Wisdom

“To take a trade, you must believe that the probability of success times the potential reward is greater than the probability of failure times the risk.”

Trading Price Action: Trading Ranges

“If you are looking at an equidistant move up and down, it hovers around 50 percent most of the time, which means that there is a 50–50 chance that the market will move up by X ticks before it moves down X ticks.”

Trading Price Action: Trading Ranges

“Mathematics dictates that your belief (that the strategy will be profitable when the probability is 60 percent) will be true only if the reward is at least as big as the risk.”

Trading Price Action: Trading Ranges

“A setup with a positive trader's equation. The trader has a mathematical advantage if he trades the setup. Edges are always small and fleeting because they need someone on the other side, and the market is filled with smart traders who won't allow an edge to be big and persistent.”

Trading Price Action: Trading Ranges

“A bar with no tail at either end in a strong trend is a sign of strength, and traders should enter with trend on its breakout.”

Trading Price Action: Trends · Fig 6.14

“As a trend wears on, the bulls typically will want deeper pullbacks before looking to buy again.”

Trading Price Action: Trends · Fig 6.14

“When the trend is this strong, you have to believe that the market will soon be higher.”

Trading Price Action: Trading Ranges · Fig 31.4

“Outside bars in new trends often trap traders out of great trades because they happen so quickly.”

Trading Price Action: Trends · Fig 6.14

“Doji bars are never good signal bars for shorts in strong bulls, but they are acceptable signal bars for shorts in trading ranges, depending on the context.”

Trading Price Action: Trends · Fig 6.14

“Small reversal bars are rarely good, and when one forms in a tight trading range, it should not be looked at as a reversal bar because there is nothing to reverse.”

Trading Price Action: Trends · Fig 6.14

“The market rarely reverses very far on the first attempt, especially when the signal bar has a close in the middle instead of at its low.”

Trading Price Action: Trends · Fig 6.14

“Second legs are often reversals.”

Trading Price Action: Trends · Fig 6.14

“A two-legged Lower Low is usually good for at least a scalp.”

Reading Price Charts Bar by Bar · Fig 1.18

“A bear spike can be a buying opportunity.”

Trading Price Action: Reversals · Fig 9.16

“Whenever there is a trading range just below the moving average, the odds favor a downside breakout.”

Trading Price Action: Trends · Fig 6.14

“A tight trading range below the moving average usually breaks out to the downside.”

Trading Price Action: Trends · Fig 6.14

“There are always sellers on any test of the moving average from below.”

Trading Price Action: Trends · Fig 6.14

“If you are going to take a trade in a tight trading range, you have to give it a little room.”

Trading Price Action: Trends · Fig 6.14

“All breakouts are spikes and climaxes.”

Trading Price Action: Trends · Fig 6.14

“A breakout spike often leads to a measured move down.”

Trading Price Action: Trends · Fig 6.14

“Whenever there is a strong spike down, it is usually followed by a measured move down based on some aspect of the spike, usually the distance from the open or high of the first bar to the close or low of the last bar of the spike.”

Trading Price Action: Trends · Fig 6.14

“When a climax occurs after a trend has been going on for many bars, the odds of a two-legged sideways to down correction lasting at least 10 bars increase.”

Trading Price Action: Trends · Fig 6.14

“A second consecutive buy climax usually results in at least a two-legged correction that penetrates the moving average and lasts at least an hour.”

Trading Price Action: Trends · Fig 6.14

“A second consecutive sell climax usually leads to at least a two-legged pullback.”

Trading Price Action: Trends · Fig 6.14

“The first pause in a strong trend is usually a successful short scalp, even in a strong bear trend, but it might become a final flag and lead to a correction up.”

Trading Price Action: Trends · Fig 6.14

“A moving average gap bar often leads to the final leg of the trend before the market has a larger pullback and even a reversal.”

Trading Price Action: Trends · Fig 6.14

“A bear channel should be thought of as a bull flag.”

Trading Price Action: Trends · Fig 6.14

“When a channel is strong, you should never scale in against the trend.”

Trading Price Action: Trading Ranges · Fig 31.4

“When the moving average is steeply up, traders will buy a pullback to the moving average and scale in lower.”

Trading Price Action: Trading Ranges · Fig 31.5

“When there is a possible reversal, many traders don't buy the first touch of the moving average. Instead, they will start to buy below the moving average.”

Trading Price Action: Trading Ranges · Fig 31.5

“Any trendline lasting about an hour or so is more significant.”

Reading Price Charts Bar by Bar · Fig 2.7

“Small trendlines in strong trends, even when drawn using adjacent bars, often have failure tests (failed breakouts) that set up good With Trend entries.”

Reading Price Charts Bar by Bar · Fig 2.7

“When bars are small doji bars, it is usually best to wait for bigger trend bars before taking more trades.”

Reading Price Charts Bar by Bar · Fig 2.7

“When the risk is greater, it is better to not take the trade and to wait for a strong setup.”

Trading Price Action: Trends · Fig 6.14