Al Brooks - Trading Price Action Trends
- Thread starter mark_mm
- Start date
An example of trade from today, when 6 pips + spread stop was enough and even that, because I was not patient enough to wait for a confirmation in which case trade would almost not go against me at all.
http://www.cornixforex.com/2012/01/example-of-eurusd-scalp-trade-with-tight-stop/
http://www.cornixforex.com/2012/01/example-of-eurusd-scalp-trade-with-tight-stop/
No it's not like that. It's not entering off one chart and hoping a 5 pip stop (my default) will work this time when it didn't last time. Reading the multiple time frame context is essential to know the potential for the trade. It might be a scalp or it might be a scalp that has potential to run and you should know the difference.
The reason a lot of trades can be reversed on limit for a tiny stop is market structure in the context of exhaustion after a good run.
Understanding structure, momentum, energy plus PA means the rational behind each trade can be very different so getting stopped out of a trade that then runs in your favor is not so common. When it happens just rejoin.
This might be getting too far away from Al Brooks style.
You definitely can trade with stops tight as <10 pips in FX ( or any market) if you can decipher where there is strong resistance AND where momentum will kick in to get you away from your entry price very quickly.
The later is very important since you do not want price to chop around your entry level for too long.
You will need to adjust your stop level to the market condition, though. On some days the market is jittery and you'll need larger stops, on other days price reverses on a dime and moves only 1-2 pips against you at maximum.
These trades are golden.
As far as I understand, this is not Al Brooks' style, however since he says you should enter on stop orders, letting the market trigger your order. To my understanding, this means that the market has already moved in the direction of your anticipated trade direction, it might therefore very well pull back once you've been filled, even if only a little.
Anyway, coming back to Al Brooks, I'm currently reading his first book and it's indeed a struggle. I listened to several webinars of his before and found them to be okay, his first book though is a nightmare from a didactical standpoint.
Since several people have claimed that learning his concepts have helped them become profitable, I'm just too curious to give up that easily. Maybe there is something in it for me, I don't know.
Intuitively, I would say that reading charts bar by bar is not good as it will lead to overtrading and entering into poor trades. For me, levels are very important and I will only trade at certain levels. If price does some pattern in the middle of nowhere, I am usually not interested as I've seen those trades fail too often.
This is also why many people come to the conclusion that all the known patterns such as double tops/bottoms, head and shoulders etc. do not have an edge because they often try to trade them each time they appear, regardless at which price level. I have been there too and it didn't work for me.
If someone would start a thread with actual trades a la Al Brooks, this would be really great. Maybe I should also register at his website to read his forums, I don't know whether there are useful discussions going on there.
So far, I'm not overwhelmed by the book, maybe it's because I have been focused on price action almost since the beginning of my trading but admittedly I'm not far into the book and hopefully there is something of substance to come.
The later is very important since you do not want price to chop around your entry level for too long.
You will need to adjust your stop level to the market condition, though. On some days the market is jittery and you'll need larger stops, on other days price reverses on a dime and moves only 1-2 pips against you at maximum.
These trades are golden.
As far as I understand, this is not Al Brooks' style, however since he says you should enter on stop orders, letting the market trigger your order. To my understanding, this means that the market has already moved in the direction of your anticipated trade direction, it might therefore very well pull back once you've been filled, even if only a little.
Anyway, coming back to Al Brooks, I'm currently reading his first book and it's indeed a struggle. I listened to several webinars of his before and found them to be okay, his first book though is a nightmare from a didactical standpoint.
Since several people have claimed that learning his concepts have helped them become profitable, I'm just too curious to give up that easily. Maybe there is something in it for me, I don't know.
Intuitively, I would say that reading charts bar by bar is not good as it will lead to overtrading and entering into poor trades. For me, levels are very important and I will only trade at certain levels. If price does some pattern in the middle of nowhere, I am usually not interested as I've seen those trades fail too often.
