Reading Price Charts Bar by Bar: The Technical Analysis of Price Action for the Serious Trader

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John Wiley & Sons, Mar 23, 2009 - Business & Economics - 432 pages

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.

 

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Contents

Preface
xiii
Price Action 1
xxvii
Trend Bars and Doji Bars 7
xxxiii
Reversal Bars 13
xxxix
Outside Bars 36
lxii
The Importance of the Close of the Bar 42
lxviii
Late and Missed Entries 49
lxxv
Small Steep Trendlines in Strong Trends 55
lxxxi
Either an Undershoot
8-4
Double Top and Bottom Pullbacks 202
8-16
Three Pushes and Wedges Trend Channel Line
8-24
Failures 221
8-35
Failed Higher High and Lower Low Breakouts 229
9-7
Failed Reversals 239
9-17
Huge Trend Bar 245
9-23
FiveTick Failed Breakouts and Failure
9-29

Swing Points and Other Key Price Levels 61
lxxxvii
Intersecting Trendline and Trend
xciv
Two Legs 75
ci
Common Trend Patterns 81
3-2
CONTENTS
3-3
Trending Trading Range Days 88
3-9
Broad Channel Trend 95
3-16
Bar Minor Trendline EMA
3-22
EMA and Gap EMA Pullbacks 108
4-2
Counting the Legs of a Trend 114
4-8
Variations of HighLow 2 Setups 128
4-22
Trading Ranges
137
Middle of the Day Middle of the Range
148
Breakouts
155
Magnets
165
Contents ix
171
Trendline Break
184
Time Frames and Chart Types 258
9-36
Globex PreMarket PostMarket and Overnight Market 267
9-45
CONTENTS
9-51
Protective Stops and Getting Trapped In or
9-59
The First Hour 289
9-67
First or Second Bar 302
11-9
Third Bar of the Day and the 15Minute Close 310 Strong Trend Bars in the First Hour Often Predict Strength
311
Double Bottom and Double Top Flags
317
Detailed Day Trading Examples
325
Daily Weekly and Monthly Charts
331
Huge Volume Reversals
343
Best Trades
353
Minor Reversal Scalps during Trading Range Days
368
Intraday Stocks
374
Trading Guidelines
381
Glossary
395
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About the author (2009)

AL BROOKS is a technical analysis contributor to Futures magazine and an independent day trader. Changing careers from ophthalmology to trading twenty years ago, he discovered consistent success and profitability as a trader once he developed his unique approach to reading price charts. He graduated from the University of Chicago Pritzker School of Medicine and received his BS in mathematics with honors from Trinity College.

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