Zen Trading Tech

1. Intro
2. Assumed Knowledge
3. Video
4. What is a High 2?
5. Drill #1: Marking all the High 2
6. Not all High 2’s are good to trade
7. Drill #2: Strong H2 vs Weak H2
8. Trendlines
9. Drill #3: Did the High 2 break a trendline?
10. High 2 is a second entry
11. Drill #4: High 2 is a Second Entry
12. High 2 is after the other side has failed twice to reverse
13. Drill #5: High 2 after 2 attempts to reverse fail
14. High 2 Fail -> Measured Move Down
15. Drill #6: High 2 Fails -> MM Down
16. Conclusion

Intro

• Talk about High 2 and how to trade
• Reverse it all for the BEAR case and a Low 1

Assumed Knowledge

• Spikes
• Consecutive bars – indicator
• Stop entries indicator and video
• Pullbacks / 2-Legged Pullbacks videos
• Check out Al Brooks book – Trading Ranges for more details on bar counting
• Also my video here on Bar Counting
• 2 Legged pullback after a spike

Video

What is a High 2?

• Go up and we pull back below the low of a prior bar. That is the end of a leg.
• When we go above the high of a prior bar now we call it a High 1.
• If we don’t come back down again keep counting High 1.
• If it goes below that bar and then reverses up we call it a High 2.
• You can continue for H3, H4, etc
• We will focus on High 2 because the market often moves in 2 legs.

Drill #1: Marking all the High 2

• Look for a breakout / spike and then once a bar goes below the low of a prior bar, the next time we go above the high of a prior bar is a High 1. If we then resume down and repeat it – we call it a High 2
• Mark the bar that GOES ABOVE – that is the High 2 bar

Not all High 2’s are good to trade

• You will notice some High 2 are going above a bear bar – this is not as reliable as going above a bull bar
• All High 2’s form as the market is going down – after going up before!
• But it would be better if there were already BULLS in the market before we buy as well!

Drill #2: Strong H2 vs Weak H2

• Ignore market structure
• High 2 above a Bull Bar is higher probability
• Now look for High 2 but look a bar or so later to identify the first time it goes

Trendlines

• You will have noticed above – without the concept of trendlines it can get ridiculous.
• High 1’s and High 2’s break very small trendlines.
• Connect Highs of bear moves for bear trendlines.
• This prevents us from buying very high in a bear spike, because the trendline was never broken.

• See here how it didn’t break any trend line

Drill #3: Did the High 2 break a trendline?

• Look at the structure and see if it broke anything significant
• Ask yourself how does this change your understanding of a High 2?
• How can you start to use the higher time frames to find good entries

High 2 is a second entry

• So now in the drills you can see there are god signals and better signals
• As a trader becomes more familiar with the High 2 concept you start to use it as a way to practice patience.
• The High 2 is the second entry after the High 1. This sounds similar but can lead to greater agility in trading.
• So if you see a bad High 1, the next entry is a High 2.
• The second best entry after the High 1 triggers
• See the chart below

Drill #4: High 2 is a Second Entry

• Now your turn! Practice identifying the second best entry after the High 1 triggers
• You can also find H2 that are weak and take the next signal

High 2 is after the other side has failed twice to reverse

• As a trader becomes more familiar with the High 2 concept you start to use it as a way to practice patience.
• The High 2 is the second entry after the High 1. This sounds similar but can lead to greater agility in trading.
• The exactness of the bars, gives way to a feeling of the price action.
• The High 2 has a relationship to the Higher time frame

Drill #5: High 2 after 2 attempts to reverse fail

• Now your turn to find High 2’s based on a feeling of the chart – including the higher time frame

High 2 Fail -> Measured Move Down

• Once the second attempt fails it can often lead to a measured move down
• Sometimes the entry for the High 2 is just too high for traders to be convinced
• High 2 after 2 attempts to reverse fail.

Drill #6: High 2 Fails -> MM Down

• Now find H2 that failed and created a MM down.
• Which worked and which did not?

Conclusion

• I hope you found that useful.
• Now you have several of the drills I do to trade High 2 entries
• Please let me know in the comments what you learned!