According to Al Brooks, what is a breakout?
A breakout is simply a trend bar or a series of trend bars.
What is Al Brooks’ 80% Rule as it applies to trading ranges?
80% of the time, if the market is in a trading range, breakout attempts will fail.
What is Al Brooks’ 80% Rule as it applies to trends?
80% of the time, if the market is in a trend, reversal attempts will fail.
Al Brooks states that every reversal is also a _____.
breakout
Since most breakouts fail in a trading range, what is the general strategy traders should use?
Traders need to buy low, sell high, and scalp.
A breakout is always a move beyond some kind of _____ or _____.
support or resistance
What percentage of bars on a typical chart are in a strong breakout that actually has follow-through?
Only about 10% of the bars.
In a bull flag, what does a doji bar as the entry bar signal to the bulls?
It signals disappointment and that there are likely more sellers than buyers above the high of the bull flag.
What concept is the foundation for Al Brooks’ 80% Rule?
The concept that markets have inertia and tend to continue doing what they have been doing.
What do the tails on every bar represent?
Every tail on every bar is a failed breakout attempt.
In a trading range, how do smart bears often react to strong bull bars near the top of the range?
They look to sell, either on a reversal down or by selling the strong bull closes directly.
In a trading range, how do smart bulls often react to strong bear bars near the bottom of the range?
They look to buy, betting that the 80% rule will apply and the bear breakout will fail.
What is required for a breakout to be successful, instead of reversing in the next bar?
It needs follow-through.
What is the name for the bar that comes after the initial breakout bar and confirms its direction?
The follow-through bar.
A bear breakout followed by a big bull bar closing on its high is an example of what?
Terrible follow-through and a failed bear breakout.
In a strong bear trend, what do bears often do when a strong bull bar closes near the moving average?
They sell the close, betting that the trend reversal attempt will fail.
In a strong bull trend, what do bulls often do when a big bear bar closes near the moving average?
They buy the close, betting that the bears will not get a follow-through bar.
A series of bars where one side gives up, causing an acceleration, is known as a _____ bar.
give up
A breakout on a 15-minute chart that forms a tight micro-channel can be seen as what on a higher time frame chart?
It would simply be one, two, or three big trend bars closing on their highs.
What is the minimum objective for traders after any kind of breakout with follow-through?
A second leg in the direction of the breakout.
Why does a ‘surprise’ (low probability) breakout often lead to a second leg?
It traps traders on the wrong side, who then need a pullback to exit, fueling the second leg.
A very strong second leg down within a trading range is more likely a measuring gap or a second leg trap?
It is more likely a second leg trap, representing an exhaustion move.
For a trading range breakout to be successful, what are some key characteristics of the breakout bar?
It should be a big bar, close on its low (for a bear breakout), and close far below the trading range.
Why do pullbacks occur even in very strong trends?
Traders and computers take partial profits to reduce risk as their stop becomes far away.
