Futures I Trade Show & Brooks Book

[ACS 10]

A couple of problems here. This morning our opening bar was a strong trend bar. Got long on its break at 969.75, and had a choice of a humongous 3.75pt stop (just below the bottom of the bar) or Al Brooks' more commonly recommended 2pt stop. Market went down to exactly 967.75 and immediately stopped me out for a 2pt loss. Then it reversed up. Did I get back in after just losing 2pts? No. Why should I trust it now to the upside after it just made a big bear-trend bar? Realtime and after-the-fact are so different.

 

As to yesterday after the 9:50 pullback, the problem there was you would be entering on the 9:55 bar immediately before the market-moving 10:00am gov't report (Existing Home Sales). That's always risky as there is often wild fluctuations with those reports. Yesterday it would have worked just fine. Again, realtime and after-the-fact are so different.

 

This morning is a reminder that nothing is perfect. Not only was the first bar a bull trend bar but it was also a very good looking reversal bar after two legs down that broke the bull trendline from yesterday and it was a trend channel overshoot. Hopefully you realized that it was just the first leg of a two step pullback to the EMA and got short at 969.00.

[mosley 10]

This morning is a reminder that nothing is perfect. Not only was the first bar a bull trend bar but it was also a very good looking reversal bar after two legs down that broke the bull trendline from yesterday and it was a trend channel overshoot. Hopefully you realized that it was just the first leg of a two step pullback to the EMA and got short at 969.00.

Thanks for your comments, and I agree nothing is perfect. Part of my post was to address the previous blanket statement (by another) that "any trade on either side of a strong trend bar is a good trade".

 

I like the Al Brooks book alot, it contains quite a few useful insights, etc. Appreciate his many chart examples although it's a shame that pretty much all his described trades are winners. Would be much more realistic if he included losers too, as I seem to find them everywhere in real trading.

 

And unfortunately I didn't get short at 969.00 as you mentioned since the entry would have come on the 9:50 bar and there was a market-moving gov't report due out at 9:55 (Consumer Sentiment). Obviously the market moved down and the trade would've worked fine. Having been nailed so many times in the past I'm still very tentative about entering trades right before gov't reports.

[zdo 20]

Here is some more of the same indicator/system from just a few minutes ago… over the weekend, will have to look at this on ndxs and also what this indicator is missing that Brooks microTL’s are picking up and vv what the microTL’s are missing that this is picking up…

Wonder how strict he is on having the microTL's bar tops (or bottoms) line up in a straight line ?? Thanks.

[mosley 10]

And unfortunately I didn't get short at 969.00 as you mentioned since the entry would have come on the 9:50 bar and there was a market-moving gov't report due out at 9:55 (Consumer Sentiment). Obviously the market moved down and the trade would've worked fine. Having been nailed so many times in the past I'm still very tentative about entering trades right before gov't reports.

One other point on that trade, while the 9:45 bar was indeed an inside bar it was quite large and would have required a 3.00pt stop (entry 969.00, stop 972.00 or even 972.25 to exceed the adjacent 9:40 bar). In this case it worked. But in realtime with all the problems mentioned (gov't report due on next bar, huge stop required) and the fact that the market had showed quite a bit of strength to the upside didn't make it nearly as easy as it is now when we look back on the charts.

[ACS 10]

One other point on that trade, while the 9:45 bar was indeed an inside bar it was quite large and would have required a 3.00pt stop (entry 969.00, stop 972.00 or even 972.25 to exceed the adjacent 9:40 bar). In this case it worked. But in realtime with all the problems mentioned (gov't report due on next bar, huge stop required) and the fact that the market had showed quite a bit of strength to the upside didn't make it nearly as easy as it is now when we look back on the charts.

 

Agree 100%. If there is ANY doubt about a trade... stay out!

[ACS 10]

I like the Al Brooks book alot, it contains quite a few useful insights, etc. Appreciate his many chart examples although it's a shame that pretty much all his described trades are winners. Would be much more realistic if he included losers too, as I seem to find them everywhere in real trading.

 

And unfortunately I didn't get short at 969.00 as you mentioned since the entry would have come on the 9:50 bar and there was a market-moving gov't report due out at 9:55 (Consumer Sentiment). Obviously the market moved down and the trade would've worked fine. Having been nailed so many times in the past I'm still very tentative about entering trades right before gov't reports.

