trade Price ActionBrooks Trading Course

Patterns on the Open

futures.io October 30, 2018


▪ Trends From The Open: 20% of days

▪ 80% of days have reversal on open (1st 90 min)

▪ How to enter, place stop, and exit

▪ 4 Patterns: Gap down, Buy Climax

▪ Gap down, Buy Climax, but fails (bull BO)

▪ Gap down, Sell Climax

▪ Gap down, Sell Climax, but fails (bear BO)

Slide

Slide 1

Main Points

2

6

9

15

18

20

34

Gap Down and

Bull Trend from the 1st Bar

Gap Down and

Bull Trend From The 1st Bar


5/4/18

Slide 3

Gap Down: Bull Trend From The Open

Failed BO below yesterday’s TRB above bull bar closing near its HTrend From The Open Bull Trend

Only 20% of days trend up or downall day from the open (about once a week)

Today, only talking about “Gap Down” opensThis is an open below yesterday’s closeor below the 20 bar EMAGap up is opposite

Exit

As long as bull trend,B above bull bar closing near its H

Gap Down and


Gap Down and

Bear Trend From The 1st Bar


9/25/14

Slide 5

Sell Climax: Usually Bad Follow-Through Next Day

Gap downTrend from the Open bear trendSell The Close, bear Micro Channel1st 2 bars are bear bars, 2nd bar closing near LBoth have good size bodies

By close of 2nd bar closing near L,60% chance of MM down from open of 1st bar to close of final bar of bear BO

As long as strong bear trend, sell below bear bars closing near their L

Sell the close of 2nd bar or below 2nd bar

Gap Down and


80% of Opens Have Reversals

BrooksTradingCourse.com BrooksPriceAction.com Slide 7

BO on Open: 50% Reverse, No Matter How Strong

Strong rally on openBecame high of day

Strong selloff on openBecame low of day

Market looks for direction early in dayTries one way, but even strong BO fails50% of time

Test of support or resistance can be very strongStill will reverse 50% of time

BrooksTradingCourse.com BrooksPriceAction.com Slide 8

Opening Reversal: Early Reversal at Support or Resistance

80% of days test support or resistance in 1st 90 minutesReversal often becomes high or low of dayOften also some other patternCall it an Opening Reversal

Wedge Bear Flag at EMAThen, Double Top (DT)

Double Bottom (DB) Bull Flag at EMA andyesterday’s close

Parabolic Wedge Top above last week’s high Wedge Bottom below yesterday’s low

Reversal is usually Double Top, Double Bottom, Wedge Top, or Wedge Bottom

Trend From The Open lasting all dayOnly 20% of days

Gap Down and


How To Enter, Place Stop, and Exit


5/21/18

Wait for Strong Signal Bar, Use Appropriate Protective Stop

Slide 10

To increase the probability of a profit, wait for a strong signal barTraders should enter most trades using stop orders

When selling, wait to sell below a bear bar closing near its low

When buying, wait for a bull bar closing near its high and buy above that bar, not simply above the 1st bar with a bull body


5/21/18


Slide 11

Put the protective stop just beyond the reversalFor example, if the buy signal bar is the low, put stop below that bar

If the buy signal bar is the 2nd or even the 5th or 6th bar of a multi bar reversal and the 1st bar has a Lower Low, put the stop below the lowest bar

Stop


5/21/18


B above bull bar closing on or near its H(often many good choices)Initial protective stop below bottom of reversal, or belowmajor Higher Low (HL), no matter which entry you take

S below bear bar closing on or near its L (often many good choices)Initial protective stop above top of reversal or above major LH, no matter which entry you take

Slide 12

Stop

Stop

Stop

Stop


5/21/18


Slide 13

Stop

Stop

Stop

Stop

Beginning traders should only be looking for swing trades, and they should mostly swing tradeThat means that they will typically take 1 – 3 trades a day

Once they are consistently profitable, they can take 3 – 10 trades a day,and they can add some scalps if they would like


5/21/18


Slide 14

Stop

Stop

Stop

Stop

With that in mind, I created a classification of patterns for swing traders4 versions of each: buy, sell, failed buy, failed sellAbout 100 basic patterns x 4 = 400 total sections

If a trader recognizes what the market is doing,he can look at the examples of that pattern to get an idea of what might follow

Gap Down and


Gap Down

and Rally to a Buy Climax


8/31/18

Buy Climax: Any Strong Open Reverses 50% of Time

No bear bar in 1st 9 barsStrong Buying Pressure so bear trend unlikelyEither bull trend or TR daySelloff became bear leg in TR day

No matter how strong an opening trend is,it will reverse 50% of the time

Slide 16

2nd Leg Bull Trap and Micro Double Top (DT)

1

2


8/23/18

Buy Climax on Open: Failed BO above Yesterday’s High

Buy Climax on openFailed BO above yesterday’s highWedge from yesterdayLow 2S below bear bar closing near its L

Yesterday’s H

Slide 17

Despite strong selloff, there were many early big bull bars closing near their highsTR more likely than big bear trendBears take profits above bull bars and bulls start to buy

1

2

Gap Down and


Gap Down

and Rally to a Buy Climax,

but Became Bull Flag


8/2/18

Gap Down: Bull Trend From The Open

Big gap downBull trend from the openB above bull bar closing near its H

8 consecutive bull bars on the open is rareStrong Buying PressureB above bull bars closing near their highs

Yesterday’s L

Failed Reversal down at MAbecame bull flag

Slide 19

No matter how strong an opening trend is,it will reverse 50% of the timeThen, 50% chance trend will resume!

