10 best price action trading patterns _ Brooks Trading Course

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There was a very strong reversal up in the middle of the chart, but the bears got one more new low.
Sometimes a new low can simply be a deep pullback from a strong rally, like here. Every Expanding
Triangle Bottom is also a lower low major trend reversal. There were many opportunities to buy above a
bull bar closing near its high.
Final �ags
The components of a final flag are
Trend
Pullback that is usually mostly horizontal. It can be as brief as a single bar
Trend is typically close to a magnet (resistance in a bull, support in a bear)
There are likely other signs of a possible reversal (in a bull, examples include
building selling pressure near the top of a channel)
A final flag is a trend reversal pattern that begins as a continuation pattern.
Traders expect the continuation to fail and are ready to take a trade in the
opposite direction.
Like all trend reversals, the probability of a swing is usually only about 40%. My
general goal is 10 bars 2 legs, which means a swing that has at least Ten Bars
and Two Legs (TBTL). A swing also means a reward that is at least twice as large
as the risk (my minimum criterion for a successful swing).
Sixty percent of the trades result in small wins and losses that usually balance
each other out. Traders who want a higher probability usually will wait for the
reversal to have a strong breakout in the new direction. At that point, the
probability of a swing trade is often 60% or more, but the stop is far away.
That increase in risk is the trade-off. There always has to be something in the
trade for the institution taking the other side of your trade. If you get great
probability, you pay for it with bad risk/reward (reduced reward relative to risk).
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A tight trading range late in a bear trend is often the Final Bear Flag.
Traders will look for the breakout below to reverse up.
A triangle is a tight trading range. When it forms late in a bull trend,
it usually is the Final Bull Flag.
Breakouts
Breakout of what? Of any support or resistance. It does not matter. Every trend
bar is a breakout of something, if only the high or low of the prior bar. With
experience, traders begin to see what is truly being broken out.
The most common things are trading ranges, pullbacks, prior highs and lows,
trend lines, channels, and moving averages. Sometimes traders need to switch to
a higher time frame to see the breakout.
Among the 10 best price action trading patterns, breakouts are my favorite
because I like high probability trades.
A breakout is simply a trend bar up or down. A breakout always closes beyond at least minor support or
resistance. The bigger the bar and the more important the support or resistance, the more likely the
trend will continue at least a little longer.
High 2 bull �ags and Low 2 bear �ags
Many traders find bar counting confusing because they want it to be perfect and
clear. What they don’t understand is that the purpose of the market is to create
confusion. It wants to spend as much time as possible at prices where both the
bulls and bears feel that the price is fair. This facilitates trading, which is the
reason why the market was created.
The basic idea of these flags is that the market often makes a couple attempts
to reverse a trend, which creates two legs. If those two reversals attempts fail,
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the market usually tries to go in the other direction. Since the other direction is a
trend and it is now resuming, the countertrend traders know they are in trouble
and will be quick to exit once that second attempt fails.
They will also not be eager to try again. The result is a high probability
continuation pattern trade that usually moves quickly. Traders often scalp these
setups, but when the trend is still strong, they can swing part or all of their
position.
The patterns are often nested, with a smaller version forming in each of the two
bigger legs. It does not matter whether a trader enters on the smaller version or
the larger, as long as they use the correct swing stop.
In a bear trend or a bear leg in a trading range, a one legged pullback (small rally) is a Low 1 sell setup.
If it triggers, but there is then one more leg in the pullback, it creates a
Low 2 bear flag. A Low 3 is either