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Question 1

According to Al Brooks, what are the three distinct parts of a typical trading day?

Answer 1

The opening (first 1-2 hours), the midday (middle 2-3 hours), and the close (last 1-2 hours).

Question 2

Which two periods of the trading day are generally considered the easiest times to make money and best for swing trades?

Answer 2

The first one to two hours (the open) and the last one to two hours (the close).

Question 3

The midday portion of the trading day often exhibits what type of market behavior?

Answer 3

It tends to be a sideways trading range, causing many traders to be more cautious.

Question 4

What is Al Brooks’s view on the importance of trading volume in modern markets?

Answer 4

He believes it is not particularly important and does not use it to decide whether a trade is suitable, focusing instead on price action and trend.

Question 5

What are the only three things a market can do in terms of price action?

Answer 5

It can break out and form a trend (bull or bear), form a channel, or enter a trading range.

Question 6

What percentage of trading days do NOT exhibit a relentless, unchanging trend in one direction?

Answer 6

Approximately 90% of trading days.

Question 7

When the market transitions from a breakout to a channel, or a channel to a trading range, what must a trader do?

Answer 7

Traders must change their trading style to adapt to the new market behavior and maximize profit potential.

Question 8

A day that consists of only one type of price action is most commonly a _____ day.

Answer 8

trading range

Question 9

What is the probability that any strong rally or sell-off at the open will fail and reverse?

Answer 9

There is a 50% probability that it will fail and lead to a major reversal.

Question 10

When a small initial sell-off at the open reverses, what is the likely outcome for the rest of the day?

Answer 10

The day often becomes a very large bull trend day.

Question 11

When a very large initial sell-off (e.g., 50-100% of the Average Daily Range) reverses, what is the likely outcome?

Answer 11

The reversal typically leads to a trading range for the rest of the day, not a strong bull trend.

Question 12

What is the statistical probability that the high or low for the day has been established by the close of the 7th 5-minute bar?

Answer 12

There is a 50% probability.

Question 13

By the close of the 18th 5-minute bar (90 minutes into the day), what is the probability that the high or the low for the day has been set?

Answer 13

There is a 90% probability.

Question 14

A profitable swing trade in the E-mini S&P 500 is typically defined as a profit of at least how many points?

Answer 14

Four points or more.

Question 15

There is a 90% chance of a profitable swing trade beginning within the first _____ of the trading day.

Answer 15

two hours

Question 16

What is the most important rule for a trader, especially when trading the open?

Answer 16

A trader must be prepared for anything.

Question 17

For beginner traders, what type of order is recommended for entering trades?

Answer 17

Stop orders are recommended over limit orders or market orders.

Question 18

On a daily chart, the small wick at the bottom of a strong bull trend bar is created by what intraday action 90% of the time?

Answer 18

It is created by an early sell-off at the open that then reverses to the upside.

Question 19

On a daily chart, the small wick at the top of a strong bear trend bar is created by what intraday action 90% of the time?

Answer 19

It is created by an early rally at the open that then reverses to the downside.

Question 20

What are the three most common patterns traders often see at the open?

Answer 20

1. A trend from the open. 2. A breakout mode pattern. 3. An opening reversal.

Question 21

Term: Breakout Mode Pattern (Opening)

Answer 21

An early trading range where the market makes a new high and reverses down, and a new low and reverses up, setting up a breakout trade above the high or below the low.

Question 22

What are the key characteristics of a tight trading range, where limit order entries are more common?

Answer 22

Prominent tails on bars, frequent reversals every few bars, and significant bar overlap.

Question 23

What are the key characteristics of a broad trading range, where both stop and limit order entries can be used?

Answer 23

Wide swings with micro-channels, large bar bodies, and less overlap between bars.

Question 24

How does looking at the daily chart provide context for the current trading day?

Answer 24

The pattern of the preceding days (e.g., trend days, range days) indicates the probable behavior for the current day.

