Futures I Trade Show & Brooks Book

[forrestang 10]

I did not mean to derail this thread by bringing up that how one decides to split his price up is completely arbitrary. On the contrary, I was hoping to get something going that people may find of use in regards to selecting the very best trades.

 

And when I said that I meant those that are specifically trying to follow price 'bar by bar' using Brooks' methods.

 

What I was suggesting was completely compatible with Brooks' methods, I would be hesitant to even call it a variation. Even Brooks said that trading from a 1min chart is possible, just hard to do practically. But trading from a 1min chart is not what I'm suggesting for this thread.

 

The point I am trying to make is that using even a 5min chart, you might find 20-30 setups each day, depending on how you see things.... and if you start throwing fbos in the mix..... depending on how you see things you will go ape shit with all the trades in front of you. So how do you pick the best trades?

 

If you look at Mr. Black's charts which aren't completely the Brooks method, he's been initiating trades at areas where price had done something before.

 

Well, for example what if you're looking at a CT trade in the form of a wedge? Would you take every wedge you see during the day, that might be foolish? Would you wait for a major TL break and retest first? What if that wedge occured at an area that the majority of traders care about? Would that help you into the trade.... maybe so?

 

What if you're looking at an M2S..... are you blindly going to just start taking every M2S's that occurs on the day? Probably not the smartest thing to do. But what if price had just broken a level of good support, and was on it's way back up to that previous area where Support had now become Resistance? Would that make that particular M2S more meaningful than some random M2S out in the middle of nowhere? I personally think so.

 

What if you're looking for the opening Gap Bar Trade? And you identified that we were in a uptrend for a while..... and during overnight, you see price headed down to an obvious level that traders car about. And the morning opens with a trend bar in the direction of the overall trend, would that Gap Bar Play make more sense to you?

 

Barbwire, what if you see price starting to stall or hesitate.... is it happening at an important level, or is it happening in between a trading range? If it's in the middle... well sometimes price likes to head back towards the median at some point (so says AMT), so this is expected, maybe you say to yourself that you can chill out for a while as you know it makes sense that price has stalled there. It's the place where most transactions are occuring and that's what price wants to do. So maybe you have something to guide yourself beyond just seeing choppy bars?

 

Fbos..... did it occur at an anticipated area? If so then maybe that particular failure is a better one than simply a failed H2 that occured in the middle of nowhere.

 

The best setups ARE NOT the difference between an M2S and a M1S for example. So I am simply suggesting to try and take a look at the bigger picture of what price has done in various areas, and just take a look see if you can base your trades on that. You can still trade soley off of a 5min chart during the day, as long as you know where price is in relation to the BIG PICTURE.

 

This will give you fewer trades to consider daily, but it will also start to open up a picture of where price is going to continue or change directions.

 

I was initially annoyed with the off topic comments months ago in this thread...... but then eventually instead of being upset about it, I realized the point that was trying to be made (however harshly and bluntly they were being made), and there was something of value there. Even successful traders that don't trade bar by bar realize that money can be made in a gambit of ways.

Edited August 23, 2009 by forrestang

[rigel 10]

What stands out in Al's trading style is that his best trades are based on locations where either longs or shorts are trapped and he has been able to recognise those setups via 5min charts with high level of accuracy and is consistently profitable.

 

He just states that one can do so on 1min or 3min charts as well but it would be somewhat difficult and that it would be sufficient to just trade from 5min chart to make a good living.

 

Nowhere he enters in depth on right and wrongs of tick charts, smart/dumb money, wyckoff etc, so really this whole debate is not contributing much to this thread and as OP suggested should be taken on another thread.

[bakrob99 11]

Do you truly believe that big money players are sitting in front of their screens, drumming their fingers, waiting for a 5m bar to "complete" before taking a position?

 

Well, Isn't Brook's system based on it? Of course it is. Each bar is a "trend" according to his book and a breakout or breakdown of that "trend" is used to determine entries.

[forrestang 10]

He just states that one can do so on 1min or 3min charts as well but it would be somewhat difficult and that it would be sufficient to just trade from 5min chart to make a good living.

 

Nowhere he enters in depth on right and wrongs of tick charts, smart/dumb money, wyckoff etc, so really this whole debate is not contributing much to this thread and as OP suggested should be taken on another thread.

 

Obviously I don't know if your post was directed at what I posted above? If it was not, forgive me and ignore this post. If it was, I don't think you read my post?

