Trends Flashcards
How can a trend channel be drawn on the chart?
With parallel lines or connecting tops
How many bars are in a Trend?
How many major Trends are usually on a chart?
Usually no more than 2 per chart
In this Bull Trend which line is the TREND line and which is the CHANNEL line?
How do I know when a channel is becoming exhausted?
The channel becomes flatter and broader
In a Bull Trend, what do the Bulls need?
The Bulls in the Trend need HLs
What needs to happen for a trend to be potentially over?
If the market (in Bull Trend) falls bellow prior HL
The trend might be over, and evolve into a TR or Bear Trend
In a Broad Bull Channel sometimes the selloffs are strong enough to convert the market into AIS.
However what keeps the odds in favor of a continued Bull Trend?
If the Bears are unable to get the market below the Major HLs, odds are the Bull Trend will continue
Why should a trader keep drawing new trend lines?
Because channels, trend lines are rarely perfect, so continuing to draw them gives the trader a better perspective on the market Price Action (PA)
What do the Bulls expect in a Bull Broad Channel?
The BULLS expect the BEAR Reversal ATTEMPTs to FAIL
There they’re buying above the strong BULL Reversal Bars at the Trend-line
They’re buying the PBs that go 50% or 1/3 of the middle of the last leg up
They’re Buying Bear closes at the Bull Trend line betting on the failed Bear BO
What does a Bear Trend need to maintain its Bear Trend?
LHs and LLs
In this Bear channel which is the Trend line and which is the bear channel line?
What Bear pattern is this?
Where do swing traders usually place their stops?
Above/Below Major Highs/Lows
When can a trader trail and move his stop?
If the Bear reaches a new low and has big bear bars closing on its low, lower stop to above this leg
If the market rallies above prior LH what does that mean for the traders?
Trend Might be over
Might have evolved into a TR or Bull Trend
In a Bear Trend, what do the Bears do when the Bulls have rallies?
The Bears look to sell the rallies as they expect the Bear Trend to Resume as most Reversals a BOs fail
If the market is not clearly in a bull or bear trend what should I then assume?
That the market is in a TR
Every Trend contains TRs?
TRUE or FALSE
TRUE
Every PB and pause is a small TR (you can go to a lower TF to see it)
Once a TR goes 20+ Bars the probability for TREND RESUMPTION is equal to a TREND REVERSAL making it 50% to go in either direction
Trading in the direction of the Trend makes it easier to make money
TRUE or FALSE
TRUE
Only take trades in the direction of the trend
Try to swing part or all of your position, let your profits grow
When a CHANNEL is this TIGHT it is a good idea to take any SHORT
Hold until there is a clear ending to the Trend
When a CHANNEL is this TIGHT it is a good idea to take any SHORT
Hold until there is a clear ending to the Trend
Always use protective stops to protect you from yourself
Always use protective stops to protect you from yourself
What kind of Bar has the strongest trend?
Big Bull/Bear BO Trend Bars
They have the highest probability for big profit
A beginner usually takes no trades
Why?
A beginner constantly sees tops
Doesn’t realize that computers need to reduce position size when stop is far away
Risk control creates a PB, but beginner sees trend reversal.
After PB, computers buy again, but now have tighter stop
Why?
A lot of times in a STRONG BULL(BEAR) Trend when the BULLS take some profit and REDUCE their position size/their risk this creates a BULL FLAG
Quite often beginners may see this as a TOP/Reversal. Which is not as the case, I must keep in mind the context to the left and that markets have inertia
Risk control creates a PB, but beginners see trend reversal
In a Tight Bull Channel, with small PBs what should I do?
PBs are small and do not look convincing. Therefore the tight channel is confirmed Buy for any reason.
AIL
Once the beginner is finally ready to trade after taking no trades during the BO, or PBs what does the beginner bet on?
The beginner bets on regression, the reversal (thinking the trend can’t last forever)
The 1st Reversal down is usually minor and the experienced bulls are going to Buy it
Markets have inertia, The beginners that missed the strong bull trade that jumped at the first sign of a reversal Bear trade get stopped out
why?
Trends have inertia 80% of reversals attempts fail
Beginner doesn’t realize, that small risk means low probability
Most Wedge Topos become bull flags (here, Wedge Bull Flag)
The beginner still thinks the markets have to reverse, they must reverse so they try a 2nd entry
Small Risk =?
= Low Probability
Strong Bull Trend and the Bears have attempted 3 reversals that have failed but the Bears still think the markets have to reverse
And they get stopped out again, Why is that?
Markets have inertia and the beginner lost a fortune betting against it noo clear evidence of a reversal was presented
Low Risk + Low Probability = Consistent losses in the markets
How are the markets trying to always make traders feel?
