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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks
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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks

  #91 (permalink)
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cunparis View Post
BTW Mike, I tried range bars for a while (part of dealing with the overlapping bars on the CL 5 min chart that I mentioned in the CL thread plus Jeff got me interested in them). But I decided yesterday that I was going back to tick & minute charts. I think the relationship of the close & open are very important and with range bars the close is always on the high or low. It makes detecting dojis and other trading ranges very difficult.

Yesterday I saw on my tick chart that price was in long trading ranges that didn't even show up on the range chart.

I don't like range bars either for those same reasons. It masks price action over time. Plus range bars can gap and run away from you quickly. The advantage of them is that they can be good for scalping: just set your range to your scalping target and you just need 1 full bar to hit your target. Also, they can help identify chop more easily and more easily help define hi/low ranges. So I guess they have some advantages, just depends on what you're using them for.

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  #92 (permalink)
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Good news and bad news

Well I got good news and bad news. The good news is I'm getting the hang of these Brooks style setups and I am noticing them in real time. The bad news is because I still feel like I'm learning them so I'm lacking the confidence to take the trades as they develop. This is clearly an emotional issue that I need to work on (or I'll just get hammered before I start trading so I don't give a $#@% , just kiddin).

I also have switched to a 3 min chart. I was trading 1 min on CL which I felt worked as CL constantly has short term setups but there are still alot of fakeouts on the 1 min so I switched to the 3 min and I am liking it much more. I would go to 5 min but I feel that it will create quite large stop loss levels that are beyond my comfort level.

Anyhow, I've attached a chart of 3 Brook's style setups that would've made for a great day, hope they help.

Blz

P.S. To be fair I would never take that first setup knowing that the oil inventory reports are coming but just nice to see that it would've worked well.

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  #93 (permalink)
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shodson View Post
I don't like range bars either for those same reasons. It masks price action over time. Plus range bars can gap and run away from you quickly. The advantage of them is that they can be good for scalping: just set your range to your scalping target and you just need 1 full bar to hit your target. Also, they can help identify chop more easily and more easily help define hi/low ranges. So I guess they have some advantages, just depends on what you're using them for.

I was trying what you said, using a 10 range bar for a 10 tick scalp (this is on CL). First problem is slippage. When the bar closes and I clicked enter I'd be about 2 ticks above. So I'd need an additional 11 ticks to get my 10. And during all that testing I realized that the illusion of getting one more bar was just that. The market doesn't know I'm using a 10 range bar. It's not going to give me a bar just cause I want it to. And often it doesn't.

But the real problem was I was getting into bad trades because I wasn't reading the market correctly. The market was distorted. Compressed. Things looked like a good entry when in fact market was in consolidation etc.

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  #94 (permalink)
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Blz17 View Post
Well I got good news and bad news. The good news is I'm getting the hang of these Brooks style setups and I am noticing them in real time. The bad news is because I still feel like I'm learning them so I'm lacking the confidence to take the trades as they develop. This is clearly an emotional issue that I need to work on (or I'll just get hammered before I start trading so I don't give a $#@% , just kiddin).

When I started practicing brooks trades I did it on sim and it was a disaster. Everything looked like a brooks trade.


Quoting 
I also have switched to a 3 min chart. I was trading 1 min on CL which I felt worked as CL constantly has short term setups but there are still alot of fakeouts on the 1 min so I switched to the 3 min and I am liking it much more. I would go to 5 min but I feel that it will create quite large stop loss levels that are beyond my comfort level.

I was going to ask you about that as I've been experimenting between 5 min & 10 range & now 300 tick & 3 min.. Here's my take:

I trade breakouts of S/R and some reversals. On the breakouts, the major breakouts are the same on 1min & 5min it's just the 1min has more noise. I like to put my stops way out of the way, often 30 ticks. When I look at a smaller timeframe I see a closer spot to put my stop. But it's often taken out. I think what happens is the "closer spot" is just noise and I put my stop just under the noise and of course it's taken out. So I'm coming to the conclusion that one really does need a 30 tick stop to trade CL. One can cut the loser short but also you risk getting out of winning trades doing that.

This was really hard to do with real money. I had a few days where I had several losers and after a couple of -$1000 days that's when I started looking at shorter timeframes. But that didn't work for me. So now I'm back to 30 pt stop but for those trades with a big stop I do it on sim until I'm convinced and it's profitable and I'm comfortable with risking that much. On the lower risk trades (shallow pullback, say 20 tick stop or a reversal) I can do that with real money without deviating from my plan.

So I guess what I'm saying is you can try the higher risk trades on sim until you decide if it works for you. So far it has worked for me but it's not easy. I need another week I think and then I'll be back to trading those higher risk trades with real money OR abandon them altogether.

I was long just before the inventory release and I exited like a good boy before news. Market shot up. this is the second time in 2 days that oil reversed and started up heading into news and then continued higher after the news release. I think some oil traders know the news ahead of time. I'm still watching this..

Good job on the brooks trades. That high 2 was always confusing for me. I guess you're just getting a reversal after the 2nd leg down right?