 

Nowhere am I suggesting to use tick charts, find out what smart/dumb money is doing, wyckof or anything. I am talking about ways to pick the very best 'Brooks style' trades and ways to go about looking at it.

 

IMO this particular type of discussion is essential to this thread. Anyone can read the book, and gain a decent understanding of the material presented there. But what's next? That is all I am trying to get a discussion going about.

[LiggerPig 10]

Do you truly believe that big money players are sitting in front of their screens, drumming their fingers, waiting for a 5m bar to "complete" before taking a position?

 

From my understanding of Brook's thoughts in his book, he's saying you should enter with a trend for a higher probability of scalping a profit. His view being by waiting for the bar to complete you are simply asking the market to confirm the trend you are looking to enter. He stresses the importance of confirmation for many of his setups.

 

He sees bars as either trending or non-trending, and much of his emphasis is on putting them in the right context with prior bars and setups. He identifies uses for other timeframe charts inc. 1 min but he says 5 min offers a good number of opportunites per day for high probability setups and is the minimum timeframe he's physically able to trade effectively.

 

I think the question as to whether it's better to use 'pure' price action or that depicted by 5 min bars is interesting. For the 5 min bars to work in Brooks' favor, instead of drumming their fingers, the big players need to be entering trades seconds ahead of the 5 min bar completion to stamp their authority on direction and paint the bar to their advantage. When one side wins the battle for the bar Al gets his 'trend' and he enters on their coat tails whether the setup is with trend, counter trend, breakout, prior setup failure, etc.

Seems pretty implausible and is an obvious way for big players to do the exact opposite if enough traders used Al Brooks' setups. It clearly makes sense to use other methods to read price action, or at least integrate better methods when using Al's setups. That said, I've found the 5 min bars to be a good 'rough guide' and can often use them as per his book.

 

Other players' methods look for best possible entry with the tightest stops whereas Brooks likes a high win rate for scalps with the possibility of catching onto some big trends. I think his stressing the need for confirmations reflects the reliance on interpreting bars rather than 'pure' price action.

[bakrob99 11]

.... I think his stressing the need for confirmations reflects the reliance on interpreting bars rather than 'pure' price action.

 

Guys and Gals - please remember the title of the book. READING PRICE CHARTS BAR BY BAR.

 

Nowhere is it PRICE ACTION. Brook's point is the bar (and the combinations of them) contain all you need to know.

[BlowFish 10]

Colour me stupid but aren't price and price action essentially the same thing?

 

 

Incidentally Brooks does not wait for a bar to close to enter. He enters on a BO of the previous bar, there is a subtle difference. He has a clear understanding of what bars represent and what they are not. (imho)

[bakrob99 11]

Colour me stupid but aren't price and price action essentially the same thing?

 

 

Incidentally Brooks does not wait for a bar to close to enter. He enters on a BO of the previous bar, there is a subtle difference. He has a clear understanding of what bars represent and what they are not. (imho)

 

I think of Price action as the movement of the transactions shown on Time and Sales. This can be displayed on charts using bars of various intervals, ticks, volume, ranges whatever... But the price movement on tape and the recoirding of it are two different things for me.

 

Your point about Brooks NOT waiting for a close to enter is quite correct. But he does wait for the prior bar's close before placing his Stop entry. That is what I was referring to.

 

Good trading.

[mikea59 10]

The very basic of questions:

 

Still stuck on basic concepts like L1/2, H1/2. This chart is from one of Al's seminars, see the L1 - how is that an L1?

 

[ACS 10]

The very basic of questions:

 

Still stuck on basic concepts like L1/2, H1/2. This chart is from one of Al's seminars, see the L1 - how is that an L1?

 

[ATTACH]13273[/ATTACH]

 

He answers that question in the seminar. It's an L1 variant. Think about the price action intra-bar. The market went up into that doji bar, dipped down to the low of the bar and then rallied up to the high of the next bar. Up-down-up. Even though the price never went below the low of the previous bar, it would have on a smaller time frame chart. That is a two-legged correction which is what you are looking for.

[mikea59 10]

He answers that question in the seminar. It's an L1 variant. Think about the price action intra-bar. The market went up into that doji bar, dipped down to the low of the bar and then rallied up to the high of the next bar. Up-down-up. Even though the price never went below the low of the previous bar, it would have on a smaller time frame chart. That is a two-legged correction which is what you are looking for.

