Futures I Trade Show & Brooks Book

[forrestang 10]

That was a big bear trendline broken this afternoon but does the shape of the decline from the double top at 913.75 argue for another push lower to create two legs down before we see at least two legs up?

 

Good point! We'll see what AH brings us.

[rangerdoc 13]

I'm new to this conversation, but have been digesting Al's book ever since I got my copy last month. I found this thread as I was searching the web for additional info to help clarify and assist with the book.

I've been trading with marginal success for several years now, but have recently jumped into the deep end of the pool by immersing myself in Wyckoff, Taylor & most recently, Brooks. Tossing out all my indicators was the best move I ever made for my bottom line.

I have to jump in and give a huge thanks to all the hard work everyone has contributed in this thread. I've found it invaluable and think it will really help me as I work my way through Al's book.

[forrestang 10]

that was a big bear trendline broken this afternoon but does the shape of the decline from the double top at 913.75 argue for another push lower to create two legs down before we see at least two legs up?

 

Don't know how high it will go? But there goes the two-legged move both ways so far in AH.

[monad 10]

I'm new to this conversation, but have been digesting Al's book ever since I got my copy last month. I found this thread as I was searching the web for additional info to help clarify and assist with the book.

I've been trading with marginal success for several years now, but have recently jumped into the deep end of the pool by immersing myself in Wyckoff, Taylor & most recently, Brooks. Tossing out all my indicators was the best move I ever made for my bottom line.

I have to jump in and give a huge thanks to all the hard work everyone has contributed in this thread. I've found it invaluable and think it will really help me as I work my way through Al's book.

 

If you have slogged through Wyckoff and Taylor , especially Taylor, then all you need to get started is the chapter on Best Trades in Al's book, ofcourse you will have to keep referencing many of the terms in there via glossary, You will find they blend with and reinforce Wyckoff concepts.

On top you only need to focus on the main trend of the day as per Taylor, however with Taylor it is imperative to stick with his original methodology rather than any variations introduced by others like G. Angell, L.Raschke etc.

Good luck

[ACS 10]

These are the notes I made while reading the book:

 

Notes on Reading Price Charts Bar By Bar

 

Number one question: is the market trending or not?

 

Watch what happens when price moves beyond prior bars or trendlines.

 

A beginning trader should not trade if the market is in the middle of the day and in the middle of the day’s range.

 

A very large bar with small or no tails after a protracted move or breakout can represent exhaustion and no trade should be taken until more price action unfolds.

 

A beginning trader should only enter a trade when the signal bar is also a trend bar in the direction of the trade.

 

If the market tries to do something twice and fails both times, expect it to do the opposite and likely succeed.

 

The best reversal bars have an open near or just beyond the close of the prior bar, a close just beyond the close of the prior bar, a tail that is 1/3 to ½ of the bar, and not much overlap with the prior bars.

 

Countertrend, wait for a trendline to be broken and a strong reversal bar on the test of the extreme, then enter on a second entry.

 

Do not take a second entry that lets you in at a better price than the first.

 

The strength of the trendline break provides an indication of the strength of the move. The bigger and faster the countertrend move, the more likely a reversal will occur after a test of the extreme.

 

On non trending days expect swing high/low breakouts to fail and create second entry countertrend trades.

 

A break of a trendline creates a new leg.

 

Any time there is a new trend or any capitulation of one side, there will usually be at least a two legged move. This can occur in a pullback in a trend, a breakout, a major reversal, or anytime that enough traders believe the move has sufficient strength to warrant a second attempt to test whether a trend will develop.

 

Strong trends have big gap openings, trending swings, no climaxes and not many large bars, no significant trend channel overshoots, failed wedges, stay away from the EMA for hours, small pullbacks, sideways corrections, no two consecutive trend bar closes on the opposite side of the EMA, and bars with small or no tails.

 

When a move has a series of trending swings watch the size as they progress to see which side is gaining strength.

 

Any move that has two legs should be traded as a pullback, even if it is with trend.

 

If the market is pulling back from a trend that ended in a climax like a trend channel overshoot and reversal or any other significant trend reversal pattern, the trend has changed and you should stop trading with the old trend and start looking for trades with the new trend.