 

Chapter 9 has quite a few losing trades described as failures and the last paragraph on page 199 talks about news events.

[bakrob99 11]

Agree 100%. If there is ANY doubt about a trade... stay out!

 

Sadly, I find that the BEST trades are the ones that have doubt attached to them.

[bakrob99 11]

Guys, I have to tell you, risking 4-6 ES ticks to scalp 4 ticks (most of the time) is not my thing because I'm a 2-contract ES player and that's why I feel that if f I'm going to risk 4-6 ticks, then I want 6+ ticks to risk 4 and 12+ ticks to risk 6 on an all-in / all-out basis.

 

 

Scourt - welcome to the Forum. I actually agree with you and have posted my concern about the R:R in this thread before. ( I believe that Brooks trades this way because he trades a large number of contracts so getting 1 point actually makes him some serious dough which it won't do for 2 lot traders)

 

Frankly, I would prefer the type of S/R trading that you show in the chart as the Stop is small and the potential target is known, and larger than the risk.

 

Do you take trades in these ranges fading the extremes?

[ACS 10]

Scourt - welcome to the Forum. I actually agree with you and have posted my concern about the R:R in this thread before. ( I believe that Brooks trades this way because he trades a large number of contracts so getting 1 point actually makes him some serious dough which it won't do for 2 lot traders)

 

Frankly, I would prefer the type of S/R trading that you show in the chart as the Stop is small and the potential target is known, and larger than the risk.

 

Do you take trades in these ranges fading the extremes?

 

You have to remember Brooks differentiates between trades that are just scalps and those where he swings at least some portion. If you are just trading for a 1 point target with a 2 point stop then I agree you are at a disadvantage and would be lucky to break even as a beginner. He mentions several times in the book that big profits come from trading multiple contracts and knowing when to swing some for that much better risk/reward ratio.

[bakrob99 11]

... He mentions several times in the book that big profits come from trading multiple contracts and knowing when to swing some for that much better risk/reward ratio.

 

I agree. Trade Size is his belief rather than try for a lot of points. And it makes sense for those who have the capacity/stomach to trade size.

 

Regarding letting a position swing - he does not profess to know when a move will work. He lets the market determine it by moving his stop to break even and letting a portion run. He is against trying to "cherry pick" trades. He states many times that doing that - you will inevitably pick more bad cherries than good ones.

[mbfromla 10]

I understand where you guys are coming from, having concens regarding risk reward.

The reason Brooks has that approach is because that works for him. Doesn't mean will work for you.

Complaining about 2 lot contracts: I highly doubt you can make serious money, consistent 5k plus not even talking 10k plus trading only 2 contracts.

As mentioned before my goal is 250$ per contract per week, then nothing will hold a trader back to trade 5 or 10 contracts or even 20 contracts with time.

 

in a chatroom of this site most of us, if not all, are profitable 2nd week in a row, i have been doing good trading the methods 3 weeks in a row so far. And market conditions were not all that favorable every day.

 

When you let the 2nd leg swing, that's where you make good money, this week alone there were a few 4- 5 point potentials for the 2nd contract, and one around 10 points swing potential.

 

And again, what works for one person might not and will not work for another, your trading style HAS to match your personality. Otherwise, you might make money a month or 2, but in a long run, your personality will take over and you will loose.

[djohnsonhot 10]

On top of runners, averaging INTO a trade, even by a couple of ticks after confirmation of a good entry, can add profits. Esp if you let that/(those) second contract(s) (by a double down from 2 to 4, from 4 to 8, etc) can REALLY pay off.

 

I have been watching a guy name Carl Futia trade for a while and wondered why he would average DOWN into a trade by adding a second, or two more, contract(s) and the math works, so long as you don't let your first run up by 5 points to something.

 

Another rule I TOTALLY agree with: if you have two reasons to enter (double top, doji, for example) and one reason to NOT enter (still not at top of day range, or running into a fib on reversal), then DO NOT enter.....think about this: if you have entered a trade but a gut feeling was hitting you when you clicked your mouse, you know it IMMEDIATELY and can USUALLY find your error for that entry.