Became bull flagB above bull bar closing on its H

Gap Down and


Gap Down and Sell Climax,

Then Reversed Up


11/2/17

Slide 21

Sell Climax: Reversal Day after ii (Consecutive Inside Bars)

Sell ClimaxOpening Reversal upii B signal bars

HL MTR

Open

Bull Reversal DayBear trend, then bull trendReversal day usually does not close far above openif initial selloff was strongIt is type of TR day

Yesterday’s L

Exit


11/15/17

Sell Climax: Reversal Up after Micro Double Bottom (DB)

B 2nd failed BO below yesterday’s low

Slide 22

Exit


11/14/17

Sell Climax: Reversal Up after 2nd Leg Bear Trap

Strong B signal barB 2nd failed BO below yesterday’s low2nd Leg Bear TrapS vacuum test of last week’s low

Parabolic WedgeExit long, bears S

Last week’s L

B HL MTRMicro DB

Slide 23

1

2


9/4/18

Sell Climax: Failed BO below Yesterday’s Low

Yesterday’s L

Failed BO below yesterday’s lowB above bull bar closing near its H

4 big bear bars, but shrinking bodiesSelloff losing momentum

Slide 24


9/6/18

Sell Climax: Reversal Up from Parabolic Wedge Bottom

3 bottom attempts so consecutive bottomsParabolic Wedge Sell Climax (tight channel with at least 3 legs)

B above bull bar closing near its HBut, strong early selling so minor reversal upand not likely to reach H of day

LL MTR

Exit

Slide 25


9/5/18

Parabolic Wedge Sell Climax: Micro Double Bottom

Micro DBB above bull bar closing near its H

Bottom of gapon daily chart

Parabolic Wedge Sell Climax Sell vacuum test of bottom of gap on daily chartReversed up from 1 tick aboveBig 3rd leg down so wait for Micro DB before buying

Slide 26

1

2

3


1/30/18

Trend From The Open Bear Trend: Sell Climax

HL MTR

Trend From The Open Bear Trend Became TR DAY

Slide 27

Micro DB, Parabolic WedgeB above neck line of Micro DB or above outside up bar


5/3/18

Gap Down: Sell Climax

Gap downWedge BottomB reversal up

Slide 28

Higher probability to B above bull barthat closes near its H


5/11/17

Slide 29

Big Gap Down: Trend From The Open Bear Trend

Failed BO below yesterday’s L,Micro DB and LL DB2nd entry B B reversal up above bull bar closing on H

4 big bear bars closing near LTrapped bulls in and bears outBoth will S 1st reversal upAt least small 2nd Leg Down likely

1

2


8/15/18

Big Gap Down: Sell Climax and Wedge Bottom

Big gap down and Bear Trend From The OpenConsecutive Sell Climaxes

Failed BO below Wedge Bottom, became bigger Wedge B above bull bar closing near its H

Slide 30


6/15/18

Gap Down: Sell Climax

B above bull bar closing near its H

Big reversal upDominant feature of day so sideways to up likely

Slide 31

Sell Climax and strong reversal upPossible bull reversal or 2nd Leg Bear Trap in TR day

1

2


6/21/18

Gap Down: Consecutive Sell Climaxes

B above bull bar closing near its H

Slide 32

Strong selloff, but Consecutive Sell ClimaxesFailed BO below Parabolic Wedge Bottom


7/18/17

Failed BO Low of Yesterday: 2nd Reversal Up

Failed BO below yesterday’s L,2nd entry B so DBB reversal up above bull barLL MTR (every MTR is a DB)

Opening Reversal Down at MAWedge Bear Flag

Slide 33

Gap Down and


Gap Down and Sell Climax,

Then Bear Resumed


6/25/18

Gap Down: Sell Climaxes, but Continued Lower

Parabolic Wedge

Gap down and consecutive Sell Climaxes1st leg up is likely Minor Reversal

Slide 35

Consecutive Wedge BottomsB above strong B signal bar

Most patterns work 40 – 60% of timeThat means they fail 40 – 60% of time!

S again below bear bar closing near its L


▪ Trends From The Open: 20% of days

▪ 80% of days have reversal on open (1st 90 min)

▪ How to enter, place stop, and exit

▪ 4 Patterns: Gap down, Buy Climax

▪ Gap down, Buy Climax, but fails (bull BO)

▪ Gap down, Sell Climax

▪ Gap down, Sell Climax, but fails (bear BO)

Slide

Slide 36

Main Points

2

6

9

15

18

20

34


Al Brooks

How to Trade Price ActionBrooks Trading Course

Patterns on the Open

futures.io October 30, 2018

patterns on the open - brooks trading course · brookstradingcourse.com brookspriceaction.com...

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