Back to Library

Trading Price Action Trading Ranges: Technical Analysis of Price Charts Bar by Bar for the Serious Trader

by Al Brooks (2012)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Trading Price Action Trading Ranges: Technical Analysis of Price Charts Bar by Bar for the Serious Trader

Author: Al Brooks | Categories: Technical Analysis, Price Action, Day Trading

Executive Summary

"Trading Price Action Trading Ranges" by Al Brooks is the second volume in his three-book series on price action trading, following "Trading Price Action Trends" and preceding "Trading Price Action Reversals." Originally derived from his 2009 work "Reading Price Charts Bar by Bar," this expanded volume focuses exclusively on how to read, interpret, and trade within trading ranges, pullbacks, and breakout scenarios. Brooks, a former ophthalmologist turned full-time trader, provides an extraordinarily detailed bar-by-bar analysis methodology using primarily the 5-minute Emini S&P 500 chart. The book is organized into five parts covering breakouts, magnets (support and resistance), pullbacks, trading ranges proper, and order/trade management.

Core Thesis & Arguments

Brooks's central thesis is that markets spend most of their time in trading ranges, and understanding how to trade these environments is essential for consistent profitability. Key arguments: (1) Every chart pattern at every time frame is a fractal of patterns visible on higher and lower time frames; (2) Trading ranges represent equilibrium between buyers and sellers, and breakouts from these ranges create the highest-probability setups; (3) The "trader's equation" - a framework combining directional probability with risk/reward ratio - must be favorable before any trade is taken; (4) Failed breakouts and breakout pullbacks are among the most reliable trading signals because they trap traders on the wrong side; (5) Countertrend trading within ranges requires precision and is generally inadvisable for most traders; (6) Price action alone, read bar by bar with a moving average, provides all the information needed to trade profitably.

Chapter-by-Chapter Analysis

Part I: Breakouts - Transitioning into a New Trend

Covers how to identify and trade breakouts from trading ranges, including signs of strength in breakouts, initial breakouts, breakout entries in existing strong trends, failed breakouts, breakout pullbacks, breakout tests, and gap analysis.

Part II: Magnets - Support and Resistance

Examines measured moves based on the size of the first leg (spike), measured moves based on gaps and trading ranges, how reversals often end at signal bars from prior failed reversals, and other price magnets that attract market movement.

Part III: Pullbacks - Trends Converting to Trading Ranges

Covers the first pullback sequence (bar, minor trend line, moving average, moving average gap, major trend line), double top bear flags and double bottom bull flags, twenty gap bars, first moving average gap bars, key inflection times, counting legs of trends and ranges, bar counting (high and low 1, 2, 3, and 4 patterns), wedge pullbacks, dueling lines, and "reversal" patterns including double tops/bottoms and head and shoulders formations.

Part IV: Trading Ranges

Provides detailed examples of how to trade within trading ranges, tight trading ranges, and triangles, with emphasis on identifying which side has control and when a breakout is likely to succeed.

Part V: Orders and Trade Management

Covers scalping versus swinging versus trading versus investing, the mathematics of the trader's equation, the requirement of two reasons to take any trade, entering on stops versus limits, protective and trailing stops, profit taking and targets, scaling into and out of positions, and avoiding being trapped in or out of trades.

Key Concepts & Frameworks

  • The Trader's Equation: A mathematical framework requiring favorable probability times reward minus unfavorable probability times risk to be positive
  • Directional Probability: The roughly 50-50 chance of equidistant moves up or down at any given point
  • Fractal Nature of Price Action: Every pattern on any time frame mirrors patterns on all other time frames
  • Failed Breakouts and Breakout Pullbacks: Among the most reliable setups because trapped traders forced to exit create momentum
  • Bar-by-Bar Reading: Classifying every bar as either a trend bar or a doji (non-trend bar) and analyzing its implications
  • Always-In Direction: The direction a trader should be positioned based on current price action context

Practical Trading Applications

  • Use the 20-bar exponential moving average as the primary reference for trend context
  • Identify trading range boundaries and trade breakouts with follow-through confirmation
  • Count legs within trends and ranges to anticipate exhaustion and reversal points
  • Apply the two-reason rule before entering any trade to filter low-probability setups
  • Use stop orders for entries in the direction of the trend and limit orders for countertrend entries
  • Scale into positions when the initial entry is working and scale out at measured move targets
  • Avoid countertrend scalping as it typically has an unfavorable trader's equation

Critical Assessment

Strengths: Brooks provides what is arguably the most comprehensive treatment of price action trading ever published. The bar-by-bar methodology is internally consistent and logically rigorous. The trader's equation framework provides a quantitative basis for trade selection that transcends subjective pattern recognition.

Weaknesses: The book is notoriously difficult to read due to extremely dense prose, minimal paragraph breaks, and sentences that frequently exceed 50 words. The relentless detail, while thorough, can overwhelm even experienced traders. Brooks's writing style is repetitive and circular, requiring multiple readings to absorb. The exclusive focus on 5-minute Emini charts may limit applicability for traders of other instruments or time frames, though Brooks argues the concepts are universal.

Key Quotes

  • "Edges are always small and fleeting because they need someone on the other side, and the market is filled with smart traders who won't allow an edge to be big and persistent."
  • "A countertrend trade is a losing strategy for most traders since the risk is usually at least as large as the reward and the probability is rarely high enough to make the trader's equation favorable."

Conclusion & Recommendation

"Trading Price Action Trading Ranges" is essential reading for serious price action traders willing to invest the considerable time required to absorb Brooks's methodology. While the book's density and writing style make it challenging, the depth of analysis and the logical framework presented are unmatched in the price action literature. Best suited for intermediate to advanced traders who have already developed basic chart-reading skills and are looking for a rigorous, institutionally informed approach to reading intraday price action. Not recommended for beginners or casual readers.