Question 25

If the daily chart shows many consecutive trend days in one direction, what should a trader anticipate?

Answer 25

The trader should anticipate an early test in the opposite direction (a pullback or reversal) to see if the trend is still strong.

Question 26

If the daily chart is in a tight trading range with many doji candles, what is the likely price action for the current day?

Answer 26

The day is likely to be another trading range day, with reversals from any strong moves back toward the open price.

Question 27

What is the statistical likelihood of a follow-through trend after a strong trend day (buy or sell climax) on the previous day?

Answer 27

There is a 50% chance of follow-through buying/selling within the first two hours.

Question 28

After a strong trend day, there's a 75% chance the market will trade _____ for at least two hours, starting before the end of the second hour.

Answer 28

sideways to in the opposite direction

Question 29

What is the probability that a strong trend day will be followed by a trend day in the opposite direction?

Answer 29

Only a 25% chance.

Question 30

A large gap up or down on the open is functionally a _____.

Answer 30

breakout

Question 31

If the market has a large gap up at the open and then forms two or three strong, consecutive bull bars, what is the likely outcome?

Answer 31

The day is unlikely to become a bear trend day; it will likely be either a bull trend day or a trading range day.

Question 32

If the market has a large gap down at the open and then forms two or three strong, consecutive bear bars, what is the likely outcome?

Answer 32

The day is unlikely to become a bull trend day; it will likely be either a bear trend day or a trading range day.

Question 33

What is a common pattern that forms after a large gap up and a subsequent sell-off?

Answer 33

The market often forms a double bottom or a wedge bull flag near the moving average before attempting to rally again.

Question 34

What is a common pattern that forms after a large gap down and a subsequent rally?

Answer 34

The market often forms a double top or a wedge bear flag near the moving average before attempting to sell off again.

Question 35

How do unfilled gaps from the previous day typically affect price action?

Answer 35

Unfilled gaps act as magnets, and the market will often attempt to close them.

Question 36

What is the defining characteristic of the 'Breakout Mode' pattern?

Answer 36

After the first bar, the market makes a new high then reverses down, and also makes a new low then reverses up.

Question 37

For a 'Breakout Mode' pattern to be reliable, it should ideally contain at least how many bars?

Answer 37

It should contain at least ten bars.

Question 38

For a 'Breakout Mode' pattern, the height of the opening range should ideally be what size relative to the average daily range?

Answer 38

It should be 50% of the average daily range or smaller.

Question 39

Once the market breaks out above the high or below the low of the 18-bar opening range, what is the probability it will reverse and break the other side of the range?

Answer 39

There is only a 10% chance it will reverse and break the opposite side of the range.

Question 40

When trading a breakout of the 18-bar range, traders anticipate a move of approximately what size?

Answer 40

A measured move, roughly equal to the height of the 18-bar range itself.

Question 41

If the market is approaching the 18-bar mark near the day's high, what trade will some traders look for?

Answer 41

They will look to sell a reversal down, betting against a breakout of the 18-bar range high.

Question 42

What is a common and high-probability setup when the market attempts to reverse a breakout above the previous day's high?

Answer 42

A second entry short, where the first attempt to reverse fails, and traders sell the second reversal signal.

Question 43

Why is a second entry signal often more reliable than a first entry signal for reversals?

Answer 43

The failure of the first signal traps counter-trend traders and confirms the strength of the original trend participants.

Question 44

If yesterday was a very small, quiet trading range day (an 'inside day'), what is more likely to happen today?

Answer 44

There is a greater chance of an 'outside day,' where the market trades both above yesterday's high and below yesterday's low.

Question 45

A reversal from a failed breakout below yesterday's low often forms what classic chart pattern before resuming its upward move?

Answer 45

A cup and handle pattern, where the reversal is the cup and the subsequent pullback is the handle.

Question 46

If a reversal attempt from a breakout above yesterday's high fails and turns into a bull flag, what should traders do?

Answer 46

They should exit any short positions and look to buy, as the bull trend is likely resuming.

