All language subtitles for Video 01 Terminology_xxl_large2_sub

This is Al Brooks.

Thank you for watching the Brooks Trading
Course.

This is the first video
in the course, and in

this video I will talk
about basic terminology.

If you are already
familiar with the terms that

I use, you can go ahead
and skip this video.

All traders often use words that can be
very unclear, and for definitions you can

go to my website, brookstradingcourse.com,
and there is a glossary there.

For example, throughout the video course I
will be using abbreviations on different

slides, and these are some of the common
ones that you will see.

Always in long, always in short,
buy, buy low, sell high, scalp,

breakout, the close of a bar, double
bottom, double top.

When you hear me talk about
a moving average, I'm talking

about a 20 bar exponential
moving average, or an EMA.

Then the high of the bar, HFT,
high frequency trading.

When you see me use HH, I'm talking about
a higher high.

Low is L.

A lower low, a low that is below a prior
low, is a lower low.

When I say moving average, that's the same
as the exponential moving average,

except rarely I will talk about some
simple moving averages.

When I do, I'll explain it.

Moving average gap bar, when
there's a bar where there's a

gap between the low or high of
the bar in the moving average.

Measured move, I talk about this in every
video.

Major trend reversal, MTR, I talk about
that in almost every video.

Open of the day, pullback, PB,
I refer to that in almost every video.

Sell, and then when I talk about
corrections, especially after a climax or

when I'm expecting a reversal,
you'll often see me use the phrase TBTL,

10 bars, 2 legs, which is a common occurrence
when the market is trying to correct.

Trading range, TR, and
when the trading range is

particularly tight, I call
it a tight trading range, TTR.

Every market at all times is either in a
trend or in a trading range.

A bull trend typically begins with a bull
breakout, which is a big bull trend bar,

a white bar.

Bear bars are black bars, and here the bar
opens at this point at the bottom of the

white box, and that is the close of the
white box.

After the breakout, which can last many
bars, here it lasted a couple bars,

there is a pullback where a low of a bar
goes below the low of the prior bar,

and that usually results in a transition
from the breakout phase of a trend,

which is very strong, into a channel phase
of the trend.

And a channel is a weaker trend,
but it's still a bull trend.

We're still going up, we have highs that
are above prior highs, we have higher

highs, and we have higher lows,
and that is the definition of a trend.

Eventually, a channel typically evolves
into a trading range.

So I view a bull channel as a bear flag,
because most of the time you get a bear

breakout and a transition into a trading
range.

And once the market's in a
trading range, it then is in

breakout mode, which means
traders are anticipating a breakout.

And here we have a bull trend in a trading
range, the breakout can be to the upside,

in which case you're getting a resumption
of the prior bull trend, or it could be to

the downside, and you can get a reversal
of the bull trend.

You'll often hear traders talk about
support and resistance.

Support is some price
below the current price,

where a sell-off is
likely to pause or reverse.

So even though you don't see anything
right here that is causing the market to

go up, the market believes this price is
too low, so when it gets down here,

the market goes up.

Here we're a little bit lower,
but the same general area.

There's support down here, every sell-off
is being bought.

And resistance is the opposite.

It's a price above the
current price, and a rally

to that level is likely
to stall or reverse.

On the chart, you don't
see a line drawn across a

resistance level, but you
notice the price action.

The market goes up and it turns down.

It goes up to that same general price
area, turns down.

It goes a little bit higher and twice
tries to go higher, and it turns down.

Traders see this price level as
resistance, and they expect that if the

market gets back up there again,
it'll do what it did the prior times.

Not always, but most of the time.

A breakout is simply a move beyond support
or resistance.

A bear breakout is a move below support.

Here we have a bull
channel, higher lows, higher

highs, and then we have
a break below the line.

This is a big bear trend bar, and it is a
breakout.

It's a move below support.

There's other support down here,
and the market broke through support here.

Here it did not.

It kept holding support, holding support.

