Quote from smilingsynic:
A few of the worthwhile ideas from Brooks include the following:
"The single most reliable Countertrend trade is entering Countertrend to a pullback which is
a small trend in the opposite direction of a major trend.
If a trader is becoming agitated because he is not in the market during an extended trend
and he feels like he needs to trade aned he begins to look at 1-minute charts, 1-minute
reversals offer a very profitable way to make money. However, it is by doing the opposite
of the obvious. Wait for a 1-minute reversal to trigger a Countertrend entry, which you do
not take, and then determine where you would place a protective stop if you had taken the
trade. Then, place a With Trend entry stop at that price. You will be stopped into a With
Trend position just as the Countertrend traders are getting stopped out. No one will be
looking to enter Countertrend at that point and likely not until the trend has moved further
along and another Countertrend setup begins to form. This is a very high probability With
Trend scalp.
Although the best reversals have strong momentum and go a long way they are often very slow
to start and can have several small bars before the sharp moves begin.
Typically, entries in trend pullbacks look bad but are profitable, and entries in reversals
look good but are losers.
Trends end with a reversal and then a test of the final trend extreme.
Any series of strong trend bars (big bodies, small tails, and very little overlap) that
is followed by a pullback almost always has a test of its extreme.
If a market forms a Double Bottom after a selloff, but before the bull takes off, and it then
has a pullback that tests just above the Double Bottom low, this is a Double Bottom Pullback
long setup
Trends often end with a test of the extreme, and the test often has two legs, each reaching a
greater extreme (a Higher High in a bull, or a Lower Low in a bear). The first extreme and then
the two legs make Three Pushes, which is a well recognized reversal setup with many names.
The majority of Three Push patterns reverse after overshooting a trend channel line,
and that alone is reason to enter, even if the actual shape is not a Wedge.
The salient point is that an expanding triangle is a series of progressively higher Higher highs and lower
lower lows that continue to trap breakout traders, and at some point they capitulate, and then all of the traders
are on the same side, creating a trend
Failures are often excellent setups for trades in the opposite direction, since the traders who were just forced out
will be hesitant to reenter in the same direction, making the market one-sided.
A one-tick failure is a reliable sign that the market is going the other way
Most days are trending range days and offer many entries on failed swing high and swing low breakouts.
You can also fade new swing highs and swing lows on trend days after a minor trendline break and when there
is a strong reversal bar
When price goes above a prior swing high and the momentum is not too strong, place an order to short
the Higher High at one tick below of the prior bar on a stop. If the order is not filled by the time the
bar closes, move the order up to one tick below the low of the bar that just closed. Continue to do this
until the current leg gets so high and has so much momentum that you need more price action before shorting.
All patterns fail, no matter how good they look. When they do, there will be trapped traders who will have
to exit with a loss, usually at one tick beyond the entry or scalp bars, and this is an excellent
opportunity for smart traders to enter for a low risk scalp. Place your entry stop at exactly the same place
that these trapped traders are placing their protective stops, and you will get in where they get out. They won't
be eager to enter again in their original direction, and this makes the market one sided in your direction and
should lead to at least a scalp and usually a two-legged move."