 

THE VERY NEXT STEP: be ready to exit with a stop. Pull your stop into your trade, and wait for another BETTER set-up with no bad gut feelings and more reasons to enter. Use all of your tools:

 

1. Volume: Brooks does not emphasize volume much. A BIG MISS in my book.

 

2. RANGE: where are you in the range.

 

3. Trend: meaning the bigger picture for that session as CONFIRMED by the overall market direction. My rule: you forget the trend, or ignore it, and you will not therefore actually know if you are in a counter move or a trend move. If you cannot bet that $1000 on a trade (if you say to yourself, YES, I would lay down $1000 because I KNOW THE TREND, and I am countering, fading, or trading with it, then do not take the entry).

 

4. Money Management: pre-determine you hard stops (6 to 8 ticks) and do NOT vary from them. The old adage goes: there will always be another trade.

 

5. Understand waves and patterns, and know your candlesticks and play the S/R levels to your advantage.

 

FINALLY:

 

6. If you have a chart tool loaded, and ignore it most of the time, take it off your chart. How many times have you entered a trade only to notice that one of your oscillators, or Moving averages, or a consolidation/chop zone indicator has signaled and THEN you notice your bad entry was actually made quite obvious and you missed it! USE YOUR TOOLS, remove tools you do not use and take Brooks at his word: simple, clean, and then use those techniques.

 

OK, everyone, happy trading. I am excited about this coming week as we are in a turning point. Either we continue long or roll over. Some great days are in the mix.

 

Regards,

 

DJ

[szubaark 10]

"1. Volume: Brooks does not emphasize volume much. A BIG MISS in my book.

"

 

Actually he does talk about Volume, but its using the 1minute on rare occasion to confirm a Climax of a Bottom or Top.

 

I never watched Volume so thats probobly good, one less thing to worry about and cloud my reactions.

[balllightning3 10]

A thought about volume.

 

For example, given that it has been a bull trend day, by following Al's trading logic, you should be looking to buy H2 or even H1 breakout pullbacks. Given the strength demonstrated by the bulls overall, should we expect to see higher volume on the bull trend bars vis-a-vis the bear trend bars?

 

Much of the bear pullback bars can be accounted to previous long taking profits, so should we be seeing lighter volume on these bear pullbacks?

 

That's just what I think, and I could be totally off. Appreciate some critique.

[djohnsonhot 10]

"Brooks does not emphasize volume much."

 

I stand by my statement. Watch his video's....he rarely mentions volume.

 

Not taking volume into consideration is a mistake. But, I understand your point.

 

Watch volume spikes, though, at major reversals.....in combination with DOJI's, volume is powerful and I always have volume as a bottom panel indicator.

[ACS 10]

"Brooks does not emphasize volume much."

 

I stand by my statement. Watch his video's....he rarely mentions volume.

 

Not taking volume into consideration is a mistake. But, I understand your point.

 

Watch volume spikes, though, at major reversals.....in combination with DOJI's, volume is powerful and I always have volume as a bottom panel indicator.

 

If you look at the early articles in Futures and first presentation at the I-Trade show, volume is on the charts. The volume vanished from his later articles and lectures. My guess is that he has been looking at charts for so long that he just intuitively knows the approximate volume, possibly from how often the price changes or ticks on each bar or some other subtle clue.

[Guest Maletor]

What are your thoughts on the short at number 4.

 

No trendline break but there is a reversal bar, three pushes up, and a channel line overshoot on a trading range day.

 

Second entry could be materializing now, but i took first entry which you see on the chart.

 

Too aggressive?

[mbfromla 10]

What are your thoughts on the short at number 4.

 

No trendline break but there is a reversal bar, three pushes up, and a channel line overshoot on a trading range day.

 

Second entry could be materializing now, but i took first entry which you see on the chart.

 

Too aggressive?

 

Doesn't look bad, and there is a separation from the 20MA, but in a strong trend like today, it was clear that this sucker was refusing to go down, so perhaps it would've been wiser to wait for an L2 at that point.

[ACS 10]

What are your thoughts on the short at number 4.

 

No trendline break but there is a reversal bar, three pushes up, and a channel line overshoot on a trading range day.

 

Second entry could be materializing now, but i took first entry which you see on the chart.

 

Too aggressive?

 

The only trade I saw today that was worth the risk was the failed breakout of yesterday's high early in the morning with an entry short at 976.00. Good looking inside bear signal bar and it was selling at the top of a prior trading range.