Markets always want to try and make traders uncomfortable
The markets are constantly in search for a fair price
TRUE or FALSE?
TRUE
Should I trade each trade differently?
Yes you should
Trends offer great profits
Understanding how they operate is a must
Great starting point is to classify them into types
Based on behavior
All trends contain BO (Spike) & Channel
TRUE or FALSE?
TRUE
What do trends begin with?
Trends begin with BOs, sometimes strong
Can a Trend BO be a series of small Trend Bars?
Yes, it can be a series of consecutive ordinary trend bars
If bull BO, usually most of the small bull trend bars close near their highs, or at least above their midpoints
Can small BOs lead to Big Trends?
Yes they can, pay attention to the details
Small BO can it still get a Big Channel?
Yes
After this tight bear channel with this Bear BO, what is this telling me?
Bulls finally gave up
No longer “bear channel is a flag”
Now a bear trend and Measuring Gap
The market has different types of Trends
Should they be traded differently?
Name the different types of trends day traders trade
Name and describe this trend
A Bear Channel has a 75% Chance of an eventual Bull BO
Therefore when I see a Bear Channel what should I think?
BEAR CHANNEL = THINK BULL FLAG
What does a Channel usually evolve into?
It usually evolves into a TR
a Bull Channel has a 75% Chance of an eventual Bear BO
Therefore when I see a Bull Channel what should I think?
BULL CHANNEL = THINK BEAR FLAG
After the Bear BO it than usually converts into a TR
What does the Traders Equation = ?
Traders Equation = Risk + Reward + Probability
… All CLEAR? TAKE THE TRADE!
Once you think a Bull Trend is likely what must I the trader avoid at all costs?
Do not get Trapped Into Shorts
Do not get Trapped out of Longs
Once you think a Bull Trend is likely what must I the trader avoid at all costs?
Do not get Trapped Into Shorts
Do not get Trapped out of Longs
Once you think a Bear Trend is likely what must I the trader avoid at all costs?
Do not get Trapped Into Longs
Do not get Trapped out of Shorts
Once you think a Bear Trend is likely what must I the trader avoid at all costs?
Do not get Trapped Into Longs
Do not get Trapped out of Shorts
Every Bear Trend usually contains what?
Spike. and Channel
Every Bull Trend usually contains what?
Spike and Channel
What is one of the strongest Bear Trends?
Small PB Bear Trend
In general how much percentage does the first bar of the day have to be the HIGH or LOW of the day?
It has about a 20% chance of being the HIGH or LOW of the day
In a TR when it is about 20 to 30 Bars that have been printed inside the TR, what must I the trader assume?
I must assume that the market is now in BO mode
The First two BULL bars of the day after the GAP Up Open is enough to make me as the TRADER think the market is in a BULL TREND - AIL (Always In Long)
What does this mean for the potential high or low of the day?
This means that the bottom of this BO is probably the low of the day
What does a Bull Trend from the open tell me?
Sign of urgency, so usually strong trend
Sometimes becomes TR
Then, trend resumption (like here), or trend reversal
When I have a strong BO to start the day for an hour or so, it usually followed by what?
It is usually followed by the market going sideways for several hours
It then decided between a trend reversal or trend resumption
Trending TRs the Range usually doubles
So when the TR is broken what usually happens in a Trending TR market?
The market enters another TR
*Remember when I see a TR, think BO Mode
*20+ Bar TR = am equal 50/50% BO(Reversal or Resumption) in either direction
In a Trending TR what percentage is there for a Minor Reversal?
60% of a Minor Reversal
*Ranges often overlap, TRs usually goo beyond S/R, before reversing
Trending TRs can get 3 or More TRs
Explain this signs given in this chart that told me the market will continue up
Are Trending TRs other patterns?
Yes, they are always other patterns
Where do the Bulls take partial or full profits?
The Bulls take partial or full profits at new high
New High what will the Bears do?
The Bears will Sell for Scalps
As long as the market is making HHs and HLs
What should I do?
Buy reversals up from PBs that go down to middle 3rd of last leg up
Stairs are a Broad Channel but each BO is smaller
What does this mean for these Bear stairs?
Bears are less confident and taking profits sooner
Bulls a more confident and buying sooner
Usually the start of the transition into a TR
Stairs are a Broad Channel but each BO is smaller
What does this mean for these Bulls stairs?
Bulls are less confident and taking profits sooner
Bears a more confident and buying sooner
Usually the start of the transition into a TR
In a Broad Bear Channel as long as the market is making LHs and LLs
What should I the trader look to do?
Look to sell PB to middle oof last bear leg
In the Bear Trend with market-creating LHs and LLS what are the Bulls doing?
