Trading Opening Breakouts and Reversals


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Futures.io October 17, 2017

Trading Opening Breakouts and Reversals

Al Brooks

How to Trade Price Action

Brooks Trading Course

BrooksTradingCourse.com

BrooksPriceAction.com

Main Points

Slide

▪ 50% chance 1st BO will reverse

2

▪ H or L of day forms early

7

▪ Early BO: Breakout Mode or 18 Bar BO

14

▪ Failed BO of yesterday’s H or L

20

▪ Trend resumption after failed reversal

31

BrooksTradingCourse.com

BrooksPriceAction.com

Slide 1

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

Market looks for direction early in day Tries one way 50% of time, decides it is the wrong way

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

Strong selloff on open Became L of day

BrooksTradingCourse.com

/17
BrooksPriceAction.com

Strong rally on open Became H of day

Slide 2

Early BO: What Is Chance H or L of Day Already Formed?

At the close of any bar, what is the chance that either the H or L of the day has already formed?

Bar 7 Bar 12

The 1st bar has 20% chance of being either the H or L of the day
By the close of the bar, 50% chance the day has already made either the H or L There is often a 7 am report at the close of bar 6 that is catalyst

/17
BrooksTradingCourse.com

By the close of the 1st hour (bar 12), 70% chance the day has already made either the H or L
BrooksPriceAction.com

Slide 3

Early BO: What Is Chance H or L of Day Already Formed?

By the close of bar 18 (90 min) 90% chance the day has already made either the H or L
Bar 18

Nothing magical about the number 18 Bar 16 has a slightly lower % chance Bar 23 has a slightly higher % chance Traders just need an approximate time when the probability is high
By the close of bar 80, 99.9% chance the day has already made either the H or L Knowing this does not help trading

/17
BrooksTradingCourse.com

BrooksPriceAction.com

Slide 4

BOM on Open: 2 Types, But Often The Same

Breakout Mode (BOM) Here, also 18 bar BO
Look for BO and then about a Measured Move (MM)

BO of range of 1st 18 bars Here, not BOM since never went above H of bar 1

Bar 18

Bear BO, so 90% chance of either bear day or TR day

Bar 18

BO Mode After 10th bar: Reversal down from new H and up from new L

Today, bull BO, so 90% chance of either bull day or TR day

/16

BrooksTradingCourse.com

BrooksPriceAction.com

Slide 5

Main Points: H or L of Day Forms Early

Slide

▪ 50% chance 1st BO will reverse

2

▪ H or L of day forms early

7

▪ Early BO: Breakout Mode or 18 Bar BO

14

▪ Failed BO of yesterday’s H or L

20

▪ Trend resumption after failed reversal

31

BrooksTradingCourse.com

BrooksPriceAction.com

Slide 6

BOM on Open: Bull BO, Then MM Up

Bulls got MM up

BO Mode After 10th bar: Reversal down from new H and up from new L

Bull BO of opening range OK to buy early

/16
BrooksTradingCourse.com

BrooksPriceAction.com

Slide 7

BOM on Open: Sell BO below Reversal up for MM Down

BO Mode: TR Open, about half of average day’s range After at least 5 - 10 bars Reversal down from above 1st bar, Reversal up from below 1st bar Either can come 1st

50% chance of BO up or down Then, look for MM (here, fell much more) Buy above the H with stop at new L of day Sell below the L with stop at new H of day
Sell PB, which is often deep, since early TR Can even be Always In Long and still continue down if no new H of day

/17
BrooksTradingCourse.com

Today had bear BO, so 90% chance of either bear day or TR day
BrooksPriceAction.com

Slide 8

BOM on Open: Sell BO below Reversal up for MM Down
When initial range is less than 10 bars, some computers will wait to see if bigger opening range forms, then sell the BO

Another reversal up so new BOM range

/17
BrooksTradingCourse.com

BrooksPriceAction.com

Slide 9

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Trading Opening Breakouts and Reversals