 

Thanks, that helps, but it's quite a subtle point, something that can be seen in hindsight, but not easily spotted in real time and certainly not well described in the book. To me, it looks like a single leg.

[ACS 10]

Thanks, that helps, but it's quite a subtle point, something that can be seen in hindsight, but not easily spotted in real time and certainly not well described in the book. To me, it looks like a single leg.

 

Like much else, with time it will become easier. If you are not sure then simply skip the trade; there are many other opportunities!

[jolee 10]

Like much else, with time it will become easier. If you are not sure then simply skip the trade; there are many other opportunities!

 

In this case and all cases , you must know what you're suppose to be doing. If you had written in your trading plan as one of your setup/patterns to trade is " Trade pullbacks to the trend or 20 EMA" then you should have taken trade whether you see it as a L1 or L2. This is where we make the mistake of not being able to see the forest because of the trees and miss out on a good potential trade.

 

Also this pattern is so important and fundamental that Guideline 29 of Mr. Brooks book says - " you can't make money in the markets unless you trade pullbacks off the trend"

 

Best of luck trading.

[ACS 10]

This is not a mechanical system that can be reduced to a simple set of rules. It is a highly discretionary methodology that requires constant evaluation of subjective criteria such as how "strong" a trend is or how "good" a setup appears. Dr. Brook's writings constantly stress that you should be looking for the very best trades and avoiding anything that is not. I'd go so far as to say that the most important thing to learn is not when to trade but when not to.

[Rafael 10]

Hi

I'm glad i found this thread regarding Al Brooks book - "Reading Price Charts Bar by Bar"

I received the book a few days a go and i'm trying to read it.

Upon reading the first few pages of the book i got the impression that the book is too advanced for my current stage but decided to go on anyway as i have a feeling that i can gain a lot of insight from the observations in this book.

 

My first question is about the definition of high1,high2. i'll be gratefull if you could clarify the following point for me:

The definition of the high1, high2 as written in the book is:

 

"High 1 is a bar with a high above the prior bar in a correction in an up or sideways market. If there is then a bar with a lower High (it can occur one or several bars later) the next bar in this correction whose high is above the prior bar's high is a high 2. Third and fourth occurrences are a high 3 and 4. there are other variantions as well"

 

Ok. i think i understand, but then on page 31 at the beginning of the page he writes (figure 1.18): "Bar 2 was a good reversal bar...... It was a high 2 long opening reversal ...."

Can anyone explain why bar 2 is a high 2 ? According to my understanding, this description doesn't go well with the definition...

It is really important for me to understand what the autor means by high 1,2 because he uses this term in almost every page...

 

Also do you think these methods can be used for an hourly and daily charts ? The author mainly refer to a 5 min chart.

 

Thanks

Rafael

[ACS 10]

Ok. i think i understand, but then on page 31 at the beginning of the page he writes (figure 1.18): "Bar 2 was a good reversal bar...... It was a high 2 long opening reversal ...."

Can anyone explain why bar 2 is a high 2 ? According to my understanding, this description doesn't go well with the definition...

It is really important for me to understand what the autor means by high 1,2 because he uses this term in almost every page...

 

Also do you think these methods can be used for an hourly and daily charts ? The author mainly refer to a 5 min chart.

 

Thanks

Rafael

 

Actually the bar after bar 2 was the H2, bar 2 was the setup bar for the H2. This is the most popular topic here and you need to go back to page 1 of this thread and read through. There is a lot of discussion on Highs and Lows. You will come across links to several of Dr. Brook's presentations. If the links are still good, save them and watch them. The first presentation "Short Term E-mini Strategies That Work" is particularly good on the subject. The method works in all time frames and the book has a chapter on daily, weekly, and monthly charts. Good luck!

[dbandas 10]

The bar after Bar 1 is the H1, so the bar after Bar 2 is the H2.

 

One is really looking for two-legged pullbacks. Often, the 2nd pullback is "deeper" as the market battles. The H2 can be at a higher price or a lower price than the H1. Figuring out when to start counting over is an art, but has to do with seeing the bigger picture of two-legged pullbacks. This throws me when he discusses H3s and H4s.

 

Reading the book from the first page to the last is daunting. I watched the videos several times, read the smaller articles to acclamate to the "lingo," and I found that indispensable. I also personally believe that Chapter Four is the place to start.

