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Hello everybody,
I started studying the course step by step, and taking notes from every session.
Recently Mr. Al Brooks says on "video-16e-channels" that "75% of the time, Channel Breakout will fail within 5 bars". This is the first rule.
The second rule that I found it conflicting with the first one, he always keep saying in many videos that: "My rule 75% of bull channel even if tight (strong) have a bear breakout"
How the first rule suggest BO fail, while the second rule suggest success BO?
I'd be grateful if anybody can clarify this for me and other students.
Can a strong BO not fail and satisfy the 1st rule? It sounds like you are classifying a BO as something that always has follow through and continues on with a trend in the direction of the BO. I'm no BTC ace, and I could be totally wrong, just my 2 cents.
75% of attempts to BO above the top of the bull channel, will fail, to be the start of an even stronger trend and restart the market cycle. and the market will pullback and the bears will attempt to reach the trendline or some prior Breakout point or Higher low, S/R etc.
75% of the time a tight bull channel will have a Bear BO below the trendline, etc. causing either the channel to be broader, and weaker. or maybe a Trading range. or less likely, the start of a bear trend. 25% of the time the market will Break Out above the tight bull channel and restart the market cycle. Breakout, Channel, then Trading range. (these probabilities shift to more neutral during the first hour of the day)
the first rule suggests 75% of attempts to Breakout above the top of the bull channel will fail (not be a Successful BO that leads to an even stronger trend above past the current channel. and will pull back below the top of the channel, so on so forth.
the 2nd rule of tight channels suggests, 75% of tight bull channels will have a Bear BO below the trendline. meaning 75% chance the tight channel will evolve into a weaker, broader channel (if it resumes) or transition into a TR. 25% chance you don't get a Bear BO below the tight channel, instead the market successfully BOs above the top of the tight bull channel and starts the market cycle over again. so 25% chance the tight bull channel will become even stronger, 75% chance it will become broader and weaken. not 75% it will reverse the trend.
this is not coming from Pro traders explanation or master of AL brooks price action to your question, I'm not at that level yet, so triple check that. but hope this helps
The first applies to a bull BO of a bull channel -- meaning, IF it bull BO of bull channel, then what is odds of success (conditional probability). Also noting he doesnt specify what 'success' means (i think).
The second rule is, if you are in a bull channel, before BO occurs, it is much more likely to do a bear BO than a bull BO. This is market cycle concept -- channel usually lead to TR instead of an even stronger trend.