Bulls buy new lows for scalps
Some will scale in low (add to their long position)
Expand on what a Broad Channel is
Trend with Deep Pullbacks (PB)
Stairs pattern, every PB goes above BO point
Rallies often strong enough to reverse to AIL
Broad Bear Trend Channels many of the Bars are in a TR
TRUE or FALSE?
TRUE
Often unclear it is a TR or Broad Channel Trend
*When unclear, trade like TR, BLSHS
Broad Bear Channel as the trader what should I look to do?
Look to Sell
After several trending highs and lows, trend becomes clear
Consider swinging part of the position
Only scalp counter-trend positions
Every Bar gives new information so keep drawing lines
TRUE or FALSE
TRUE
Channels rarely exact
Have to keep redrawing
Look to sell reversals down from near top
Consider buying reversals up from near bottom
How should I trade Tight Channels?
Trade Tight Channels like a BO
It is difficult to know if a BO or Tight Channel
Therefore: Assume BO and trade like one
a Tight Channel is a BO on a Higher TF
If there is a BO on a higher TF how would that look on a 5-minute TF?
a BO on a higher TF is a tight channel on a lower TF
In a Tight Bear Channel Only look to sell
Why are these areas great Bear Entries?
PBs to top of Channel
PBs to top of Channel
80% of Reversals Fail and the Bears bet on that
Gaps are getting bigger so the Selling pressure is increasing and Bear Trend is strong
In a Tight Bull Channel Only look to buy
Why are these areas great Bull Entries?
PBs to bottom of Channel
80% of Reversals Fail and the Bulls bet on that
Gaps are getting bigger so the Buying pressure is increasing and Bull Trend is strong
Broad Bull Channel BLSHS
In this channel should I trade in both directions?
Yes, however since it is a Bull Broad Channel selling is optional
Look to Buy Low (BLSHS)
Is this a Tight or Broad Bull Channel?
Sometimes impossible to tell
When in doubt, only look to trade with the trend
If I cannot clearly distinguish if the channel is tight or broad than assume the channel is tight and trade with the trend
Is a Small PB Trend the strongest type of Trend?
Yes it is the strongest
It is also often contained in the…
Trend from Open,
Spike and Channel,
Trending TR
Small PB Trend has brief, small PBs
TRUE or FALSE?
TRUE
PBs less than half size of avg bar
Usually begins in 1st hr
Small PB Trend
On a higher TF it is a strong BO Trend
TRUE OR FALSE?
TRUE
When Gaps stay open (No Stairs) and the Trend is strong (Bears)
What is likely?
Also, explain this chart…
Lower Prices are likely
Sign of Strong Bear
Need to see some bull strength, therefore, Bulls don’t buy until gaps close
*You should not be looking to buy when there is still Body Gaps in this Bear Trend
In a strong Trend what usually happens to reversals?
Reversals will Fail and become Bull Flags
Usually bigger PN in final 2 hrs, 1 1/2 - 2 biggest prior
Trend Resumption into close
Small PB Trend can never have a Big PB
TRUE or FALSE
FALSE
Less often, bigger PB or Reversal into close
Can Strong Bull Trend still Reverse?
Yes it can, this chart shows that
Close below MA, MAG, 20 Gap Bar Buy
All Buy setups failed
Can a Strong Bear Trend still Reverse?
Yes, it can but it is Rare
This chart shows just that
Small PB Trend day can also be a tight Channel Trend
TRUE or FALSE
TRUE
Trends as they mature they tend to become weaker
Channels, as they mature, tend to become broader and flatter
FLATTER = LOOK at the chart image above, the slope of the new bigger channel is flatter than the slope of the first tight channel
Weak Bears get Trapped into Losing Shorts
How did the Weak Bears get Trapped here?
Traded against the Trend
PBs too small to make profit
Bears have tight stops so low risk
Low Risk = Low Probability
Small losses add up to big loss
Weak Bulls are too afraid and Get Trapped Out
State reasons why they get Trapped out
Weak Bulls too afraid to buy
Want a strong signal bar
Want PB so can use tight and have smaller risk
Don’t realize probability is very high IF using correct stop
Strong Bulls make a lot of Money
What are they doing in this strong Bull BO?
They know there is a high probability of profit
Buy for any reason
Put stop below bottom of Bull Leg
After each new high, raise (trail) stop, to below bottom of last bull leg
When Price stays above MA for 20 or more bars
What does the Bull do at the 1st PB to MA?
Bull buy 1st PB to MA
(20 Gap Bar Buy Setup) & 1st Close below MA
They also Buy Reversals up from MA
Support at MA - Market had a MA Gap Bar
What are the Bulls looking for at the MA?
Bulls look for 1st Bull Bar completely below MA
Moving Average Gap Bar (MAG)
Bulls must be careful because bears were strong enough to put entire bar below MA
Often final rally before TR