This is also why many people come to the conclusion that all the known patterns such as double tops/bottoms, head and shoulders etc. do not have an edge because they often try to trade them each time they appear, regardless at which price level. I have been there too and it didn't work for me.
If someone would start a thread with actual trades a la Al Brooks, this would be really great. Maybe I should also register at his website to read his forums, I don't know whether there are useful discussions going on there.
So far, I'm not overwhelmed by the book, maybe it's because I have been focused on price action almost since the beginning of my trading but admittedly I'm not far into the book and hopefully there is something of substance to come.
I think a few people are confusing reading charts bar by bar with trading charts bar by bar, which will definitely lead to overtrading and entering poor trades.
Reading price charts bar by bar means reading the footprints of price in the context of the overall price action environment.
Trades must only be taken off setups with a legitimate edge. DT/DB's, HnS, pin bars, etc. must be read in context.
Pin bars (hammers and shooting star dojis) in isolation indicate a possible price turn; however, in the context of the overall price action environment leading up to these candles, they often indicate continuation of the previous price move and can be excellent bull/bear trap setups, especially when they form a few seconds prior to the close of a bar, trapping the traders who make assumptions and jump the gun without a clear entry trigger, thinking they're getting a better entry price.
The ability to place 2-tick stops on certain setups (this is not something I do regularly; most of my initial stops are 10-20 ticks with CL, the wild one) or to buy/sell at the low/high tick of a price turn is based on very specific setups, all of which are covered somewhere in the Labyrinth of Brooks
I was thinking exactly the same thing. If anything, Al says to reduce frequency and take only the best trades. Many of the bars are simply "noise" even as he teaches it.
On the issue of tight stops, my experience also says that it can be done with certain set-ups. An example would be if you sell short at a resistance line in anticipation of a double top and price starts falling. It does not make sense to use a wider stop since any movement above that level would negate the setup, i.e., a double top.
There are many academia research articles about their testing of such well known patterns as you've mention. Yet, the testing was performed via their own personal "trade management" method involving stops, trailing stops, profit targets or personal entry signal involving those patterns.
In fact, each author had different results for the exact same pattern. The results usually differed because of the trade management difference or others had different entry rules into the exact same patterns.
My point, why do folks bother testing patterns for academic review when their entry signal or trade management rules stink or not something any experience trader would use (rhetorical question). Simply, there will not an edge found if someone is going to test a pattern all by itself while ignoring all the other important pieces of the puzzle that's involved in profitable trading of these commonly known patterns that you've mentioned.
The edge is in the trader, in the entry signal, in the trade management and in other important things in the trading plan...in combination as a trading plan.
Just the same, a trader must be prepare to adapt his/her trading plan when there's fundamental changes in the environment of their trading instruments to prevent or minimize drawdowns. Such adaptation is something most newbie or beginner traders will not have enough experience to do. That's why the real edge is the trader that's able to adapt his/her trading plan because patterns will always be the same (nothing new there) but the markets change many times every year.
Therefore, as soon as someone starts to talk about everything else that's involved in successfully trading that has nothing to do with a pattern that's being discussed in any given book...its view as "ramblings" or too much information. That's why books that only talk about the pattern, similar to how academia approach testing a pattern...these types of pattern books, research articles will always remain on someone's favorite book list.
In contrast, a book that's gets into all that important stuff that's involved in understanding how to think like a profitable trader before the appearance of any pattern and to profitably trade a pattern after the appearance of any pattern...these books will remain on someone's boring or "too much" information book list...collecting dust.
There's more to profitable trading than just a pattern or bar to bar analysis. 100 traders that say it doesn't work while 1 trader that says it does work involving a discretionary trade method...it should be obvious the edge is the trader and/or his/her trading plan of that trade method.
P.S. I don't know what's in Al Brooks books because I've never read them. Yet, if he's talking about other things in his book that seem like it has nothing to do with bar to bar or something that has nothing to do with a trade signal...there's probably good reasons for those discussions.