Volpri, thank for smart reasoning, very good as usual
Could you please explain one thing about Brooks trading style. Brooks as well as you talk about stops and entries based on extremes of bars/candles. This is totally unclear for me. Bars/candles are artificial construction of trader, there are no bars on marketplace. In fact bars are just indicators, the way to bundle ticks into compressed construction. For me entry ‘1 tick above previous 5 min bar’ sounds as logical as ‘enter when MACD(x,y,z) crosses zero line’.
What is your logic behind placing stops (and entries may be) based on bars extremes?
A little more about bars. Bars, ALL bars are either trends or ranges. All bear bars are bear trends. All bull bars are bull trends. All doji bars are ranges. It is easy to see this by dialing down to a smaller TF.
Take one example, for instance. Take a five minute chart that has a sideways move...i.e. bear bar, bull bar, bear bar. Just take the 5 minute section of 5 minute bull bar sandwiched between the two bear bars and look at that 5 min bull bar as 1 min bars. As live price is unfolding. You will see that one 5 min bull bar is in fact a trend when seen as 1 minute bars and can be a multi leg trend depending on the size of the 5 min bull bar. Do the same on the 5 min bear bars on either side of the 5 min bull bar, you will see them as bear trends on the 1 min chart. Now look at a doji on the 5 min. On the 1 min it is sideways movement as in a range type behavior.
The same thing can be done with say 15 min charts compared with 5 min charts. Or 60 min with 15 min. ...etc
Try deducing that from line charts or MA crossovers. Not so easy.
All trends are price movement.
All price movement has inertia. Hence all trends have inertia. Price tends to keep doing what it is doing until a stronger force acts upon that movement.
Bars show the depth of movement and clarity of movement better than moving averages. Moving averages purpose is to “smooth” movement out. Bars are raw data and are formed as data pours in live. There is no smoothing. WYSIWYG.
Price often tests high peaks and low points. Hence bars are more useful than MA’s or crossovers...etc.
I use moving averages but mostly to see where price is staying in regards to it’s average. For instance, if price is staying above a 20 EMA and when the bears push they cannot get price down to the moving average, much-less thru it, and when their effort ends, there is a gap between their lowest point and the EMA. They could not manage to get price to and through the EMA. That signals strength on the side of the bulls and not so much. strength on the side of the bears as they couldn’t even get price through the moving average. I use moving averages for other reasons too but this is one.
