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I wonder if somebody is able to clarify something for me
( and thanks in advance )
I have been concentrating on learning about MTRs, but this situation keeps popping up and I am never quite sure how to handle it..
In this chart you are in a up trend ( yellow line )
That line breaks and you get a signal to sell for a MTR.
This is all good and well, and you get more than 10 bars, 2 legs, and twice the profit of what your loss would be.
The problem for me now though is... The downtrend part.
Al says you are in a trend until a major high ( or low ) is taken out.
On this chart I have drawn a red line where I think a major high could be classed as
( because you had good solid bear bars after it )
So according to that, this chart is STILL in a downtrend.
BUT... you also have a break of that downtrend line and possible MTR back up..
I have seen this situation so many times, and sometimes it will continue down, and sometimes it will do the MTR and go up..
My question is this..... Is this chart still classed as in a downtrend because we are below the red line, or is it classed as a MTR because we have broken that downtrend line and about to go up ( or sideways )
Maybe there is no definitive answer to this, and at the end of the days it just come down to experience ?
Thanks to anybody who reads and responds to this..
Hi Steve,
Actually one could argue the bear trend broke TL even earlier (purple line)
This happens all the time as a bear trend weakens and the channels become broader. But you can see after that break the market still tested to new LOD. So probably after your break it will also try to get back to new LOD. Unless the market finds support somewhere higher.
I think it's best to stick to Al's definition of a bear trend officially ending when a push goes above prior major LH.
Until there's been a strong BO in the reversed direction to make traders think a new trend has begun, I think it's best to follow the market cycle "BO-CH-TR" and expect a trading range after a trend. So even though your slide shows bulls becoming more assertive towards the end, there hasn't really been a strong bull spike. Best bulls made was a DT for now so probably a TR is in effect and one can still look for sell scalps.
Hope this helps,
CH
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Hi, and thanks very much for that reply,
Yep it does clear things up a lot.
In fact today ( Monday 8th Jan 2024 ) we had that exact same situation in the USD / CAD
It was in a uptrend
Broke that line and started a downtrend
And then that downtrend line itself was broken, and it looked like it was going to be a MTR and reverse up again.... BUT... it stayed below a major lower high and kept going down.
So yep... I'm starting to see now, that just because you have a trend line break, that does not mean it is a definitive MTR..
Thanks again for your reply.....
Hi there Steve. When I am not sure how far a trend can go as markets are always in some inertia, I look for MM targets and MM X 2 or X 3 while using most recent TR breakouts and major trading ranges that are a lot larger structures and like here on your chart, I found confluence which is 2R or MM X2 and this is where I look for major profit taking and side ways and reversal back to the prior TR test. I apply this technique to almost any chart to determine how far can price push before taking profit. Attached is the 4H USDCAD.
- BPA_BTC_Rose
Thank you Rose... Yes good advice....I need to start looking into measured moves a bit more..
I have watched all the videos on them, and need to start implementing them into my charts..
Also thanks W... that screen shot has given me something to think about too..
I was reading this. Thanks for the MM advice
When Al talks about a swing... Can a leg be classed as a swing ?
And is that leg considered finished, when you get a bar that closes below a previous bar ?
Or does a swing consist of multiple legs ?
This chart above shows a MTR on the GBP/ USD today ( Monday 22-1-24 )
It broke the trend line.. AND went above a major lower high, so I bought the first reversal up..
And then a good 2nd leg... But I was not sure whether or not to close it once there was a close below a previous bar.
At that time, it had not got to twice the risk, which is what we are told you need for this to be a positive traders equation. ( later in the day it went much higher )
I did not know what to do in this situation.... whether to close with a bit of profit, Or just leave it open and hope that twice your risk gets hit..
There is a 40% chance of a swing up... But I don't know if that means a 40% chance that twice your risk will get hit ?