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Al Brooks Price Action Fundamentals SmithJones > Market Cycle > Flashcards

Market Cycle Flashcards

1
Q

What are the market cycle phases?

A

BO

Tight Channel / Broad Bull Channel

Trading Range

*Each pattern might be 1-2 bars or 20+ bars

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2
Q

What market cycle phase is this?

A

Bull BO

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3
Q

What market cycle phase is this?

A

Tight Bull Channel

  • AIL
  • Stop is far so big risk
  • Probability of higher prices likely
  • Best to buy for swing, but scalp is ok
  • DO NOT SELL
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4
Q

What market cycle phase is this?

A

Broad Bull Channel

  • Sometimes has bear legs, strong enough to reverse to AIS for some traders
  • If PB reaches about 2/3rds probability for new high is about the same for new LL
  • Ok to sell new high for scalp, if bull rally is weak
  • Best to Buy PBs
  • On smaller TF contains TR
  • On higher TF, can be part of Tight Channel or BO
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5
Q

What market cycle phase is this?

A

Trading Range (TR)

  • Bulls Buy Low (in Bottom 3rd) - Bears Sell High (in Top 3rd) - BLSHS - this is were the risk is low and reward high
  • Probability better for bulls near bottom and top for bears
  • On higher TF, can be part of Channel or BO
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6
Q

What market cycle phase is this?

A

Bear BO

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7
Q

What market cycle phase is this?

A

Tight Bear Channel

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8
Q

What market cycle phase is this?

A

Broad Bear Channel

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9
Q

When there is a PB after a Strong BO to start a Trend what is it a start of in the market cycle?

A

Once there is a PB in the trend after a BO the market cycle has now entered a channel.

As soon as it pulls back the BO Phase has ended

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10
Q

Does the market cycle ever end?

A

No, it does not

It is in a Never-Ending Cycle

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11
Q

When a BO to a new high occurs to start a Trend then Pulls back …

What phase of the market cycle would this be?

A

It is the start of a channel

As soon as it pulls back the BO phase of the trend has ended

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12
Q

What does a Trend begin with?

A

A trend begins with a BO

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13
Q

What defines a Momentum Trader?

A

They Buy high, expecting higher

Buy Strong BOs, expecting to be able to exit higher

High probability, but big risk (stop far below)

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14
Q

What defines a Value Trader?

A

Buys Low (PBs) to Reduce Risk - put stop below HL, especially after a new High

Sells High (PBs) to Reduce Risk - put stop above LH, especially after a new Low

Have lower risk and lower probability

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15
Q

What does a channel evolve into?

A

into a Trading Range

the channel eventually weakens and evolves into a TR

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16
Q

What is important to PAY attention to in a Bull Channel?

A

It is can the BEARS make money (and vice versa for a Bear Channel)

And if it is easy enough for the Bears to make money in the Bull Channel the Channel is likely to transition into a TR

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17
Q

The Channel eventually weakens and evolves into what?

A

TR

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18
Q

a Trend begins with what?

A

a BO

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19
Q

as soon as there is a PB after the start of Trend BO

what phase in the trend has ended?

A

The BO Phase has now ended

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20
Q

What is the PB a start of in the market cycle?

A

Start of a Channel

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21
Q

What does the channel phase lead to?

A

a Trading Range

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22
Q

What are Bear momentum Traders expecting?

A

Expecting Lower prices so they sell at lows

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23
Q

What are Bear Value Traders expecting?

A

Lower Prices but the Sell High to reduce risk

24
Q

What does a Channel Evolve into?

A

a TR

a channel eventually weakens and evolves into a TR

25
Q

75% of Bear Channels have a what?

A

a Bull BO

26
Q

Only 25% of Bear Channels have a successful what?

A

Bear BO

27
Q

Anytime I see a Bear Channel I should assume what?

A

It is going to transition into a TR

which it does more than 75% of the time

28
Q

What should I be asking myself in a Bear Trend/Channel?

A

Can the Bulls make money?

And when I see clearly that they are it is a 1st sign that the Bears are weakening

(Vice versa in a Bull Trend/Channel

29
Q

Value Trading = ?

A

Value Trading = Channel Trading still looking to short, Buying PBs

Evolving to Trading Range Trading = Buying Reversals

30
Q

Momentum Trading = ?

