According to Al Brooks, what is the most important feature of a bull trend?
It needs to have higher lows.
According to Al Brooks, what is the most important feature of a bear trend?
It needs to have lower highs.
All trends, no matter how steep, are contained within _____.
channels
In a rising channel, what is the term for the bottom line?
The trend line (or bull trend line).
In a rising channel, what is the term Al Brooks uses for the top line?
The trend channel line.
When Al Brooks uses the word ‘trend’, what is he typically referring to?
A major trend, of which there are at most one or two on a chart at any time.
What does Al Brooks call smaller trends that are not major trends?
He usually refers to them as swings or legs.
What are the two key characteristics of a major higher low?
It has a very strong bull breakout and usually results in a new high.
In a bull trend, where is the correct location for a trader’s protective stop?
Below the bottom of the most recent major higher low.
Why is placing a stop below a minor higher low a bad strategy in a bull trend?
You will too often get stopped out before the market resumes its upward trend.
If the market falls below a major higher low, what has likely happened to the bull trend?
The bull trend has probably ended and converted into a trading range or a bear trend.
If the market falls below a minor higher low in a tight bull channel, what is the likely outcome for the trend?
The market is likely converting into a broader, flatter bull channel.
Why are higher lows considered more important than higher highs in a bull trend?
Because the higher lows determine where traders place their protective stops.
In a bear trend, where should a trader’s protective stop be placed?
Above the top of the most recent major lower high.
A two-legged pullback in a bear trend that goes above a minor lower high is often a _____.
low two short or double top bear flag
After a strong breakout to a new low in a bear trend, the prior peak becomes a _____ and a good location to move a stop to.
major lower high
A tight bear channel breakout, where the market breaks below the bottom of the channel, will reverse up what percentage of the time?
75% of the time.
What is the typical outcome of the first breakout of a tight channel (e.g., below a bear channel)?
It usually results in a minor reversal and a trading range, rather than a strong trend in the opposite direction.
Even if a broad bear channel has rallies strong enough to be considered ‘always in long’, the trend is likely to resume as long as what condition holds?
The rallies fail to get above a major lower high.
When a chart is not clearly in a bull or bear trend, you should assume it is in a _____.
trading range
What is the ‘80% rule’ as it applies to trends?
When a market is in a trend, it is constantly trying to reverse, but 80% of the reversal attempts will fail.
What is the ‘80% rule’ as it applies to trading ranges?
80% of breakout attempts from a trading range will fail.
What is a key hallmark of a trading range?
The market is not clear, and both bulls and bears have reasonable arguments.
Besides pullbacks, what other structures are considered small trading ranges within a larger trend?
Pauses in a trend.