Eventually it broke out, and now it's
testing the next lower support level,

which is a prior low, and we don't know
yet if it will continue down and break

below that support or bounce at that
support.

When the market was at this price level
earlier, it rallied.

Maybe it will do that again now that it's
at that same price level.

And it did.

The support held, and a strong bear breakout
led to a bounce instead of a bear trend.

Every bear trend bar is a breakout.

Every bull trend bar is a breakout.

It's a bull breakout.

We're reversing up.

You can also say that
we're breaking out,

breaking out of a very
steep two-bar bear trend.

And we're stalling here, a
smaller bar with a tail on top at

a price level where the market
stalled repeatedly earlier.

So we're stalling at resistance.

We don't know yet if
the market will reverse

down from resistance
or if it will break out.

In this particular case,
we broke far above the

resistance level, and we
had follow-through buying.

So this is a successful bull breakout
after a failed bear breakout.

This type of chart is a candle chart.

I sometimes refer to each candle as a bar
instead of a candle.

And you'll see on a lot of the bars,
there's a black line on top.

Sometimes there's a black line on the
bottom.

And white bars can have black lines on the
bottom or on top.

Black bars can have black lines on the
bottom or on top.

They can have them on top and bottom.

Here's a black bar
with a line on top and

bottom, a white bar with
a line on top or bottom.

And I usually refer to those black lines
as tails.

Other people refer to them as wicks or
shadows.

It doesn't matter.

I just like the word tail.

A bar where there is either a big white
box or a big black box is a trend bar.

It occurs more commonly in trends.

And I call it a trend bar because it's a
one bar trend.

So the market is trending up for this one
bar.

Open nearest low, close nearest high.

In general, the strongest trend bars have
relatively small tails.

Sometimes they have big tails like that,
but it's still a bull trend bar.

It's mostly a bull trend bar.

And if the tails are more
prominent relative to the size

of the bodies, I tend to
say that's not a trend bar.

It's more of a trading range bar.

And I refer to trading range bars as
doji's.

Trading range bars in general have smaller
bodies and more prominent tails.

I view them as a one bar trading range.

And on some smaller time frame chart,
they are one bar trading ranges.

A bull trend bar is a one bar bull trend.

And on a smaller time frame chart,
it's a pretty strong bull trend.

And a trading range bar or doji is a
trading range on a smaller time frame chart.

I make decisions on
what I'm going to do with

my trading based upon
technical analysis.

A lot of institutions prefer fundamental
analysis.

Technical analysis, I'm looking at charts
that show prices.

And the price action is how the price
moves.

How is the price acting?

How is it going up, going down,
going sideways?

How much momentum?

How strong are the moves up and down?

Fundamental analysis, it's mostly used by
institutions.

And they are looking at economic
information.

And they mostly ignore charts,
but not entirely.

A lot of fundamental
traders will say, ah, the

fundamental information
supports higher prices.

And anytime the market sells off,
if it pulls back to some support level,

like a moving average or prior low,
they'll look to buy more.

In their mind, they're making the decision
based upon fundamental information,

betting that the bear reversal will fail.

So a lot of fundamental traders also look
at charts.

Sometimes you'll hear the expression,
an ABC pullback.

For example, let's say an ABC pullback in
a bull trend.

It's two legs sideways to down.

It doesn't always have to be down.

It can simply be sideways.

And in a bull trend, I refer to those as a
high two buy setup or a high two bull flag.

And it's an opportunity for traders to
buy, to get long.

So for example, we have a little bull
trend.

Bull trend started here.

We have a new bull leg here.

We pulled back.

We tried to resume up.

It failed.

Maybe a second attempt will be successful.

This is a high one buy setup.

It did not work.

And this bar is a high two buy setup.

And it did work.

Buying above its high led to a profitable
trade.

Some traders would also call that an ABC
pullback.

So you have a bull trend and then A,
B, C.

A three-legged correction, two legs down,
one leg up.

A leg down, B leg up, C leg down,
and then bull trend resumption.

And traders would buy using a stop order
above the high of the bar.