One final thing: I can see the 20 EMA on an ES 5 min chart because that's a very popular timeframe and a very popular moving average. But I am skeptical of applying the 20 EMA setups to all markets and all timeframes. Price may touch the 20 EMA on a 3 min but on a 5min maybe it wouldn't touch it at all and on a 1 min maybe price would break below it. I think it's ok to use the ema as a frame of reference and for gauging the trend of the market (that's precisely why I added Jeffsdots to my chart) but I do not use the EMA in any way for my entry & exit decisions. I posted a CL trade today and the EMA just happened to turn blue on the bar I entered long. I didn't even notice the EMA when I took the trade and would have taken it even if it had been red.

Thanks for sharing your brooks trades, please keep them coming.

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My thoughts

CUNPARIS & BLZ,

I could not agree more, maybe you could approach John Wiley & Sons with that
idea.

GarryM

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cunparis View Post
Obviously the brooks patterns won't work with range bars very well.

For Brooks setups, I think a 5 minute chart is a must, he makes that clear in the book. I wouldn't try to use it on a non-minute chart. Still, my entries are on a 6 range chart, because that is what works best for me.

I treat the "Brooks 5m chart" the same way I treat my 60m chart. I look for breakouts, I look for reversals, I look for trending patterns, etc. Then I make my moves accordingly on a 6 range.

Mike

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Blz17 View Post
Attached is a picture of a Brooks pattern that he claims has very high reliability.

Thanks Blz, I wish I could hit the "Thanks" button twice

Now I just need you to translate the rest for me

Mike

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Blz17 View Post
Well I got good news and bad news. The good news is I'm getting the hang of these Brooks style setups and I am noticing them in real time. The bad news is because I still feel like I'm learning them so I'm lacking the confidence to take the trades as they develop. This is clearly an emotional issue that I need to work on

First, thanks again for the chart. I think I now more clearly understand the Low2 and High2 he is describing (remember, I am still on chapter one).

Confidence is what you need, and you've already identified it. The best way to build it is by doing. So, first you need to fully understand the setups. You can't "think" you have it right, you have to "know" OK THIS IS THE SETUP! Then you keep nailing it over and over, and if the setups are profitable and within your risk tolerance, the confidence will come.

I think for me it will take a lot of screen time to feel that way with his setups. But that is true of everything, so it is no different really.

As for 1m, 3m, 5m etc -- I'm using a 5m for Brooks setups. You need to think like a winner to be a winner. And winners have no problem using 5m candles. But I'm also not going to trade Brooks style and that's the ballgame. Hell no. I always trade my style, and so should you. So I will take a Brooks setup and use that information to help me get a better entry on a 6 range chart. At least for now.

Mike

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Big Mike View Post
First, thanks again for the chart. I think I now more clearly understand the Low2 and High2 he is describing (remember, I am still on chapter one).

I think for me it will take a lot of screen time to feel that way with his setups. But that is true of everything, so it is no different really.

As for 1m, 3m, 5m etc -- I'm using a 5m for Brooks setups. You need to think like a winner to be a winner. And winners have no problem using 5m candles. But I'm also not going to trade Brooks style and that's the ballgame. Hell no. I always trade my style, and so should you. So I will take a Brooks setup and use that information to help me get a better entry on a 6 range chart. At least for now.

Mike

No problem Mike. I recall at one point Brooks describes the Low2/High2 setup in a very clear way. He in essence says that the market will almost always try something twice before failing. So in an uptrend the market will push down once and bounce (your High1) then it will try and push down again and then bounce again (your High2). Therefore sometimes it won't even appear in the candles, you just have to see the price action make those two attempts to push up or down and fail.

I couldn't agree more on the chart time. Despite my last paragraph the Low2's and High2's are something I still struggle to identify clearly but it's getting better. I think with more time I'll recognize more setups and be able to distinguish the higher probability ones.

I did start looking at the 5 min on CL (keep in mind I watch the 5 min for all other instruments) today and I may make a shift to it. However, I do still think that because of the huge range in each bar that there are very tradeable setups on the 3 min chart. Screen time will ultimately determine which direction I go.

Thanks for the words of encouragement and feedback.

Blz

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Mike - I do not recommend reading the book from to back. Read chapter 1 lightly. Then read the chapter on "best trades" and then "daytrading". Then you can go back to chapter 1 again, and then read the other two again. I've read best trades & day trading at least 3 times. I may be slower than the average reader though. It would easily take over a year to do this book. I've had it over 1 month and have only done those 3 chapters. Well I did read the sections on breakouts since that's what I trade.


Blz17 View Post
I did start looking at the 5 min on CL (keep in mind I watch the 5 min for all other instruments) today and I may make a shift to it. However, I do still think that because of the huge range in each bar that there are very tradeable setups on the 3 min chart. Screen time will ultimately determine which direction I go.

I think 3min is ok because CL moves so much more than ES. 5min is ok too when CL isn't range bound which it essentially is at the current time. I was trying to find the optimal chart setting but what's optimal this week isn't what's optimal over the past year. I'm going to use 300 tick for reversals and early entries and 5min for breakouts. My goal is to be in the trade on the 300 tick before the 5min breakout. I'm still experimenting..

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