[ACS 10]

Came up with a goose egg today. Not a single setup spoke to me. Anyone see anything?

[Guest Maletor]

Sure did ACS.

 

First bar was a bull trend bar in a minor gap. That is a gap that is not a breakaway (flag) or opening (it is outside yesterday's range) gap. These have a higher probability of filling. So I snagged it.

 

Number two was 11:00 EST. Two inside bars, *not* in barb wire. These bars were contractions in volatility as I saw them, not trading range bars. The EMA held, and it was an L2, so I took it short.

 

There was even an L1 to be had off that sell off and a new LOD. Not as high probability as the former two but still good.

 

I can't read the rest of the chart too clearly. I always get thrown off when it looks like it's going to be a trend day and the market reverses.

 

I'm sure there are plenty of worthy entries after LOD, but I didn't see them or take them.

 

Chart attached.

[DynamicFx 10]

I'm sure there are plenty of worthy entries after LOD, but I didn't see them or take them.

 

I saw the trendline break and was waiting for the pullback. As you can see I took the wrong entry bar. I sat and watched the bar marked 'A' and thought to myself, this is buying coming in, this is the entry bar. Even though it was only demo, I was quite frustrated in not taking it.

 

When I checked my YM chart later in the day, this setup was much clearer.

 

I also noticed the barbed wire pattern after that first move up. There are certain nuances to barbed wire that I need to work on, as at times it can just be a continuation pattern as seen a bar 'B'. I saw bar 'B' break below, and was expecting another leg up, but it closed just too much in the middle for my liking, so I passed on it.

 

If I had of waited for the trendline break later in the day, I might have been successful with those final trades.

[ACS 10]

Sure did ACS.

 

First bar was a bull trend bar in a minor gap. That is a gap that is not a breakaway (flag) or opening (it is outside yesterday's range) gap. These have a higher probability of filling. So I snagged it.

 

Number two was 11:00 EST. Two inside bars, *not* in barb wire. These bars were contractions in volatility as I saw them, not trading range bars. The EMA held, and it was an L2, so I took it short.

 

There was even an L1 to be had off that sell off and a new LOD. Not as high probability as the former two but still good.

 

I can't read the rest of the chart too clearly. I always get thrown off when it looks like it's going to be a trend day and the market reverses.

 

I'm sure there are plenty of worthy entries after LOD, but I didn't see them or take them.

 

Chart attached.

 

The tails were just a little too big for me on the first bar. I saw trade 2 but the signal bar was a doji and after a sharp up and down a trading range was a strong possibility so I didn't pull the trigger. The reversal bar at the low was not a good looking one and the second entry was in barb wire (you had to be very persistant to get filled on that one). The rest of the day was too messy for me too.

[djohnsonhot 10]

Came up with a goose egg today. Not a single setup spoke to me. Anyone see anything?

 

 

The last couple of days have been choppy...but, I on my Five minute chart, I did see a beauty of a set-up before lunch on a break-down with stacking candles (on a short, open is at or below the close of the previous candle).....several in a row.

 

When I see that sort of Price Action, esp if the next candle gaps lower on a short, then I enter at will ....the participants are entering trades so quickly that the exchanges cannot keep up with the number of orders and the price gaps down candle to candle on such action.

 

I use a simple Zero Lag Vergvoort Crossover set of EMA's (Zero lag TEMA and Zero Lag Heikan-Ashi TEMA with the same value: 20/22 or 34) and look for cross-overs when ranges exhaust (volume confirming that longs are out or shorts are out) and look for Brooks' pull-back legs and DOJI's. If I stick to those set-ups, I am at 75% plus.

 

I use my other indicators to confirm as well. Volume though is a must and pure/simple price action and working ranges.

 

Rules not mentioned: I have to see more than a few attempts to push past a double top to go long at the top of the day's session range and vice-versa for shorts. The rule simply says that I am not willingly enter long at tops or short at bottoms (absolute ranges, mind you).

 

Happy Trading.

[szubaark 10]

I took this Open trade. My reason was it was a Double top Bear Flag, 2nd attempt to close gap,and we were below EMA..why did this FAIL?

Entry was 5th Bar (9:55 Eastern candle)

 

took -3 Stop ouch