Question 47

What percentage of the time will even a very strong opening trend experience at least a minor reversal (a pullback lasting 5-10 bars)?

Answer 47

80% of the time.

Question 48

A major reversal at the open implies a change from a _____ to a _____.

Answer 48

trend in one direction; trend in the opposite direction

Question 49

A minor reversal at the open often forms a _____ or a _____ before the original trend resumes.

Answer 49

trading range; flag pattern (bull or bear)

Question 50

If the market gaps far below the moving average, 80% of days will form one of what four patterns?

Answer 50

A double top bear flag, a wedge bear flag, a double bottom reversal, or a wedge bottom reversal.

Question 51

The first profitable swing trade of the day often comes from betting that the first strong move from the open will _____.

Answer 51

reverse

Question 52

After a strong breakout, what is a common setup for a second entry in the direction of the trend?

Answer 52

A pullback that forms a bull or bear flag, allowing traders who missed the initial breakout to enter.

Question 53

In a trading range, traders using limit orders often buy below the low of prior bars and sell above the high of prior bars, betting that all _____ will fail.

Answer 53

breakout attempts

Question 54

What does a series of bars with poor follow-through after a strong move (e.g., a big bull bar followed by dojis or bear bars) indicate?

Answer 54

It indicates that the move is likely a leg within a trading range, not the start of a new trend.

Question 55

What does Al Brooks mean when he says a day had 'two or more legs'?

Answer 55

The market moved in one direction for a period, had a significant pullback, and then moved in the same direction again.

Question 56

When a strong trend day finally enters a trading range for several hours, what are the two possibilities traders anticipate near the end of the day?

Answer 56

A trend resumption in the original direction or a major trend reversal in the opposite direction.

Question 57

What is a 'High 2' or 'Low 2' buy/sell setup?

Answer 57

It is a second attempt by the market to move up (High 2) or down (Low 2) after a pullback, often forming a flag pattern.

Question 58

A failed breakout of a wedge bottom, followed by a strong bull bar, is a high-probability setup for what?

Answer 58

A reversal to the upside, potentially establishing the low of the day.

Question 59

How can the 60-minute 20-bar exponential moving average be used on a 5-minute chart?

Answer 59

It can act as a significant support or resistance level for intraday reversals.

Question 60

A breakout that occurs late in the day after many hours of sideways movement has a higher probability of _____.

Answer 60

failing

Question 61

What does the term 'running the stops' refer to in the context of a breakout?

Answer 61

The market pushing just beyond a key high or low to trigger the protective stop orders of traders on the wrong side.

Question 62

A trend that begins with a gap up is considered a _____.

Answer 62

breakout

Question 63

After a large gap down, even if the day becomes a bull trend day, where is the first logical target for the rally?

Answer 63

The bottom of the gap (yesterday's low or close).

Question 64

A 'parabolic wedge' is a type of climax that signals what?

Answer 64

It signals that a trend is exhausted and is likely to lead to a significant pullback or reversal.

Question 65

In a strong trend, traders often look to enter on pullbacks. What is a common pullback depth?

Answer 65

A pullback to the 20-bar exponential moving average.

Question 66

Term: Trend From The Open

Answer 66

A day type where the market begins trending in one direction from the very first bar and experiences only minor pullbacks.

Question 67

When a trader 'fades' a move, what are they doing?

Answer 67

They are trading in the opposite direction of the most recent strong move, betting on a reversal.

Question 68

What is the key difference between a channel and a breakout?

Answer 68

A breakout is a very strong, steep move with little to no pullback, while a channel is a weaker trend with significant pullbacks and two-sided trading.

Question 69

If you see a strong sell-off at the open and then a strong bull reversal bar closing near its high, what should a trader in a short position do?

Answer 69

They should exit their short position and consider going long.

Question 70

A 'micro double top' is a reversal pattern that occurs over how many bars?

Answer 70

It is a small reversal pattern that forms over just a few bars.