Futures I Trade Show & Brooks Book

[Guest Maletor]

Ah yes, don't we all just love hindsight?

Here's a chart I randomly pulled up and marked. It's from 6/11.

 

1 - H1 powerful trend, microtrendline break, bull signal bar

2 - Lower high after trendline break, up down reversal

3 - H2, M2B

4 - Higher low after trendline break

5 - Double top, bear reversal bar

6 - Failed bull reversal bar, H1 in a channel, breakout pullback of double top, trapped shorts

7 - HOD channel overshoot, up down reversal, test channel start

8 - Lower high after trendline break

9 - micro trendline breakout failure short, lots of selling pressure.

 

Question: Why would I not be a trapped short at bar 6?

 

I think 7 is the worst trade and 3 is the best.

 

What are your thoughts? Would you mark this day differently?

[BlowFish 10]

Agree about 3, after a momentum move (perhaps more important to a scalper than 'trend') you might anticipate a 2 legged correction. Mind you I'd be wary of 5 too being at the top of a range. I also see trades between 5-6 and between 8-9. No time to annotate a chart right now, have company.

[Guest Maletor]

I can't edit my post but I meant to say trapped short at bar 5, not 6.

 

Between bar 5 and 6 is a failed L2 and an inside bar, but it's a bear trend bar.

 

Between 8 and 9 is an L2 that I probably would have taken and lost 2 - 2.5 pts.

[ACS 10]

I can't edit my post but I meant to say trapped short at bar 5, not 6.

 

Between bar 5 and 6 is a failed L2 and an inside bar, but it's a bear trend bar.

 

Between 8 and 9 is an L2 that I probably would have taken and lost 2 - 2.5 pts.

 

ES broke a bull TL three bars after bar 1 so look for two legs down which ended one bar after bar 3. Now look for test of extreme in two legs. First leg ended four bars after bar 3. Market then tests the EMA and starts what looks like second leg but stops at bear flag at bar 4. Flag means two legs down again. First leg is doji after bar 4 and second ends three bars after bar 4. Now have higher low so expect rally to test extreme. This unfolds as two legs. First leg ends two bars after bar 5 and may be THE top but the pullback holds the TL and forms a second leg up to the HOD. Second TL is then broken so longer looking to buy unless strong uptrend begins again. You should not be looking to sell between bars 5 and 6; trend is up, no break of TL, etc. Context is important; every L2 is not a sale. Between bars 8 and 9 it looks like every L signal bar is a bull trend or doji that the book warns about. Bar 3 is classic two-legged pullback to the EMA and clearly the best trade.

[Guest Maletor]

Didn't HOD go too far to be considered a test of the extreme?

[Guest Maletor]

I probably got most of these wrong, but here goes.

The after lunch trading on both days turned quite unattractive, probably due to summer. It's not even worth it to me to trade a summer Friday.

 

1 - False two bar double bottom, trend from open

2 - L2, should allow some room to run, can't move stop up to -3 ticks

3 - 2 legged test of extreme, 5 bars prior was a doji L2, and we had three pushes down and a trendline break, BW

4 - L4 at EMA, this one is after a doji too and is not so good,

 

5 - L2, breakout pullback, piece of barb wire

6 - L1, micro TL break

7 - L2, normally I would like for it to reach the EMA, but here the TL worked in favor of the EMA

8 - I probably wouldn't have taken this real time, but there are some long buying wicks, three pushes (5 actually), TL break, lower low test of extreme, reversal bar.

 

1 was best trade of 6/15. 5 was best trade of 6/16 (though a pretty average trade on an more typical day)

 

3 and 4 tie for the worst on 6/16. 8 was worst of 6/16

 

How do you see this?

[ACS 10]

Didn't HOD go too far to be considered a test of the extreme?

 

My first instinct is yes but if you look at some of the charts in the book then I'd say no.

[ACS 10]

I probably got most of these wrong, but here goes.

The after lunch trading on both days turned quite unattractive, probably due to summer. It's not even worth it to me to trade a summer Friday.

 

1 - False two bar double bottom, trend from open

2 - L2, should allow some room to run, can't move stop up to -3 ticks

3 - 2 legged test of extreme, 5 bars prior was a doji L2, and we had three pushes down and a trendline break, BW

4 - L4 at EMA, this one is after a doji too and is not so good,

 

5 - L2, breakout pullback, piece of barb wire

6 - L1, micro TL break

7 - L2, normally I would like for it to reach the EMA, but here the TL worked in favor of the EMA

8 - I probably wouldn't have taken this real time, but there are some long buying wicks, three pushes (5 actually), TL break, lower low test of extreme, reversal bar.