 

Types of pullbacks: H/L 1 lasting one or two bars, H/L 2 that breaks a minor trendline lasting three to five bars, pullback to the EMA, pullback beyond the EMA with EMA gap bar, pullback that breaks a major trendline then tests the extreme and has a two legged countertrend move.

 

Once one type of pullback occurs stop trading the previous types.

 

A sideways move that has a beginning and end spike that are near in price is a double bottom/top bull/bear flag.

 

On strong trend days there is often a strong countertrend move between 2 and 2:30 NY time to shake traders out of their positions.

 

Three push patterns can end a trend or a pullback of a strong trend.

 

Do not trade breakouts in a sideways market. Wait for price action to confirm the breakout or reveal it to be a failure.

 

Any time three or more consecutive bars mostly overlap and one or more is a doji stop trading and treat it like a trading range.

 

A big move in one direction that is followed by one that retraces the entire move often means the market will move into a trading range.

 

Trends that end with a trend channel overshoot usually have a test that does not exceed the prior extreme. Trends that end with a trendline break can exceed the extreme.

 

The most reliable countertrend trade is to enter countertrend to a pullback in a trend.

 

A strong break of a trendline will usually lead to at least a two legged pullback.

 

Signs of strength in a trendline break: covers many points, goes well past the EMA, extends beyond the last swing pullback, lasts ten to twenty or more bars, prior trendline breaks, reversal to test extreme lacks momentum by having overlap or fails at the EMA or old trendline and does not get close to old extreme.

 

Always have two reasons to enter a trade: reversal bar, good signal bar pattern, EMA pullback in a trend, breakout pullback, breakout test, H/L 2 or 4, failure of anything, any second entry.

 

When a strong move ends in a three push pattern and then corrects with less momentum (shallower slope, smaller trend bars, more tails) the odds are high that the prior end of the three pushes will be exceeded soon.

 

A tight trading range (largely overlapping bars) is like barb wire and acts like a magnet, drawing breakouts back towards its middle.

 

Doji bars are one bar trading ranges. Never buy above one in a bear or sell below one in a bull.

 

The best time to trade is the first 90 minutes and the easiest trades are failed breakouts and breakout pullbacks of patterns from the prior day.

 

On a strong trend day trade every H/L 2 where the setup bar touches or penetrates the EMA.

 

On a trading range day fade second entries at new highs and lows or wedges with strong reversal bars.

[thetatrader1520887476 10]

Only Had an Hour and half to trade today. Started at 12:30 saw the trend line over shoot at 12:15 so at 12:30 I was expecting another leg down which happened at bar 1. Bar 2 was a double bottom bull fag and a trend line break. I went long with a market order at 7half for a swing to 913 magnet over head. not Al brooks style but good risk reward.

so what happened? Bar 3 was a trend line break now I was looking for at least two more legs up. bar 4 was a High 4 and the start of the first leg (likely a better spot for a long). Bar 5was a break out pull back (you cant see it here but real time the bar traded at the low till the last 30 sec.). I added to my potions on a stop above bar 5 my target was hit two bars later. I had to stop at 2:00.

Bar 6 was a micro trend line over shoot so I was expecting two legs up which you got bars 7 and 8 bar 8 was also a second attempt to go higher and was a good short. Notice ema gap after the bar 8 short that gets filled and take out the B/E stops to the tic. you have to be looking for shorts after the Double top bear flag and the trend line break after bar 8. lots of Barbed wire. I did not trade it so I don't know if I would have got the short down to 905

[thetatrader1520887476 10]

Price action setup buy the book.

[ACS 10]

Price action setup buy the book.

 

This is where it gets confusing for me. What about the break of the bull trendline from yesterday? Is this morning's rally a test of that extreme? This whole month seems like an unending series of trendline breaks and tests of extremes that is getting hard to keep track of.

[thetatrader1520887476 10]

ACS I am new at this so I am just learning as I go. I think you have to look at the most resent PA and see if it does what it is suppost to. like Trend line break look for at least a two 2 legged pull back and possible reversal. then wait for more PA over and over again wait wait wait.

I think if a few of us work together and look at each others charts and make comments we will be able to get it down pretty quick.