A

Momentum Trading = BO, Buying at the Market, any good clear reason to trade the huge PRESSURE momentum

31
Q

Once you get a stop order from a STOP ENTRY BULL chances are the market has transitioned to a what?

A

Trading Range

32
Q

Every chart is a _____ or a _____?

A

Trend or a TR

33
Q

Every Bar is a _____ or a _____?

A

Trend Bar or TR Bar

34
Q

Markets have inertia, in a TR what is the 80% Rule?

A

Markets tend to continue doing what they’ve been doing

In a TR the markets are constantly trying to BO

The BOs will fail 80% of the time

35
Q

Markets have inertia, in a Trend what is the 80% Rule?

A

Markets tend to continue doing what they’ve been doing

In a Trend, the markets are constantly trying to Reverse

The Reversals will fail 80% of the time

Here, in Bear Trend Reversals lead to LHs and Bears flags

36
Q

Define Inertia and 80% Rule

A

Inertia = an object tends to continue doing what it has been doing and tends to resist change

Therefore markets tend to continue doing what it has been doing

If in a TREND 80% of REVERSALS will fail

If in a TR 80% of BOs will fail

37
Q

PBs on higher timeframes are what on lower time frames?

A

Trading Ranges on lower time frames

38
Q

Is this a Trend Resumption or Reversal?

A

Trend Reversal

When a TR lasts 20+ Bars, the prior trend is so far back that it loses influence and market loses direction

Probability for trend resumption fails to equal of a probability of a trend reversal

Therefore BO MODE is ACTIVATED and expect a Measured Move up or down

(MM could be the height of the TR initially and evolve to the height of the BO)

39
Q

Is this a Trend Resumption or Reversal?

A

Trend Resumption

When a TR lasts 20+ Bars, the prior trend is so far back that it loses influence and market loses direction

Probability for trend resumption fails to equal of a probability of a trend reversal

Therefore BO MODE is ACTIVATED and expect a Measured Move up or down

(MM could be the height of the TR initially and evolve to the height of the BO)

40
Q

What defines a BULL Trend?

A

Bull trend needs Major HLs

41
Q

Do minor Higher Lows usually lead to BOs and create a new Major HL in a Bull Trend?

A

No they do not, Minor HLs is usually a leg in TR or PB

usually weak, and usually follows weak rally.

They do not lead to stong BOs

42
Q

What is meant by High 1 or High 2 or High 3 in a Trend?

A

The amount of PBs that create a high above the Previous HL but have yet to break above it

43
Q

Can there be a Bear Leg or Bear Swing in a Bull Trend?

A

Yes there can

44
Q

Can a Bull leg be part of a swing in a Bear Trend of part of the Trend?

A

Yes it can be both

45
Q

what is an endless PB?

A

When a PB grows into a trend reversal (falls below the bottom of bull BO)

No longer bull trend

Either TR or bear trend

46
Q

Can a TR be as small as one bar?

A

Yes a TR can be one bar

47
Q

Strong reversal after sell Climax, 2 Bar PB,

how long will the Bears wait before potentially selling again?

A

Ten Bars Two Legs

*It may also be the start of a TR

48
Q

After how many bars of sideways movement does the prior trend lose its influence?

A

After 20 bars

*Neutral market now

*Market is in BOM

49
Q

Identify different parts of the market cycle on this chart

A
50
Q

Knowing the cycle that the market is currently in gives me the best opportunity to make the best trades as every BAR is a trade

What percentage of the bars on every chart are either in a TR or a Channel?

A

90% of the bars on every chart are in either in a TR or a CHANNEL

51
Q

Decisions are easier when we create only two choices (binary decision)

List market cycle binary decisions

A
52
Q

Binary Decision making

BO or Channel?

A

Unclear

*If unclear, assume BO

Only look to buy

Tight Channel is BO on higher TF

53
Q

Tight or Broad Channel?

A

Tight Channel

*When unclear, assume tight

Only trade in direction of the trend - SELL

54
Q

Major or Minor Reversal?

A

Minor Reversal

Generally, when there is a tight channel follow by a reversal they tend to be minor as the bears had complete control, the bulls will need to do some more for before a MTR occurs

55
Q

Identify some binary trading decisions on this chart

Binary = Two choices (This or That)

A

Al Brooks Price Action Fundamentals SmithJones (28 decks)

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