Video 12 A, B & C: Market Cycle Flashcards
Market Cycle - Every Bull Chart is in 1 of 4 Pattern. What are they?
Breakout
Tight Bull Channel
Broad Bull Channel
Trading Range
Breakout Characteristics
No pullbacks, or just one pullback lasting 1-2 bars
Market quickly goes your way
Probability is high, but risk profile is back because your stop has to be at that start. Stop is far, so risk big.
Do not sell short
Bear Breakout Opposite
Tight Bull Channel Characteristics
Always in Long Most pullbacks only last 1-3 bars Stop is far, so risk is big. Probability of higher prices high Do not sell short Best to buy for swing, but scalp is ok. Tight Bear Channel Opposite
Broad Bull Channel Characteristics
Sometimes has bear legs, strong enough to reverse to Always in Short for some traders
Even strong bear leg stays above prior higher low.
If PB reaches about 2/3rds, probability for new high, is about the same for Lower Low.
Okay to sell new high for scalp
Best to buy pullbacks
On smaller time frame chart, contains Trading Ranges TR
Bear Channel Opposite
Trading Range Characteristics
When a pullback lasts 20+ or more bars
Market does not breakout and it will reverse.
Bull buy bottom third
Bears sell top third or breakout that may fail. 80% of breakouts fail.
Bulls and bears both scalp, so reward is small.
Bulls and bears are confused.
What happens as soon as Pullback?
Breakout phase of trend has ended
True or false: A bull flag is a bear channel?
True. No matter how strong the trend is. 75% chance the bull channel will have a bear breakout. And it will evolve into a trading range.
Why does Al talk about Bulls and Bears all of the time?
Because of the market cycle. he’s always talking about entries. Risk and Reward and how to structure a trade. Becuase there are entries on every bar if you understand what the market is doing.
Whenever you can loo at a chart and come up with a reasonable buyer setup and a reasonable sell setup. You have to assume the market is in a….
Trading Range
Define Inertia
The market continuing what it has been doing and resist change. What will the right do? What has the left done? 80% rule
As long as the bars are above the last major bull breakout….
The higher low is still a bull trend.
For a Bear Trend Reversal, you need….
Bull Reversal trend needs a strong bull BO, and follow through above MAJOR Lower-High (LH)
A LEG is how many bars?
1-10 Bars
Small Trend within trend, or TR
Usually smaller than swing
Pullback is smallest type of leg
A Trading Range (TR) becomes a neutral market and in breakout mode after how many bar?
After 20 bars. Probably in the resumption of the trend
True or False: Perfect setup, Perfect trades, Perfect entry are nonsense
True. Institutions are trading on every bar and every bar has potential and volume. Waiting for a perfect setup is nonsense. Institutions are buying and selling on every bar.
True or False: Do not trade in a tight trading range?
True
True or False: If you’re buying a Minor reversal in a bear trend, it’s better to only be scalping?
True
True or False: Only buy on strong bull breakout. Bulls can scalp or swing trade
True. Buy for any reason
How to Trade Broad Bull Channels
How to trade a Trading Range (TR)
Bulls will buy low
Bears will sell high
Both will scalp
