17

Question 1

What is the simplest definition of a tight channel?

Answer 1

A channel where there is not much space between the trend line and the trend channel line.

Question 2

In a tight channel, what should be a trader’s directional bias?

Answer 2

Traders should only trade in the direction of the trend.

Question 3

A tight channel on one time frame is often what pattern on a higher time frame?

Answer 3

A breakout.

Question 4

Why is it difficult to make money shorting a tight bull channel?

Answer 4

The pullbacks are too small, making even limit order and scaling-in strategies unprofitable.

Question 5

If you find yourself repeatedly losing money selling with stops, you should assume the market is in a _____.

Answer 5

tight bull channel

Question 6

What defines a micro channel?

Answer 6

A series of bars with no pullbacks.

Question 7

In a bull micro channel, every bar’s low is at or _____ the low of the prior bar.

Answer 7

above

Question 8

In a bear micro channel, every bar’s high is at or _____ the high of the prior bar.

Answer 8

below

Question 9

What is one quantitative rule for identifying a tight channel based on bar size?

Answer 9

All pullbacks are less than twice the size of an average bar.

Question 10

What is another quantitative rule for identifying a tight channel based on scalp size?

Answer 10

All pullbacks are less than two to three times the size of the smallest scalp.

Question 11

In the E-mini, what is the smallest scalp size Al Brooks uses for his rule?

Answer 11

One point (four ticks).

Question 12

In Forex markets, what is the smallest scalp size Al Brooks recommends?

Answer 12

10 pips.

Question 13

Using the scalp size rule for Forex, a channel is considered tight if pullbacks are less than _____ pips.

Answer 13

20 to 30

Question 14

Why will you lose money trading against a tight channel even if you win on 70% of trades?

Answer 14

The losses on the losing trades will be significantly bigger than the wins.

Question 15

What ends a micro channel?

Answer 15

The first pullback.

Question 16

What is a ‘small pullback bull trend’?

Answer 16

A type of tight bull channel where the pullbacks are all small, lasting only one or two bars.

Question 17

Besides a small pullback trend, what are two other variations of a tight channel?

Answer 17

A parabolic wedge and a tight trading range.

Question 18

How is a tight trading range a type of tight channel?

Answer 18

It is a channel that is horizontal, or sideways, rather than trending.

Question 19

What is a parabolic wedge?

Answer 19

A type of tight channel characterized by three pushes, where the third push often fails and reverses.

Question 20

After a nine-bar bear micro channel, what is the most likely outcome for the bulls?

Answer 20

A trading range, not a bull trend reversal.

Question 21

In a small pullback bull trend, what is the correct placement for a protective stop?

Answer 21

Below the bottom of the most recent higher low.

Question 22

What is Al Brooks’ general rule for when a tight trading range is too small to trade?

Answer 22

When its height is not at least two to three times the smallest scalp AND two to three times the average bar height.

Question 23

In the E-mini, if the average bar is 6 ticks, what is the minimum required height for a tradable range?

Answer 23

At least 12 to 18 ticks tall.

Question 24

In Forex, what is the minimum height a trading range should be to consider scalping?

Answer 24

At least 20 to 30 pips tall.

Question 25

A micro channel can consist of as few as how many bars?

Answer 25

Two bars.

Question 26

What is the significance of drawing a micro trend line?

Answer 26

It highlights strong legs or trends that cover a few bars (typically 2 to 10).

Question 27

What is the likely outcome of the first reversal attempt against a strong micro channel?

Answer 27

It is likely to fail and be followed by another leg in the direction of the micro channel.

Question 28

After a bull micro channel, traders will look to buy the first reversal down, treating it as a _____.

Answer 28

bull flag

Question 29

After a bear micro channel, traders will look to sell the first reversal up, treating it as a _____.

Answer 29

bear flag

Question 30

What is one way to get an earlier entry when you spot a strong micro channel forming on your primary chart?

Answer 30

Switch to a smaller time frame chart (e.g., a 1-minute chart) to find an entry there.

Question 31

A strong breakout occurring early in a trend is more likely to be a _____ gap.

