48b

Question 1

According to Al Brooks, what are the three parts that exist in every market’s cycle?

Answer 1

A bull trend, a bear trend, and a trading range.

Question 2

The behavior of the market tends to change after the initial one to three hours of the day, marking the end of the _____.

Answer 2

opening range

Question 3

What is the typical behavioral shift that traders must be prepared for after the opening range concludes?

Answer 3

A transition from a trend to a trading range, or a trend reversal.

Question 4

When the market is in a trading range, what is the primary trading strategy?

Answer 4

To scalp by buying low, selling high, and taking quick profits.

Question 5

Once the market begins to trend, what trading strategy should be employed?

Answer 5

Swing trading for a portion or all of the position.

Question 6

A wide bear channel often has periods where the market is technically always in what state?

Answer 6

A bull trend (during the pullbacks).

Question 7

What should a trader be prepared to do in response to the market changing its behavior during the day?

Answer 7

Transition to a different trading style appropriate for the new market behavior.

Question 8

What is the approximate percentage of trading days that start with a strong trend and continue in that trend all day without transitioning?

Answer 8

About 10%.

Question 9

On 90% of days that begin with a strong trend, what two outcomes are most likely to occur later in the day?

Answer 9

The market will either enter a trading range or reverse into an opposite trend.

Question 10

A very strong, steep trend that is likely unsustainable is known as a _____ move.

Answer 10

parabolic

Question 11

What is a common result of a series of buying or selling climaxes?

Answer 11

A reversal into a trading range or an opposite trend.

Question 12

What does poor follow-through after strong trend bars (e.g., a strong bull bar followed by a bear or doji bar) typically signify?

Answer 12

The market is in balance and is likely transitioning into a trading range.

Question 13

A trading range day must have at least one leg _____ and one leg _____.

Answer 13

up, down

Question 14

Even on a strong trend day, it is common for the market to enter a _____ sometime during the middle of the day.

Answer 14

trading range

Question 15

When a trend enters a trading range that lasts for about 5 to 10 bars, what is the probability of the original trend resuming?

Answer 15

Approximately 60%.

Question 16

Once a trading range continues for 20 or more bars, what happens to the probability of a breakout direction?

Answer 16

It drops to near 50/50 for a breakout up or down.

Question 17

How is a ‘small pullback bull trend’ characterized?

Answer 17

It has very small pullbacks, few and small bear bars, and gaps between bars.

Question 18

In a small pullback bull trend, the low of a bar often stays above the high of the prior signal bar, creating a _____.

Answer 18

gap

Question 19

What is a key difference between a small pullback bull trend and a bull leg in a trading range?

Answer 19

In a trading range bull leg, pullbacks are deep enough for bears to profit by selling, which is not the case in a strong trend.

Question 20

If pullbacks in an uptrend repeatedly break below prior breakout points, is it more likely a true bull trend or a bull leg in a trading range?

Answer 20

It is more likely a bull leg within a trading range.

Question 21

A trading day that trends up for the first half and trends down for the second half, without breaking the opening low, is best classified as what type of day?

Answer 21

A trading range day.

Question 22

A _____ is a pattern often found late in a bear trend, characterized by a weak rally before the trend resumes, and is often a final flag.

Answer 22

wedge bear flag

Question 23

The presence of many large bull bars within a broad bear channel suggests the channel is more likely to evolve into a ____.

Answer 23

trading range

Question 24

In a trading range, bulls often look to buy below prior lows, a strategy that relies on the failure of _____.

Answer 24

bear breakouts

Question 25

A _____ is a common reversal pattern that consists of a trend, a breakout, and then a higher low (for a bull reversal) or lower high (for a bear reversal).

Answer 25

major trend reversal

Question 26

When an exceptionally strong, climactic move occurs at the open, traders should be cautious of what two possibilities?

Answer 26

A trading range or a parabolic reversal.

Question 27

A parabolic move is often characterized by a series of three or more pushes, which can be identified as a ____.

Answer 27

wedge top

Question 28

After a parabolic buying climax, traders should expect at least a _____ bar correction, often with two legs.

Answer 28

ten

Question 29

When any bull trend is followed by a very narrow trading range, traders must consider the possibility of a _____ and a major trend reversal.

Answer 29

double top

Question 30

When a trading range becomes extremely narrow, what is the recommended action for most traders?

Answer 30

To stop trading, as it is difficult to make money even with scalps.

Question 31

In a narrow trading range, bulls taking profits near prior highs and bears selling near prior highs contributes to the continuation of the _____.

Answer 31

range-bound action

Question 32

A breakout from a long and narrow trading range often leads to a _____ move, which traders can swing trade.