Here's another example.

Bull breakout, a pullback, did not lead to
much of a trend.

To me, this is a high one bull flag.

I would refer to this as a high two bull
flag.

If this breakout were bigger, I would
restart the count.

For example, here we have a pretty big
bull breakout.

This correction has to do with this bar,
not with this prior trend.

So I'm starting the process over again.

New breakout, new pullback.

This breakout is not big enough for me to
start the process over again.

You could call it a high one.

You could say this is a breakout and a
pullback.

Or you could say, well, maybe the market
corrected down and maybe this is still

part of the correction and this is part of
the correction.

This is an A, B, C, where A
went above the top of the bull

breakout, but it's still
part of the corrective process.

And that's why I say it can be sideways to
down, not necessarily down.

This one was a little bit down, mostly
sideways, but this one clearly is sideways.

Here's another bull breakout.

I'm looking for pullbacks.

This is an inside bar, but it has a bare
body on a small time frame.

That's a small pullback.

On this chart, it's technically not a
pullback because the low of this bar did

not go below the low of that bar,
but it's an inside bar.

It's a pause.

For me, that's a high one bull flag and
bulls will buy just above its high,

looking for resumption up.

In general, they'll put a stop down here
because sometimes the market will go

sideways and then slightly lower,
but this trade is still valid.

For me, this is a bull trend and a
pullback, a high one buy setup.

Is this enough of a
breakout for me to restart

the count and call
this another high one?

You can.

I would say that it's
not big enough, and I would

say this is all part
of the same correction.

To me, this would be a high one,
a first attempt up, did not get very far,

and this would be a high two
buy setup, and traders would

buy above the high of that bar
or above the high of this bar.

Any time the market forms a double bottom
bull flag, it's a high two buy setup.

In a bear trend, traders are looking for
the exact opposite.

Here's a bear trend, and any
time there is a pullback or

a pause, traders look at it
as an opportunity to go short.

The high of this bar did not go above the
high of this bar, so it's technically not

a pullback on this timeframe, but it probably
is a pullback on a smaller timeframe.

In any case, it's a pause, and traders
will place a stop order to go short just

below the low of this
bar, betting that if it does

go below that bar, the
trend will resume down.

Here, it simply went sideways,
and here's a second attempt to go down.

For me, this is a low one short,
and then we have a double top bear flag.

That's a low two short, so you either sell
there or you sell below this bar here.

Low one bear flag, low two bear flag.

Same thing here.

As the market's going up
after each bar, traders place

a stop order to go short
just below the low of the bar.

They place a stop order when this bar closes
to sell right below the low of the bar.

They get filled here.

It's still going up.

It's still correcting, but it's still most
likely a minor reversal and a bear flag.

Traders who did not
sell here, they might

instead place an order
to sell below this bar.

It does not get filled.

They then place an order to sell below
this bar.

It does get filled.

So a second entry short in a rally in a
bear trend.

It's a low two short, a low two bear flag,
an ABC bear flag.

A-B-C.

There are always other ways to label
things.

Some traders instead will look at this as
a larger low one, a sideways move low one,

and then this is part of that correcting
process.

And then a low two with a second leg also
subdivided.

They'll look at this as sideways to a low
one and then up to a low two.

So they'll view this as a larger low two
bear flag or a larger double top bear flag.

First top, second top.

It doesn't matter what you call it.

You're looking for ways to enter the
trend.

And when you see these bear flags,
look to sell.

This is a fairly tight bear channel.

The first reversal is probably minor.

A minor reversal is going to be usually a
bear leg in a trading range or a bear flag.

We got a bear trend.

We're trying to reverse, probably a minor
reversal.

I call it a pullback.

Whenever I see a reversal
attempt and I think it will not

get very far and the trend
will resume, I call it a pullback.

That last slide I showed a minor reversal.

And look at this reversal, bear trend,
and a very strong bull breakout.

Follow-through bar, another follow-through
bar.

So at this point, we're in a bull trend.