Answer 31

measuring

Question 32

What does a measuring gap imply?

Answer 32

It implies the market will likely have a measured move based on the height of the breakout.

Question 33

A strong breakout occurring 20 or more bars into a trend is more likely to be an _____ gap.

Answer 33

exhaustion

Question 34

What does an exhaustion gap imply?

Answer 34

It is likely the climactic end of the trend, usually followed by a trading range or reversal.

Question 35

A series of consecutive buy climaxes without a pullback suggests _____ bulls.

Answer 35

exhausted

Question 36

After an exhaustive buy climax, what is the minimum pullback traders should expect?

Answer 36

A pullback lasting about 10 bars and having at least two legs (sideways or down).

Question 37

In a very tight bear channel, any bull reversal attempt will probably become a _____.

Answer 37

bear flag

Question 38

What is a spike and channel bull trend?

Answer 38

A pattern with a strong initial breakout (spike) followed by a weaker, often parabolic, channel.

Question 39

After a spike and channel pattern, where does the market often test?

Answer 39

Near the bottom of the channel and the original breakout point.

Question 40

What signal indicates that bulls who bought the close of a rally are giving up?

Answer 40

A rally back to their entry price that immediately sells off, showing they are exiting at breakeven.

Question 41

What characterizes the pullbacks in a tight bull channel?

Answer 41

They are small, typically lasting only one or two bars, and do not fall far from the prior bar's low.

Question 42

What does Al Brooks mean by 'the gap stays open' when trading against a tight channel?

Answer 42

The market never returns to your initial entry price, resulting in a loss even when scaling in.

Question 43

On a higher time frame chart, a very tight channel appears as either a micro channel or a _____.

Answer 43

breakout with no pullbacks

Question 44

After a strong bear micro channel, why should traders not look to buy?

Answer 44

The best the bulls can hope for is a trading range, which is not profitable enough to risk buying into.

Question 45

In a small pullback bull trend, why do weak bulls often get trapped out?

Answer 45

They keep waiting for a significant pullback to buy, but the pullbacks never look good enough.

Question 46

What is one sign of a strong bull trend in a tight channel regarding the moving average?

Answer 46

Most bars are above the moving average, and the market stays above it for 20 or more bars.

Question 47

What is a key characteristic of the bars within a strong breakout or micro channel?

Answer 47

They are a series of trend bars closing at or near their highs (in a bull trend) or lows (in a bear trend).

Question 48

A breakout with consecutive big trend bars closing near their extremes suggests the trend is _____.

Answer 48

resuming

Question 49

What is a 'buy the close' bull trend?

Answer 49

A strong trend where bulls are so confident they buy at the market close of bars, expecting higher prices.

Question 50

The first reversal below a strong bull micro channel is often a _____ opportunity.

Answer 50

buying

Question 51

Why is it generally a low probability trade to buy above a bear bar, even within a bull flag?

Answer 51

The market could still attempt another leg down before resuming the bull trend, stopping you out.

Question 52

What is a higher probability buy entry in a bull flag, compared to buying above the first reversal bar?

Answer 52

A second entry buy, such as buying above a bull bar that forms after a failed second leg down.

Question 53

A breakout below a bull micro channel that fails, followed by a second failed attempt down, is a ____ probability buy setup.

Answer 53

higher

Question 54

What does a higher low major trend reversal pattern consist of?

Answer 54

A bear trend, followed by a bull breakout, and then a higher low.

Question 55

An unusually strong bull breakout late in a bull trend increases the chances of it being an _____ climax.

Answer 55

exhaustive buy

Question 56

What does a micro double top followed by several strong bear bars indicate?

Answer 56

Bulls are quickly giving up, and a deeper pullback or reversal is likely starting.

Question 57

What is a 'measuring gap' in the context of a breakout?

Answer 57

A strong breakout, often with gaps, that projects a measured move target.

Question 58

When a market reaches a measured move target projected from a measuring gap, what often happens?

Answer 58

The trend often pauses or reverses at or near that target.

Question 59

A breakout of a triangle with good follow-through indicates that the prior _____ is likely resuming.

Answer 59

trend