 

1 was best trade of 6/15. 5 was best trade of 6/16 (though a pretty average trade on an more typical day)

 

3 and 4 tie for the worst on 6/16. 8 was worst of 6/16

 

How do you see this?

 

I agree. Trade 2 gave some serious heat, probably due to the prior three bars forming a sort of trading range that tried to pull the market back up, but it did work and it shows why you need a two point stop.

[balllightning3 10]

Hi,

 

I have been reading Al Brook's "Reading Price Charts Bar by Bar".

 

Though not a newcomer to TA or PA, I have been having problems grasping some of the concepts put forward by Al. I hope someone will be able to shed some light on my queries and explain them in more "layman" terms. I greatly appreciate any help at all.

 

1. The first thing i'm having problems understanding are the high/low 1,2,3,4. In the book, the author proposes that a reliable sign that a pullback in a bull or trading range (converse is true) has ended is when the current bar's bar extends at least one tick above (below) the high of the prior bar, hence forming a high/low 1. My question is, do you have to wait for a pullback before you start counting the high/low bars? What about days that trade mostly flat. How then do you apply the counting of High/Low bars? Also, how do you know WHEN to start counting? I am also puzzled by the fact that there are many examples in the charts in the book whereby the high of the High1 bar does not exceed the high of the previous bar but is still labeled as a High1 bar.

 

2. Another question I have is that, in the book, a 20 EMA is used in the charts for the ES. I would like your opinions as to would I need to make a change to the time interval of the EMA I if I traded another market, such as maybe corn, or forex? What about if I were using a different time interval, or even a different type of chart (tick chart)

 

Once again, I am very thankful for anyone who can help me with these questions.

 

IKZ

[ACS 10]

Hi,

 

I have been reading Al Brook's "Reading Price Charts Bar by Bar".

 

Though not a newcomer to TA or PA, I have been having problems grasping some of the concepts put forward by Al. I hope someone will be able to shed some light on my queries and explain them in more "layman" terms. I greatly appreciate any help at all.

 

1. The first thing i'm having problems understanding are the high/low 1,2,3,4. In the book, the author proposes that a reliable sign that a pullback in a bull or trading range (converse is true) has ended is when the current bar's bar extends at least one tick above (below) the high of the prior bar, hence forming a high/low 1. My question is, do you have to wait for a pullback before you start counting the high/low bars? What about days that trade mostly flat. How then do you apply the counting of High/Low bars? Also, how do you know WHEN to start counting? I am also puzzled by the fact that there are many examples in the charts in the book whereby the high of the High1 bar does not exceed the high of the previous bar but is still labeled as a High1 bar.

 

2. Another question I have is that, in the book, a 20 EMA is used in the charts for the ES. I would like your opinions as to would I need to make a change to the time interval of the EMA I if I traded another market, such as maybe corn, or forex? What about if I were using a different time interval, or even a different type of chart (tick chart)

 

Once again, I am very thankful for anyone who can help me with these questions.

 

IKZ

 

Just about all these questions have been asked and answered in previous posts or in the videos that are linked here.:missy:

[RichardTodd 10]

Here's what I did in the first hour off my "brooksy" chart... again, I was trading in terms of the range defined by the first few bars. Again, I entered long after a red doji bar, which I've been warned about. This time, it failed on me, but I took the reversal (failed failure to break down from the range), and it more than made up for the loss.

 

 

I haven't seen much in the book about taking profits, other than scalp out and maybe swing a portion of the position... so I chose a peak from Friday to exit. Time will tell if that was too early or not.

 

At the level I'm at with this stuff, my other trading styles are far more profitable for me. So, I'm going to try to step up my 'brooks' game soon. I may try to start doing the h1/h2 labelling after hours, to see if I can grok it, but during the day I'm still just keeping it simple.

[forrestang 10]

 

Once again, I am very thankful for anyone who can help me with these questions.

 

IKZ

 

This thread is seriously long, and slightly bloated now. But if you take a weekend to read it, it would probably make your reading through the book 100x easier. Watch those videos people posted too, it will help I promise.

[ACS 10]

Here's what I did in the first hour off my "brooksy" chart... again, I was trading in terms of the range defined by the first few bars. Again, I entered long after a red doji bar, which I've been warned about. This time, it failed on me, but I took the reversal (failed failure to break down from the range), and it more than made up for the loss.

 

The first several bars were more than a range, they were a bear flag so you should expect at least two legs down. The first leg ended at 939.75 and bounced off the EMA but that bounce was only a pullback before the next leg down. No buys should be contemplated until the market shows signs of strength after that second leg down.

[Mr_black 10]

Nice start for the week I took 3 trades Range Bo-Short, Micro trend Line Bo Short and Long on Bear Trap...Volume was used for confirmation non-confirmation....... PL+16 ticks.....