Here, this is a major reversal,
not just a bear flag.

Here, minor reversal, bear flag.

Here, minor reversal, bear flag.

Minor reversal, bear flag.

But look at the size of this breakout,
far above the bear channel.

This is a major trend reversal, which means
the bear trend is becoming a bull trend.

Now, look at this.

We have a bull trend here and then a bear
breakout to a broader bull channel.

But you can look at this and say,
bull trend, pretty strong bear breakout.

If we go above that high
or test that high, maybe

we'll get a trend
reversal into a bear trend.

And that's what we have.

We have a bull trend and then a bear
trend.

If a bull trend goes to a bear trend,
it's a major reversal.

If a bull trend just goes sideways and the
bull trend resumes, it's a minor reversal.

Even this is a minor reversal because the
bull trend resumed.

So minor reversal, the trend resumes and
instead of reversing.

Sometimes you'll see a bar like this.

It's low is below the low of the prior
bar.

It's high is above the high of the prior
bar.

That is an outside bar.

It does not have to be below.

I call it an outside bar if the high is
exactly at the high of the prior bar.

And the low goes below the low of the
prior bar.

For example, over here, this bar did not
go above that high.

The two highs are at the same price,
yet it's low went below.

I would still call that an outside down
bar, an outside bar.

And an inside bar is
a bar where it's high

and low are within the
range of the prior bar.

This bar, the low is above that low.

The high is below that high.

So this black bar is an inside bar.

And look at the next bar, this white bull
body, it's inside of the black bar.

It's high is below that high, and it's low
is above that low.

Same here, another inside bar.

This bar is inside that bar.

This bar is inside that bar.

A small inside bar here.

Here's an inside bar.

The high is the same as that high,
but the low is above that low.

So I would still refer to that as an
inside bar.

That's why I say for an outside bar,
the high is at or above the high of the

prior bar, and the low is at or below the
low of the prior bar.

And an inside bar, the high
is at or below the high of the

prior bar, and the low is at or
above the low of the prior bar.

An outside bar here, outside bar here, and
this is actually an outside bar as well.

It's low was below the low of that bar.

It's high was above the high of this bar.

Here's the Australian dollar versus the U
.S.

dollar, a five-minute chart, forex chart.

I distinguish trades into swing trades and
scalps.

A scalp means that I'm trying to take a
quick profit.

I usually exit within five bars and
sometimes just one bar.

A swing trade means I'm
planning to hold onto my

position as long as the
trend is going in my direction.

Let's look at this chart and let's talk
about buying here.

If I buy above the high of this bar, I
get filled right here just above that high.

And let's say I get out four or five bars
later below the spare bar, right where

this red box is, right below the low of
that bar.

To me, that's a scalp.

I did not allow any pullbacks.

I got out within one,
two, three, four, five bars,

and it did not matter to
me that the trend continued.

If I buy here and get
out a few bars later

and did not allow
pullbacks, that's a scalp.

On the other hand, what happens if I exit
up here or up here?

If I'm exiting up here at the end of the
session, to me that's a swing trade.

So I buy here.

I don't worry about the pullback here or
here or here or here or here.

None of these look like major reversals.

I'm willing to continue to hold despite
all of the pullbacks.

And then I look to exit at the end of the
session.

If you're holding through pullbacks and
for a lot of bars, that is a swing trade.

That last chart was a five-minute chart,
and here is a daily chart.

There are other terms to use
when talking about scalping and

swing trading on higher time
frame charts, daily or weekly charts.

So for example, let's say a bull trader
bought here and he got out here.

He's a scalper.

You might call him a fast money trader or
simply a trader.

And if you get out here
and this was a monthly

chart, people would
call him an investor.

If it was a weekly chart, they might call
him an investor.

To me, I would call him a swing trader
even on this chart.

But in general, if you're taking quick
profits on a daily chart, traders will

call you a trader or a fast money trader
or a scalper.

But usually they use the term trader.