I have to run out petty soon I have my 4 and 3 year old girls. I will be busy most days this summer with them, but it will be a good time to learn this stuff when I get to watch the charts.

[monad 10]

Trading via lower time frame charts is recommended especially in fast markets as today in the first 90min or so. Page 156.

The Breakout Pullbacks and Trendline break setups are much clearer as shown on the 2min chart.

 

After the shallow (first) TL, there is a weak effort to create a lower high then a 2 leg move down, and after that we have 2 leg up.

[szubaark 10]

Hi

 

I started paying attention to these M2Sell/Buy setups. Al says to wait for a small candle then short/buy at top or bottom of Range BUT you will almost never get a small candle. usually on 2-3rd EMA touch they will just spike.

BUT why didnt this one work today? Everything was textbook for Short BUT kept creeping higher. Go figure.

[monad 10]

There is a danger in taking these setups in isolation.

Al points out clearly that a TL break does not equate to reversal, Refer to the Best Trades chapter.

Also avoid anything that looks like barbwire, which is where the short was, there is section on how to trade barb wire page 320, especially after a false breakout, you have to take the trade in the other direction, At the initial stage, it is best to avoid these,

Al emphasizes on the need for patience for clear setups ie. when in doubt, stay out.

 

After a strong trend, if there is a TL break, expect the market to test the previous high in 2 legged move.

 

Lastly this was also the time period ie. after lunch EST when reversal occur, it is there somewhere in Al's book.

 

Plus in that pattern there are clear candlestics of climactic nature ie. doji bars closing on the high with long tails , Al has pointed these out as indication of buying.

 

Think the book is not an easy read, there are so many elements which have to come together, however it would be best to focus on the Best Trades at the initial stage, until such time as when all the chapters have been studied over and over again.

IMO

Edited June 19, 2009 by monad

[jolee 10]

You at BW , also look to left at support prices - dont short bottom of trading range.

[BlowFish 10]

Price action setup buy the book.

 

Nice chart. It's worth mentioning that there are numerous trend line breaks that did not result in two legs. (un drawn trend lines that would have been valid until they broke resulting in the 'final' channel). Am I right in thinking that first break you would anticipate continuation (particularly with a micro trendline)? It looks like that would have been an OK scalp anyway.

 

I have to say I am always far to ready to take counter trend trades:crap: I'll even scalp the 2nd leg of a 2 leg corection if it looks like there is enough mileage in it. But,the idea of having a conclusive (a close or two across the line with good separation perhaps) trend line break and re-test is a great way to keep you on the right side of the market

[trader273 10]

Hi

 

I started paying attention to these M2Sell/Buy setups. Al says to wait for a small candle then short/buy at top or bottom of Range BUT you will almost never get a small candle. usually on 2-3rd EMA touch they will just spike.

BUT why didnt this one work today? Everything was textbook for Short BUT kept creeping higher. Go figure.

 

 

No method is a 100%, just because one instance stops out doesnt meant the system is flawed.

[BlowFish 10]

snip....

 

 

BUT why didnt this one work today? Everything was textbook for Short BUT kept creeping higher. Go figure.

 

In a nutshell barbed-wire.

 

Theres always stuff you can say with hindsight (like the subsequent 'proper' test of the old high) but the BW was already apparent.

[thetatrader1520887476 10]

There was a double bottom bull flag made up from 2 and 5 bars back aslo had was a failed third attempt lower with trapped shorts that will not be looking to go short any more. witch makes for a one sided market a long after that short would have been a good trade.

but this is all hindsight.

The book is always telling you to look for trapped traders. witch is easy in hindsight. But bottom line stay away from Barbed wire. and if you find yourself looking really hard for a set up then it is most likely not a good set up. = Wait

 

Thanks for the chart was a good observation hopefully every one will continue to post and we will all speed up the learning.

[szubaark 10]

Thing is most days will be Choppy,Whipsaw Ranges. Trading these setups in real time is a whole differant ballgame then mark up a chart at end of day.

 

I hope everyone keeps posting their Entries each day with charts so we can fight this beast.