[szubaark 10]

7/20

 

5wins 9 losses Total -6 ES Points

 

After 2 months so far, im not getting anywhere with this "Al" method.

Im getting 4 Ticks but then -1.50 to -2 Stops are needed to catch the 4 ticks. AND U DO NEED THE FRIKIN 2 PT STOP.I can have 4 out of 5 winning days in a week and then One bad day will make me negative for day. Cherry picking these setups is a stressful way to live and even then these setups are 50/50 i feel. I guess i just cant make this work in a REAL Trading environment. At end of day marking up the charts, sure thats easy.

Think Ill stop posting charts for a while.

[ACS 10]

7/20

 

5wins 9 losses Total -6 ES Points

 

After 2 months so far, im not getting anywhere with this "Al" method.

Im getting 4 Ticks but then -1.50 to -2 Stops are needed to catch the 4 ticks. AND U DO NEED THE FRIKIN 2 PT STOP.I can have 4 out of 5 winning days in a week and then One bad day will make me negative for day. Cherry picking these setups is a stressful way to live and even then these setups are 50/50 i feel. I guess i just cant make this work in a REAL Trading environment. At end of day marking up the charts, sure thats easy.

Think Ill stop posting charts for a while.

 

You are overtrading. On a day like this 14 trades is WAY too many. Look for 1-3 trades a day that really jump out at you. Your first trade makes sense to me because after the bear flag you should expect one more leg down. The second trade was a sale at a time when you could be expecting the correction to end after two legs down from the bear flag. There was a gap open higher so even with the flag the larger trend might be up. Better to wait for more price action to see if the market reverses from that low or continues down. The bar after your second trade was a setup for a H2 from a double bottom that tested the prior close. From that bottom you would expect two legs up and the best trade was the H2 (variant) that came two bars after your fourth trade. By then you should be finished since the market was indecisive and there was a lot of barb wire (where you took 6 trades). Slow down and try to think about what the price action is revealing about the market. When you have attained that ability then the best setups will become obvious. I have only begun my own journey down that road but it has helped me eliminate a lot of losing trades already. Make sure you do the same thing when reviewing charts at night. Don't just look for setups, look for the story the market told during the day. Best of luck.

[RichardTodd 10]

Here was the only other Brooks-style trade I made today.

 

 

I'm not sure how great it was, because I was looking at the run up to 944ish as a wedge-shaped pattern, and was looking for more of a retest of the breakdown before getting short... but I remembered the ioi discussion in the book, and went for it.

 

The low from that trade established a channel that held the rest of the day, but from a Brooks perspective, I didn't see any more entries that I liked. Probably just inexperience with the method... but all the overlapping candles made me hesitant. I generally trade much smoother looking charts than the 5min, but I'm trying hard to evaluate this method on its own turf, so to speak.

Edited July 20, 2009 by RichardTodd
"it's" when I meant "its"

[HAL9000 10]

7/20

 

5wins 9 losses Total -6 ES Points

 

After 2 months so far, im not getting anywhere with this "Al" method.

Im getting 4 Ticks but then -1.50 to -2 Stops are needed to catch the 4 ticks. AND U DO NEED THE FRIKIN 2 PT STOP.I can have 4 out of 5 winning days in a week and then One bad day will make me negative for day. Cherry picking these setups is a stressful way to live and even then these setups are 50/50 i feel. I guess i just cant make this work in a REAL Trading environment. At end of day marking up the charts, sure thats easy.

Think Ill stop posting charts for a while.

 

 

Hi Szubaark,

 

I am not trading Al's method, but I have watched the webinars,

so I think I know, what you are trying to trade.

 

Please don't to stop to post your trades, yes I am just a lurker, but

it might help you, because you will get feedback over time, that might help you.

 

I simulated for a long time, not in a profitable way, but maybe now, I might have found an edge with the help of this community here at TL,

but only time will tell, and its finally still up to me.

 

So here is my remark, my question to you:

 

I see a trendline on your chart, which shows an uptrend (maybe you draw it in hindsight?!), but

 

why are you shorting against this climbing line?

 

Why are you not holding a long longer based on this climbing line?

 

You don't have to answer me, just answer these questions for yourself.