And if a person is holding for a long
time, 20, 30, 40 bars, you start to get

into the realm of being an investor,
especially if it's a weekly or monthly chart.

Some swing traders
will hold far beyond a

typical swing, which
might be 10, 20 or 30 bars.

They may hold
indefinitely, sometimes for

years or months, and
that would be an investor.

People would use the term investor instead
of swing trader for that kind of a person.

If you look at a
chart, you see the market

going up and down, up
and down, up and down.

And the smallest move up or down on a
chart is a tick.

So if it goes up one move, it's called a
tick.

If it goes up three or four, it's called
three or four ticks.

If you're looking at a Forex
chart, people tend to use

the term pip instead of a
tick, but it's the same thing.

And nowadays, pips are also subdivided
into tenths or even hundredths,

but I just refer to pips and I don't worry
about the tiny, small divisions.

A point is a group of ticks or pips.

So for example, one point on the E-mini
chart is four ticks.

A corresponding move on the SPY,
S-P-Y, ETF chart is 10 ticks.

You'll sometimes hear traders talk about
the lot size.

I traded five lots,
which means you traded five

contracts or five shares or
five units or five something.

And a handle is a big round number.

So if the SPY is trading at 202.50,
you would say it has a 202 handle on it.

When I talk about moving averages,
I'm usually talking about a 20-bar

exponential moving average.

Whether it's a five-minute chart or a
month chart, it doesn't matter.

If you hear me say moving
average and I don't qualify it,

I'm talking about a 20-bar
exponential moving average.

Some people refer to it as an EMA,
exponential moving average.

I simply call it a moving average.

This moving average is a 20-bar
exponential moving average.

Computers, you cannot get around the
reality that they control all major markets.

Most trading nowadays is automated.

That means the orders are placed by
computers and software programs,

which are called algorithms, are making
decisions about when to buy, when to sell,

when to add on to positions, when to
slightly reduce positions.

Here's an example of a flowchart of an
algorithm.

You'll sometimes hear me talk about an
institution, Bank of America, CalPERS,

the pension fund for state
employees in California, Fidelity

Investments, those are all
institutions, Goldman Sachs.

An institution could be a bank,
it could be a hedge fund, a high-frequency

trading firm, a pension fund like CalPERS,
mutual funds like Fidelity, any large

entity is an institution, and that
includes large individual traders.

So, for example, the smallest position
size in the e-mini is one contract.

If a trader is trading 100 contracts or
200 contracts or more, I would consider

them to be as significant
as an institution,

even if they're trading
for their own account.

You'll often hear me talk about setups,
and it's a chart pattern, it's something

on the chart, and it makes me believe that
there will be a profitable trade.

Sometimes the setup is one bar,
sometimes it's three or four bars,

sometimes it's 20 or 30 bars.

So, for example, we have a bull trend,
and it's pulling back for a few bars,

and as it's pulling back,
traders are placing buy stops one

tick above the high of the
prior bar, did not get filled.

A new bar closes, they place a buy stop one
tick or one pip above the high of that bar.

And in this case, the trader did get
filled.

This is the bar when they
enter their trade, so it's the

entry bar, and this is the
bar that signaled the entry.

When they saw this bar,
they thought, huh, if it

goes above the high of
this bar, I want to get long.

This is the signal bar, and traders get in
on the entry bar.

The signal bar is the reason to take the
trade.

It's the signal to look to enter.

So here's the signal bar.

We're with the trend, we're trading in the
direction of the trend.

Buying above this bar is buying with
trend.

Counter trend means doing the opposite.

For example, we have a bull
trend, and if I'm selling

below that bar right here,
it's a counter trend trade.

So I'm trading in the direction opposite
to the trend.

Context, you'll often hear me talk about
context.

Is it a buy setup or a sell setup?

I'm always interested in the context,
and context means all the bars to the left.

If I see this bar, I want to know what
took place before it.

Do I want to buy here?

Maybe it's better to sell here.

I want to know what the bars to the left
look like, and those bars to the left

provide the context.