 

Good luck!

[mikea59 10]

Actually the bar after bar 2 was the H2, bar 2 was the setup bar for the H2. This is the most popular topic here and you need to go back to page 1 of this thread and read through. There is a lot of discussion on Highs and Lows. You will come across links to several of Dr. Brook's presentations. If the links are still good, save them and watch them. The first presentation "Short Term E-mini Strategies That Work" is particularly good on the subject. The method works in all time frames and the book has a chapter on daily, weekly, and monthly charts. Good luck!

 

I am constantly struggling with this as I read the book. I believe Al makes no real distinction with labeling his H1's, H2's etc. with regard to the entry bar and the signal bar. Sometimes he calls a bar an H2 when the NEXT bar is really the higher high, sometimes he calls a bar an H2 when IT is the higher high. Very confusing to the reader, but I'm getting used to looking at his H1's, H2's... and just realizing that he might be referring to the next bar.

 

Also, I think he is guilty of hindsight analysis. In figure 1.18, there is no trend established in the first few bars, best you could say we're sideways, or really bearish if you consider Y. So, you should maybe be looking for Ln's. After 7:10 or so, we start to see a bull trend, so bar 2 (or the next bar) would be a H2 in light of the fact that the following bars are bullish. Labeling bar 2 as H2 in real time is nothing more than a guess.

[ACS 10]

I am constantly struggling with this as I read the book. I believe Al makes no real distinction with labeling his H1's, H2's etc. with regard to the entry bar and the signal bar. Sometimes he calls a bar an H2 when the NEXT bar is really the higher high, sometimes he calls a bar an H2 when IT is the higher high. Very confusing to the reader, but I'm getting used to looking at his H1's, H2's... and just realizing that he might be referring to the next bar.

 

Also, I think he is guilty of hindsight analysis. In figure 1.18, there is no trend established in the first few bars, best you could say we're sideways, or really bearish if you consider Y. So, you should maybe be looking for Ln's. After 7:10 or so, we start to see a bull trend, so bar 2 (or the next bar) would be a H2 in light of the fact that the following bars are bullish. Labeling bar 2 as H2 in real time is nothing more than a guess.

 

I agree about your first point. Sometimes the setup bar is referenced and sometimes it's the entry bar. That's easy to see. About the second point I'm going to differ. With no trend established, you are looking at a trading range where countertrend entries are taken at the extremes of the range. Bar 2 in 1.18 is a reversal bar H2 at a new swing low and therefore a good candidate for a long trade.

[jolee 10]

Here's Dr. Brooks chart and comments for today

 

092509BrooksComments.PDF

 

092509ESchart.pdf

[Gabe2004 10]

Here's Dr. Brooks chart and comments for today

 

[ATTACH]13731[/ATTACH]

 

[ATTACH]13732[/ATTACH]

 

 

Hello Jolee

 

Where is the site where you got these files from?

 

Thanks

 

Gabe

[jolee 10]

Dr. Brooks daily updates and comments and advice available from brookspriceaction.com.

 

Best of luck trading.

[Gabe2004 10]

Dr. Brooks daily updates and comments and advice available from brookspriceaction.com.

 

Best of luck trading.

 

Thank you

 

I remember that the original site was shut down but I did not know that this started.

It's good that someone could convince Dr Brooks to do this.

 

Gabe

[rigel 10]

Think you will also find that the 8 articles in Futures Mag are much easier read and provide enough info. on the methodology , also the seminars provide greater clarity.

The Daily commentary is certainly valuable, however was surprised lately as to how Al finds time to type all that in.))

Guess he has observed all this over such along period, it is like multitasking whilst driving a car.

[mikea59 10]

I believe he does his analysis at the EOD, after he is done trading. But you are right, he seems to spend a lot of time doing this analysis and answering questions, I'm not sure what his motivation is, I assume he is well intended, but it just seems kind of strange.

 

Also, the kind of EOD analysis he does is flawed in my opinion - so heavily influenced by confirmation/hindsight bias. When he has so many different setups, and many of them are just "approximate" setups, it's so easy to point out the successful ones after the fact. I think when you are evaluating a trading system it's more helpful to concentrate on failed setups, because those are the ones that you will most likely stumble over in live trading. If you are overwhelmed by a large number of failed setups then you should walkaway from the system.