[szubaark 10]

Nice chart. It's worth mentioning that there are numerous trend line breaks that did not result in two legs. (un drawn trend lines that would have been valid until they broke resulting in the 'final' channel). Am I right in thinking that first break you would anticipate continuation (particularly with a micro trendline)? It looks like that would have been an OK scalp anyway.

 

I have to say I am always far to ready to take counter trend trades:crap: I'll even scalp the 2nd leg of a 2 leg corection if it looks like there is enough mileage in it. But,the idea of having a conclusive (a close or two across the line with good separation perhaps) trend line break and re-test is a great way to keep you on the right side of the market

 

Hi, Can you show Chart examples? its hard to follow without examples.

[BlowFish 10]

The comments where about this chart (posted earlier by TT) I added the green lines.

[rigel 10]

Thing is most days will be Choppy,Whipsaw Ranges. Trading these setups in real time is a whole differant ballgame then mark up a chart at end of day.

 

I hope everyone keeps posting their Entries each day with charts so we can fight this beast.

 

You are right, it can be frustrating as there are so many terms and pattern names, by the time you have figured out which one you are looking at, the trade would have passed and then in hindsight it becomes so easy to justify with all the trendlines, etc.

Many of the charts in the book, though based on a simple 5min chart have so much complex analysis, so in realtime it could be worse than say anybody who relies only on CCI divergence as an example.

Guess as Al says he prints out these charts daily and identifies the setups as a daily routine exercise, so you reach a point where it becomes subconscious like driving a car.

Edited June 19, 2009 by rigel

[szubaark 10]

Also like ano other method, with this method the difficulty comes with idenntifying the Legs. Since a H2 Long setup u might think is 2 Legs but its just One leg with 2 small legs in between. Im constantly asking myself is this a 2 Leg pullback or a a 3 Leg pullback? LOL

[BlowFish 10]

Often the legs are just separated by a small doji. Another trick is to zoom in to a 1 min chart. Sometimes the correction within the correction is only a minute or two.

[forrestang 10]

Just my two cents since we're all learning here....

 

Things that have helped me, was to try to label each H/L 1 &2 etc that occurs on each chart. Then start adding things in there. When you see inside bars, label them as such "ii"...., throw in Double Bottom Bull Flags or Double Top Bear Flags, then the Pull back that occurs afterward. Eventually, the trading opportunities that occur will become more obvious.

 

H1,L1s etc that occur are legs. But in viewing the big picture on the day, the legs in during a trend start to become obvious. Eventually, the problem will become deciding how to take profits, which is what I struggle with.

 

At the end of the day, I also have been re-marking up charts. I do a remark of the ES contract, then I also do the NQ contract that provides a bit of subtlety to help a bit. Don't be afraid to construct Trend Lines to help make sense out of what the big picture is telling you.

 

The book is great, but it's hard to read and not organized in the best manner. So it will take a bit of time to FULLY decipher. But in the meantime, real time throughout the day, continue to mark it up.....trying not to get too caught up in how correct you are labeling everything. There is wiggle room for interpretation of all the pullbacks.

 

If all this is still too confusing, REALLY, just focus on labeling your H/Ls. Then focus on taking the H/L2s....which represent second entries (The 1st wave is usually for the newbs).....that occur NEAR the EMAs. Most importantly, concentrate on taking WITH TREND ENTRIES. Eventually you will branch out and find the other great opportunities throughout the day.

 

Then start to add micro trend line breaks into the mix. Which most of times will represent H/L1s.

 

Don't think about reversals initially. Pay attention to when they "might" occur. If anything maybe you use this to decide not to enter (For example in a BEAR, if you see 3 Tight Pushes down form a wedge, then a retest with reversal occuring, maybe hold of on prior with WITH TREND shorts temporarily). But as mentioned in the book, if you are spending too much time looking for reversals.....then you are probably not observing the trend, and are missing many of the MOST profitable trades that occur throughout the day.

 

All the above is of course just observations I've made as I'm still learning with the rest of you.

Edited June 19, 2009 by forrestang

[zdo 20]

"difficulty comes with idenntifying the Legs" szubaark

anyone got time to give us a Leg lesson that's not just a re-gurg of the original text and covers some of those gotchas ? thx

Edited June 19, 2009 by zdo