So for example, if there's a strong bear
trend, do I really want to be buying here?

No, it's a bull reversal bar.

It's a buy signal, but it's a buy signal
that I would not take.

If anything, I'm looking to sell.

When there's a very tight bear channel
like this, I don't care if there's a good

bull reversal bar and a good
follow-through bar.

It's more likely the
reversal will fail, and

this bull reversal will
end up as a bear flag.

This is a low one sell signal bar.

Traders will sell just below its low,
expecting the reversal to fail,

become a bear flag, and for the bear trend
to resume.

I often talk about always in.

That is the direction of the current
trade.

For example, here I would say the market's
always in long.

So if I had to be in the market this
instant, would I rather be long or short?

If I had to be always in
the market at this point, I

would be long because odds
are the market's going higher.

In a bear trend, the market's always in
short.

At this moment, do I want to be long or
short?

If I had to be in the market this instant,
if I had to be always in the market and

it's right at this instant, I want to be
short.

The market's always in short here, and
somewhere in here it became always in long.

Traders thought it was better to be long,
easier to make money being long than short.

I pay attention to context.

The context here is that we're in a bear
trend.

We're getting lower highs and lower lows.

We're starting to get a lot of two-sided
trading, tails below bars, some bull bars,

smaller bars, sideways bars.

It's still always in short, but it looks
like it's evolving into a trading range,

which means that it may soon reverse into
always in long.

Three big bear bars, a
bear channel with about

eight or 10 bars, but tail
on the bottom of the bar.

That's weakening, a weakening trend.

Another big bear breakout, but a big tail
below.

And the close of this bar, the bottom of
that black box, is above the breakout point.

There are problems with this bear trend.

Another breakout, a close just around the
breakout point instead of far below.

Bulls are buying prior lows and they're
making money.

And that usually means
that a bear channel is

in the process of evolving
into a trading range.

And once it's in a trading range, traders
will start to look for trend reversals.

So we have a fairly tight bear channel and
we have a bull trend bar breaking above

the high of the channel, breaking above
the top of the channel.

Trend lines are rarely perfect.

You can see I'm using this high and then
this series of highs.

The market looks like
it's turning down every

time it hits an imaginary
line at that point.

I would extend the line from here all the
way here.

I could draw it from this
high across that high, or I

could simply use a small
trend line from here to here.

In any case, we're getting a bull breakout
of a bear channel.

And that means traders will start looking
for possible trend reversals.

So we have a low here, we reversed up.

We have a lower low, we reversed up.

And here the bears are trying to resume
back down, but this is forming a higher low.

This setup, this buy setup here, is
called a higher low major trend reversal.

Higher low with the potential of reversing
into a major trend.

It's also a head and shoulders bottom.

This would be the left
shoulder, this is the

head, and this would
be the right shoulder.

So it's a reversal setup.

Not a high probability buy at this point,
but once you start to get three or four

bars with big bull bodies closing on their
highs, the bar is getting bigger.

At some point, the market becomes always
in long for everybody, which means that

traders can buy for any
reason, expecting that the

market will be higher as
more bars become visible.

Another breakout, we have a small breakout
here, and now we have three bull bars,

and traders might buy this
far as it moves above that

high, the neckline of the
head and shoulders bottom.

They may simply buy the close,
arguing that it's the third bull close,

very little overlap between the bars,
and the bodies are getting bigger,

and it's following a higher low major
trend reversal.

Over here, the tails are starting to become
prominent, the bodies are getting small.

Each doji is a one bar trading range,
and here it's forming a pullback.

A pullback means that when I refer to an
attempt at a reversal as a pullback

instead of a trading
range, that means I believe

the trend will resume
instead of reverse.

Each one of these bars is a
one bar trading range, a doji

bar, and together they form a
slightly bigger trading range.

Somewhere in here, traders concluded that
the market became always in long.

It was always in short all the way down
here.

This is Al Brooks, and
thank you for watching

this video in the
Brooks Trading Course.

This video was on terminology.