 

 

Regards and best wishes,

 

Hal

[Kiwi 16]

You are overtrading. On a day like this 14 trades is WAY too many. Look for 1-3 trades a day that really jump out at you. Your first trade makes sense to me because after the bear flag you should expect one more leg down. The second trade was a sale at a time when you could be expecting the correction to end after two legs down from the bear flag. There was a gap open higher so even with the flag the larger trend might be up. Better to wait for more price action to see if the market reverses from that low or continues down. The bar after your second trade was a setup for a H2 from a double bottom that tested the prior close. From that bottom you would expect two legs up and the best trade was the H2 (variant) that came two bars after your fourth trade. By then you should be finished since the market was indecisive and there was a lot of barb wire (where you took 6 trades). Slow down and try to think about what the price action is revealing about the market. When you have attained that ability then the best setups will become obvious. I have only begun my own journey down that road but it has helped me eliminate a lot of losing trades already. Make sure you do the same thing when reviewing charts at night. Don't just look for setups, look for the story the market told during the day. Best of luck.

 

Good analysis (and thanks for posting szubaark).

 

I trade like but not the same as Al. Key things are:

- being patient and waiting for the clearest trades

- expecting one or two pushes out of each basing

- never fighting the trend

- resisting your own emotion driven reactions when you miss what is a great trade in hindsight.

 

I would add that horizontal s&r (and thus where you expect a retracement to end) can add a lot to an ma based retracement strategy.

[szubaark 10]

Thanks ACS kiwi hal

 

Yes sometimes i focus too much on the Setups and miss the big picture.

That Double Top at Open threw me off as i thought we tried TWICE to gi higher and Failed so felt Sellers were in control. But once gap closed, they took it higher, in a slow controlled upmove. than the BW after the 2pm Higher High attempt caused most of my losses. That BW made sure only strong hands survived and got in on the upcreep to new Highs on day.

[RichardTodd 10]

As a suggestion, people prone to overtrading may want to try focusing on the 15-minute charts for a while. It's helped me, in the past.

 

Speaking of which, I'm starting to think it might be useful to go over 1, 15, and 30 minute charts at night, with the purpose of figuring out how to spot their best setups on the 5-minute chart. If I'm going to stick with the Brooks 1-chart mandate, it might be good practice. For instance, look at how clear the ii setup is at 2:30 to 2:45 on the 15-minute chart today (sorry, not at my trading machine so using bigcharts on SPY with no annotation):

 

 

... and look at how relatively unclear it is on the 5-minute chart (I didn't make a trade here because it seemed so noisy):

 

 

If I had been able to recognize what it would have looked like on the higher timeframe, though, it would have been a nice trade.

Edited July 21, 2009 by RichardTodd
typo

[DynamicFx 10]

Sorry for asking this here, but it's partly connected to what Brooks says in the book.

 

I trade currencies live, but I'm also demo trading the ES at the moment. What I'm interested in, is swing trading the SPY on 15m+ timeframes, using some of Brooks methods.

 

Could someone please outline what is needed to trade the SPY. I am almost certain to go with IB as the broker, but am unsure if I'll actually be allowed to trade the SPY.

 

Also, is it possible to get a demo feed of the SPY on any charts.

 

Thanks.

[Mr_black 10]

Today's trades: Bar 5 Outside bar Short P/L+8 , Bar 7 Mtl Fbo no entry, Bar 12 Bear Trap Long P/L+8,Bar 21 H2 Long P/L-4, bar 25 Mtl fbo Short P/L+5.....Total P/L+17

[Guest Maletor]

Today's trades.

 

Had some that worked out that were not very good...

 

1 - Decent sized gap, trend bar, and reversal bar failure = trapped longs

2 - 2 bar double bottom in strong trend, worked out, but with the outside bar i should have waited for more PA

3 - like the L2 that developed at the previous lower high resistance and was an EMA gap, this was best trade of the day

 

Between 3 and 4, I'm sure you could have found a micro trendline short, but I was waiting for something a little more juicy.

 

4 - Worst trade of the day, L1, after a strong trend, after a doji, it did have a 2 bar double top, but it entered chop, double bottomed and I got out +4

 

5 - three pushes down, shrinking stairs, up down reversal, bottom of channel, failed final flag, this one was a risky SOB (still not as bad as 4 )

 

6 - catching the second leg up on a breakout pullback of a significant trendline break, stopped out because i failed to recognize the bigger TL drawn from the open and bar 3 highs

 

a - this area was tough to play. it ended the two legs i was looking for, so there was reason to start looking short again. in the end, lots of overlapping junk looking stuff kept me out.

 

7 - not a trade i took, but that's a reversal bar and a micro trendline break, not a great trade.

Edited July 21, 2009 by Maletor

[forrestang 10]

Has anyone figured out how to quantify what the 'best trades' are each day?

 

By that I don't mean setup 1 vs. setup 2 or something, just if you were trying to explain to someone to pick the very best trades throughout the day, how would you do it?

 

I mean wether it be something having to do with how we opened, or using a S/R level somewhere, or whatever criteria you wish?