Brooks Trading Course – Terminology & Foundational Concepts

Key Terminology & Abbreviations

• Traders in the Brooks methodology rely on a precise shorthand; get comfortable seeing these letter-pairs repeatedly.
• AL – Always-in Long • AS – Always-in Short
• B – Buy • BLSH – Buy Low / Sell High scalp
• BO – Breakout (bull or bear)
• C – Close of the bar
• DB / DT – Double Bottom / Double Top
• EMA – 20\text{-bar} Exponential Moving Average; default "moving average" throughout the course.
• H / L – High / Low of the current bar
• HH / HL / LH / LL – Higher-High, Higher-Low, Lower-High, Lower-Low
• HFT – High-Frequency Trading
• MGB – Moving-average Gap-Bar (gap between bar & EMA)
• MM – Measured Move
• MTR – Major Trend Reversal
• OD – Open of the Day
• PB – Pullback
• S – Sell
• TBTL 10 B 2 L – "Ten Bars, Two Legs" corrective pattern after a climax
• TR / TTR – Trading Range / Tight Trading Range

Market Structure Concepts

• Any market is always either in a trend or a trading range.
• Bull trend progression – Bull BO ⇒ PB ⇒ Bull Channel ⇒ Trading Range.
• Bear trend progression is the mirror image.
• A bull channel = bear flag (pre-labeled for a probable bear BO).
• Once price is in a TR it is in “breakout-mode”; expect pressure in both directions.

Trend • Pullback • Breakout • Trading Range

• Trend ⇒ sequence of HH and HL (bull) or LL & LH (bear).
• Pullback (PB) ⇒ any bar whose low (bull PB) or high (bear PB) exceeds the prior bar in the opposite direction.
• Breakout (BO) ⇒ any bar that pushes beyond S/R; every big trend bar is technically a BO.
• Trading Range (TR) ⇒ overlapping bars, sideways action, failed BOs.
• Measured-Move (MM) ⇒ project a leg length A\to B from point C.

Support & Resistance

• Support – price area beneath current price that historically triggers buying.
• Resistance – price area above current price that historically triggers selling.
• BO above resistance ⇒ bull BO; BO below support ⇒ bear BO.

Bar & Candle Anatomy

• White body = bull bar (closes above open).
• Black body = bear bar (closes below open).
• Tails / Wicks / Shadows = thin lines beyond the body.
• Long body + small tails ⇒ Trend Bar (one-bar trend).
• Small body + long tails ⇒ Doji / Trading-Range Bar.
• Outside Bar (OB) – high ≥ prior high & low ≤ prior low.
• Inside Bar (IB) – high ≤ prior high & low ≥ prior low.

Chart Types & Time-Frames

• Course uses candle charts (bars ≈ candles).
• Same principles apply on 5\text{-min}, daily, weekly, or monthly.
• Tick = minimum price move; Pip in FX.
• Point = fixed group of ticks (e.g.
1\,\text{ES point}=4\,\text{ticks}).
• Handle = big round number (e.g. “202 handle” on SPY).

Trade Types – Scalps vs Swings

• Scalp – objective: quick profit, exit within ≈ 1-5 bars; no tolerance for PBs.
• Swing Trade – hold through PBs as long as trend intact; may span many bars.
• Higher time-frame language:
• Fast-exit on daily ⇒ "trader" or "fast-money"
• Multi-month holds ⇒ "investor" (though technically long-duration swing).

Entry Mechanics – Setups • Signal Bar • Entry Bar

• Setup – any pattern that suggests a probable trade.
• Signal Bar – bar that triggers the idea (e.g. a bull reversal bar).
• Entry Bar – bar that actually fills the order (stop entry above/below signal).
• With-Trend Trade – aligns with current trend.
• Counter-Trend Trade – opposite the prevailing trend; lower probability.

Counting Pullbacks – High/Low 1 & 2

• Bull context:
• High-1 (H1) – first PB; buy on stop above bar.
• High-2 (H2) – second PB (often forms DB bull flag); higher success.
• Bear context:
• Low-1 (L1) = first rally PB; sell stop below bar.
• Low-2 (L2) = second rally PB; may present DT bear flag.
• ABC Pullback – synonym; three-leg correction: A down, B up, C down (bull case).

Trend-Reversal Classification

• Minor Reversal (MR) – typically morphs into PB or TR; trend soon resumes.
• Major Trend Reversal (MTR) – transitions bull ↔ bear; requires strong BO, follow-through, often tests prior extreme.
• Higher-Low MTR (bull) or Lower-High MTR (bear) frequently appears as Head & Shoulders Bottom/Top.

Institutional & Algorithmic Context

• Algorithms (Algos) – software executing rules; dominate order flow.
• Institutions – banks, hedge funds, pension funds, mutual funds, HFT firms, or even very large individual traders (≥ 100 ES contracts).
• Computerised trading unavoidable; price patterns still repeat because algos are coded by humans observing the same signals.

Always-In State & Context Analysis

• Always-In Long (AIL) – if forced to hold a position right now, long side is wiser.
• Always-In Short (AIS) – inverse.
• Transition cues:
• Shrinking bear bar bodies, larger tails ⇒ weakening bear channel.
• Bull BO above channel TL ⇒ potential switch to AIL.
• Context = “bars to the left.” Never evaluate a single bar in isolation.
• Tight bear channel + nice bull reversal bar? Still likely a failed reversal (bear flag) because of broader context.

Miscellaneous Vocabulary

• Lot – unit size (contracts, shares, etc.).
• Setup Names Recap:
• MGB – bar failing to touch the EMA forms a gap; often strong.
• TBTL 10B 2L – typical corrective pattern after a climax: 10 bars total, subdivided into 2 legs.
• Trendline / Channel Line – rarely perfect; draw through obvious swing points & extend.
• Doji Cluster = emerging TR; anticipate BO attempts and eventual MTR potential.

Practical Implications & Study Tips

• Memorise abbreviations – slide-notes & real-time commentary rely on them.
• When in doubt, default EMA is 20\text{-bar} exponential.
• Label H1/H2 and L1/L2 opportunities; they occur in every session.
• Distinguish MR vs MTR: follow-through strength & context are decisive.
• “Always-In” lens keeps you aligned with dominant force; filters counter-trend temptations.
• Glance at prior S/R before treating any bar as a setup; market memory matters.
• Algos amplify textbook patterns; paradoxically makes classical TA more reliable.

These bullet-point notes capture all terminology, patterns, trade mechanics, and contextual principles introduced in Chapters 1-6 of the Brooks Trading Course introduction video. They are structured as a reference sheet to replace the original lecture while preserving every definition, nuance, and example given.