While complex strategies and systems may work for some traders, understanding price action is all you really need to succeed in this arena. Price action analysis is an effective approach to trading today′s markets whether you′re involved in stocks, futures, or options. It allows you to focus on the process of trading without being overwhelmed by a complicated collection of trading techniques. And while this method may appear elementary, it can significantly enhance returns as well as minimize downside risk.
One way to apply price action analysis to your trading endeavors is with chart patterns. Nobody understands this better than author Al Brooks, a technical analyst for Futures magazine and an independent trader for more than twenty years. Brooks discovered ten years ago that reading price charts without indicators proved to be the most simple, reliable, and profitable way for him to trade. Mastering that discipline is what made him consistently successful in trading. Now, with Reading Price Charts Bar by Bar, Brooks shares his extensive experience on how to read price action.
At the end of the day, anyone can look at a chart, whether it is a candle chart for E–mini S&P 500 futures trading or a bar chart for stock trading, and see very clear entry and exit points. But doing this in real time is much more difficult. Reading Price Charts Bar by Bar will help you become proficient in the practice of reading price action through the use of trendlines and trend channel lines, prior highs and lows, breakouts and failed breakouts, and other tools and show you how this approach can improve the overall risk–reward ratio of your trades.
Written with the serious trader in mind, this reliable resource addresses the essential elements of this discipline, including the importance of understanding every bar on a price chart, why particular patterns are reliable setups for trades, and how to locate entry and exit points as markets are trading in real time. Brooks focuses on five–minute candle charts to illustrate basic principles, but discusses daily and weekly charts as well. Along the way, he also explores intraday swing trades on several stocks and details option purchases based on daily charts revealing how using price action alone can be the basis for this type of trading.
There′s no easy way to trade, but if you learn to read price charts, find reliable patterns, and get a feel for the market and time frame that suits your situation, you can make money. While price action trading doesn′t require sophisticated software or an abundance of indicators, this straightforward approach can still put you in a better position to profit in almost any market. Reading Price Charts Bar by Bar will show you how.
Chapter 1. Price Action.
Trend Bars and Doji Bars.
Bar Basics: Signal Bars, Entry Bars, Setups, and Candle Patterns.
Signal Bars: Reversal Bars.
Signal Bars: Other Types.
The Importance of the Close of the Bar.
Exchange Traded Funds (ETFs) and Inverse Charts.
Late and Missed Entries.
Chapter 2. Trendlines and Trend Channels.
Micro Trendlines: Small, Steep Trendlines in Strong Trends.
Horizontal Lines: Swing Points and Other Key Price Levels.
Trend Channel Lines.
Dueling Lines: Intersecting Trendline and Trend Channel Line.
Chapter 3. Trends.
Signs of Strength.
Common Trend Patterns.
Trend from the Open.
Trend Resumption Day.
Trending Trading Range Days.
Tight Channels and Spike and Channel Bull or Bear.
Stairs: Broad Channel Trend.
Chapter 4. Pullbacks.
First Pullback Sequence: Bar, Minor Trendline, EMA, EMA Gap, Major Trendline.
Double Top Bear Flags and Double Bottom Bull Flags.
EMA and Gap EMA Pullbacks.
2 HM: If Away from EMA for Two or More Hours, Then Fade EMA and First EMA Gap Bar.
Trend Day 11:30 Stop Run Pullback to Trap You Out.
Counting the Legs of a Trend.
High/Low 1, 2, 3, and 4.
Variations of High/Low 2 Setups.
Three Push Pullbacks.
Chapter 5. Trading Ranges.
Tight Trading Ranges.
Middle of the Day, Middle of the Range.
Big Up, Big Down.
Trading Ranges Setting Up Trend Reversals.
Chapter 6. Breakouts.
Breakout Entries in Strong Trend.
Breakout Pullbacks and Breakout Tests.
Chapter 7. Magnets.
Measured Moves Based on the First Pullback (AB=CD).
Measured Moves on Breakouts based on Thin Areas and on Flags.
Reversals Often End at Signal Bars from Prior Failed Reversals.
Other Price Magnets.
Chapter 8. Trend Reversals.
Trend Channel Line Failed Breakouts: Climaxes, Parabolas, and V Tops and Bottoms.
Signs of Strength in the First Leg of a Reversal.
Trends Reverse With a Test: Either an Undershoot or an Overshoot.
Double Top and Bottom Pullbacks.
Climax: Spike and Trading Range Reversals.
Climax: Three Pushes and Wedges (Trend Channel Line Overshoots and Reversals).
Chapter 9. Minor Reversals: Failures.
Failed Signal and Entry Bars and One–Tick Failed Breakouts.
Failed High/Low 2.
Failed Higher High and Lower Low Breakouts.
Failed Trendlines and Trend Channel Lines.
Failed Final Flags: Tight Trading Range.
Failed Final Flags: Huge Trend Bar.
Failed Scalps: Five–Tick Failed Breakouts and Failure to Reach a Scalper′s Profit Target.
Chapter 10. Day Trading.
Selecting a Market.
Time Frames and Chart Types.
Globex, Pre–Market, Post–Market, and Overnight Market.
Scalping, Swinging, Trading, and Investing.
Always In the Market.
Have at Least Two Reasons to Enter a Trade.
Entering on Stops.
Protective Stops and Getting Trapped In or Out of a Trade.
Chapter 11. The First Hour.
Patterns Related to the Premarket.
Patterns Related to Yesterday.
Trend Bar on Gap Open: First or Second Bar.
Gap Openings: Reversals and Continuations.
Trend from the Open or Trend from the First Bar.
Third Bar of the Day and the 15–Minute Close.
Strong Trend Bars in the First Hour Often Predict Strength Later in the Day in the Same Direction.
Opening Patterns and Reversals.
Double Bottom and Double Top Flags.
Trading Range Breakouts.
Chapter 12. Detailed Day Trading Examples.
Chapter 13. Daily, Weekly, and Monthly Charts.
Huge Volume Reversals.
Chapter 14. Options.
Chapter 15. Best Trades.
Minor Reversal Scalps during Trading Range Days.
Pullbacks in a Strong Trend.
About the Author.