Trading Brooks H2 AND L2

i see many persons do visit this thread and that encourages me.

leaving your thoughts criticism or any words of encouragement will go a long way in ensuring that i continue to post since this is for the most part to help others.

it does help me also........since i may look back on it later, in case i lose my way in the future
 
Slope Trader said:
Hi Padu,

What role does the moving average play in choosing entries or exits using this approach?
More...

good question

brooks does not mention anything concerning the ema in this strategy.

but since we need the market to be a range bound one for this to work- climaxes, in a range, occur at the extremes of the range-so it should not be steep but flat
 
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Slope Trader said:
Hi Padu,

What role does the moving average play in choosing entries or exits using this approach?
More...

not only should the ma be flat it should remain flat:and the ma will remain flat only if the market returns to it very quickly.
if the market takes a lot of time to return to the ma, the ma will stop being flat.

and you will begin to have a pull back and perhaps,once the pull back ends eventually a trend.[a trend means market will move in one general direction ]

so a range is where you have very fast moves or reversals and because of these fast moves up and down, the ma will be flat.

if a range is fast up and down, then a pull back is not range:a pull back usually moves relatively slowly with relatively small bars and does have persistent direction.

now if we accept all of the above and NOTE that all this is relative to the time frame being considered:
[any trend, range or pull back on a 5 min may be just noise on a daily time frame.....so noise is can only exist on a particular time frame....that is important to keep in mind.]
then we have to form a trading plan around these definitions.
 
a two leg move into an extreme of a range may be faded.
a two leg breakout out of a range may be faded.....target the bottom of the mentioned range

see chart horizontal lines show extreme of range ...trendlines show two leg moves
b.png
 
this trade short audusd is the same as the others.....the move up looked more like a trend in a range so .......use wide stop and average.....the sell climax may signal the end of a down trend .....but judging from the recent price action-deep pull backs- expect a deep pull back and then a resumption of the down trend
a3.png
 
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red trend line shows that the gap as defined by brooks is closed and hence the gap is an exhaustion gap.
the yellow line shows a gap so at least a measured move down may be expected.
a4.png
 
what is this bar counting.........and why do it?

it is to have a set up to enter a pull back.......so before you enter on H1H2 etc there has to be a pullback and to have a pullback you must have a trend.

this is obvious stuff but many people have asked 'what the hell is this bar counting'.

so you have to identify a trend and a pull back.....then bar count to identify when the pull back has likely ended so that you can enter the dominant trend.
 
what Brooks does not point out is that you can get bar counting setups with minor trends and in trading ranges [ which are pullbacks in a smaller time frame] which are not 'good entries'.

for example a pullback in bull is a minor downtrend and a low 2 is a two leg pullback
 
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