Answer 32

measured

Question 33

If bulls swing trade a breakout from a range and the market pulls back slightly below the breakout point, where is a reasonable place for their stop loss?

Answer 33

Below the measured move target to the downside.

Question 34

What action indicates that the 'last bulls' have given up during a bear breakout from a trading range?

Answer 34

They exit their positions immediately rather than waiting for their stop loss to be hit.

Question 35

The last third of the day often begins with a _____ of the support or resistance established during the middle third of the day.

Answer 35

breakout

Question 36

What is Al Brooks' '80% Rule' as it applies to trends?

Answer 36

If the market is in a trend, 80% of reversal attempts will fail.

Question 37

What is Al Brooks' '80% Rule' as it applies to trading ranges?

Answer 37

If the market is in a trading range, 80% of breakout attempts will fail.

Question 38

During the middle third of the trading day, the market often tests a significant support or resistance level, such as the _____.

Answer 38

day's opening price

Question 39

The day's opening price often acts as a _____ for price, especially when the market has been trading in a range around it.

Answer 39

magnet

Question 40

If the market is above the open price for most of the day, the open acts as what?

Answer 40

Support.

Question 41

If the market is below the open price for most of the day, the open acts as what?

Answer 41

Resistance.

Question 42

What are the three possible outcomes after the market tests the opening price late in the day?

Answer 42

1. The trading range continues. 2. It reverses off the level, creating a trend day. 3. It breaks through the level, creating a trend day in the breakout direction.

Question 43

Large trend bars that appear during a trading range and move quickly toward a support level (like the open) might just be a _____ test, not the start of a new trend.

Answer 43

vacuum

Question 44

When traders are eager to buy at a support level, they may place limit orders slightly above the level, indicating what?

Answer 44

They are confident the support will hold and are afraid of missing the entry.

Question 45

A strong reversal up from a test of support often marks the end of the day's _____ and the beginning of the final third.

Answer 45

middle third

Question 46

If a trader buys a reversal up from a support level, where is an aggressive but logical place for a stop loss?

Answer 46

Below the low of the reversal, betting that the low of the day has been made.

Question 47

A more conservative stop loss placement when buying a reversal would be below the _____ of the initial bull reversal pattern.

Answer 47

bottom

Question 48

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

Answer 48

A signal that occurs after a two-legged pullback within a trend.

Question 49

For traders seeking higher probability entries, what is a sign of confirmation that a new trend is underway?

Answer 49

Seeing three or four consecutive trend bars closing near their extremes.

Question 50

A _____ that forms late in a bull trend is often the final bull flag before a reversal or significant pullback.

Answer 50

triangle

Question 51

What other factors can act as 'magnets' for price, similar to the day's open?

Answer 51

Big round numbers, measured move targets, or the apex of a triangle.

Question 52

A day that trends up for most of the session but sells off in the final hour to close near the open will form what kind of bar on the daily chart?

Answer 52

A doji candlestick (or a bar with prominent wicks/tails).

Question 53

When trading, there is always a tradeoff between high _____ and favorable risk/reward.

Answer 53

probability

Question 54

Higher probability setups, like waiting for strong breakout confirmation, usually involve a wider stop, which means greater _____ and a poorer risk/reward ratio.

Answer 54

risk

Question 55

If you believe with at least 60% certainty that the market is in a bear trend, what should you do?

Answer 55

You must sell at least a small position.

Question 56

A large bear trend bar breaking below a tight channel can be interpreted as a climax, which increases the chance of a _____.

Answer 56

rally

Question 57

In a bear trend, a strong bull reversal bar that is the largest bar in the last 15 bars can be viewed as a bad _____ signal bar.

Answer 57

sell

Question 58

After a bear trend, a bull breakout followed by a higher low is a setup for a _____.

Answer 58

major trend reversal

Question 59

Although the probability of a major trend reversal setup succeeding is never 60%, a strong setup can have a probability approaching _____.

Answer 59

0.5

Question 60

When entering on a major trend reversal setup, a trader who waits for a strong breakout and follow-through is trading for higher _____, but at a worse price.

Answer 60

probability

Question 61

The middle of the day is often characterized by a transition, where an opening trend becomes a ____.

Answer 61

trading range

Question 62

What is the primary decision a trader must make about an initial trend at the market open?

Answer 62

Whether it's the start of a major trend day or just one leg of an eventual trading range.

Question 63

In a potential major trend reversal, the pattern can be described as a _____, which is a type of double bottom or double top with a higher low or lower high.

Answer 63

wedge

Question 64

For traders who prefer to buy pullbacks, a test of the _____ is a common entry point once a new trend has been established.

Answer 64

20-bar exponential moving average

Question 65

When a market has a strong breakout, traders often _____ their stops to lock in profits.

Answer 65

trail