Summary of Al Brooks's Trading Price Action Trends

By IRB Media

Please note: This is a companion version & not the original book. Book Preview:

#1 The most useful definition of price action for a trader is any change in price on any type of chart or time frame. The smallest unit of change is the tick, which has a different value for each market.

#2 The most important decision for traders is whether the market is trending or not trending. They must read the price action on the chart in front of them to make this decision. The market is very efficient, and there is a 50 percent chance that the next tick will be up and a 50 percent chance that it will be down.

#3 The most useful aspect of price action is what happens after the market moves beyond previous bars or trend lines on the chart. For example, if the market goes above a significant prior high and each subsequent bar forms a low that is above the prior bar's low and a high that is above the prior bar's high, this price action indicates that the market will be higher on some subsequent bar, even if it pulls back for a few bars in the near term.

#4 The market often breaks out of a small flag to reach a scalper's profit and then pulls back, and the pattern then evolves into a larger flag. This larger flag may also break out in the same direction, but it might instead break out in the opposite direction.

• Language: English
• Publisher: IRB Media
• Release date: May 5, 2022
• ISBN: 9798822501461

IRB Media

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Insights on Al Brooks's Trading Price Action Trends

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 1

#1

The most useful definition of price action for a trader is any change in price on any type of chart or time frame. The smallest unit of change is the tick, which has a different value for each market.

#2

The most important decision for traders is whether the market is trending or not trending. They must read the price action on the chart in front of them to make this decision. The market is very efficient, and there is a 50 percent chance that the next tick will be up and a 50 percent chance that it will be down.

#3

The most useful aspect of price action is what happens after the market moves beyond previous bars or trend lines on the chart. For example, if the market goes above a significant prior high and each subsequent bar forms a low that is above the prior bar's low and a high that is above the prior bar's high, this price action indicates that the market will be higher on some subsequent bar, even if it pulls back for a few bars in the near term.

#4

The market often breaks out of a small flag to reach a scalper's profit and then pulls back, and the pattern then evolves into a larger flag. This larger flag may also break out in the same direction, but it might instead break out in the opposite direction.

#5

The market does something for a reason. Whatever reason I am giving is just one of the countless reasons behind the move, and I point to that one reason to give some insight into what some of the major traders are doing.

#6

The purpose of television is to make money for the corporations that own the shows and the networks. The shareholders of those companies are not concerned at all about whether you make money from trade recommendations on the shows.

#7

Many television analysts make trade recommendations based on their fundamental analysis, and then describe the trade in technical terms. However, their predictive ability based on the fundamentals is pure guesswork and has a 50 percent probability of being correct.

#8

The market is controlled by computer algorithms, and the programmers are always looking for every possible edge. Individual traders have no way of knowing if what they see is real or a trap set by one computer to trap other computers.

#9

The price action that traders see during the day is the result of institutional activity, and not the cause of the activity. The activity is the result of a confluence of unknowable influences that lead to a trade being profitable or a loser.

#10

The only reason institutions are responsible for price action is because it makes trading based on price action more reliable. Most institutions are not going to be day trading in and out, making the market reverse after every one of your entries.

#11

There are certain price action events that change the perspective of smart traders. For example, if there is a two-legged pullback in a bull trend and the market then trades above the high of the prior bar, many buyers will be long at one tick above that prior bar's high. If the market then trades below the low of the two-legged pullback, everyone will assume that the market will have at least one more leg down.

#12

High-frequency trading, which is the majority of stock, futures, exchange-traded fund, currency, commodity, and option trading, is done by firms that have algorithms designed by quantitative analysts called quants.

#13

The same is true for HFT firms. Their edge is always very small, but if they use it thousands of times a day, it will theoretically produce consistent profits. The edge in trading is always very small, but if you use it thousands of times a day, it will theoretically produce consistent profits.

#14

The computerized trading controls most of the volume, and this will always be the case. The technology is rapidly changing, and it controls most of the price action.

#15

The problem that HFT firms face is that they can kill the goose that is laying those golden eggs. Their trading is statistically based, and they might lose money if enough firms make adjustments due to recent price action.

#16

The high-frequency traders are helping the institutional traders get a better price on their trades, which is something that the quants used to do for the institutional traders. The quants are providing liquidity to the market and reducing spreads for all traders.

#17

The market has inertia, but at some point, the current price action becomes excessive. For example,