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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

  #151 (permalink)
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shodson View Post
Seems like 9:25am was an H1 and 9:35 would have signaled an H2, which would have failed. Correct? If not, why?

If my memory serves me I believe Brooks says that doji bars are not good setup bars as they represent a one bar trading range and indecision. So the High bar at 9:25 would not be counted as the prior bar was a doji.

Blz

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  #152 (permalink)
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I copied your chart and marked it up a bit. I still don't know how to spot Low2/High2 setups with very good accuracy. I believe the key is the scope of the setup and the environment of trade. For example I know Brooks says to look for High2 setups in an up or sideways market. One thing he didn't quantify with that is the extent of the sideways market. On your chart (as I've marked) I believe the sideways movement is too tight to be trading High2's. Again that's just my opinion as I'm still learning this stuff as well but it definitely seems to be sinking in.

Thanks for marking up the chart. You're right I did miss one. So a failed L2 and a good L3. I've been using a stop:target ratio of 1:1. I want to get consistent with that before trying to add a runner. What do you think?

I agree about the chop for the rest of the chart.

Can you explain EMA Gap? I know I got the book next to me but you explain it better with your examples. One of my complaints about the brooks book is all the patterns are mixed together so if you want to read up on one pattern you have to dig around and find it. I really wish he had one one chapter per pattern and then concluded with charts by by bar showing all patterns.

I got stopped out on my CL L2 so I programmed a sell stop for a L3..

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cunparis View Post
Thanks for marking up the chart. You're right I did miss one. So a failed L2 and a good L3. I've been using a stop:target ratio of 1:1. I want to get consistent with that before trying to add a runner. What do you think?

I agree about the chop for the rest of the chart.

Can you explain EMA Gap? I know I got the book next to me but you explain it better with your examples. One of my complaints about the brooks book is all the patterns are mixed together so if you want to read up on one pattern you have to dig around and find it. I really wish he had one one chapter per pattern and then concluded with charts by by bar showing all patterns.

I got stopped out on my CL L2 so I programmed a sell stop for a L3..

No problem. Going through the charts like this helps me learn the patterns as well. As I said I'm an amateur at best so the more time hammering home the patterns the more comfortable I'll feel putting real money on the line.

The EMA Gap Bar is when in a downtrend you have a first bar with a low above the EMA and vice versa for an uptrend. I only use this pattern when its clearly within a strong trend never when there is a trend in place that is weak. The other time I'll use it is when the market is choppy. Howerver, I'll only trade them if I get the EMA Gap Bar that is near the top or bottom of the range. If it's in the middle then I won't touch it.

I'm still not adding runners but I honestly think it will be tremendously profitable as it seems you can at a minimum scalp the Brooks setups far more often then not. So, it seems that you could take one position off at a scalp, move stop to breakeven on the second and give it chance to run. If you get stopped out oh well but if it runs you've hit pay dirt. Of course this is all in light of accepting more monetary risk on the trade.

Agreed on the Brooks book, so utterly disorganized and confusing. This book is taking me longer to read then any other book just because I feel like my head is going to explode everytime I sit down with it for 10 minutes.

Thanks for all the discussion, lets keep it going.

Blz

P.S. On your last CL short I would not have taken any trades in there as CL was in barb wire. I know there are ways to trade off Barb Wire but as a general rule I believe Brooks says to steer clear.

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Barb Wire Follow Up

As a follow up to my last post where I thought it was best to steer clear of the barb wire. I recall from Brooks book that a second breakout attempt is highly reliable as being successful. So, as you can see from the picture the market broke out of the barb wire which is a breakout to avoid but then it pushed again and exceeded that breakout level.

I could be dead wrong and certainly invite any criticism but I believe I am understanding this correctly.

Blz

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Mr Brooks

Very interesting guy.
Anyone that trades for a living for 20 years deserves respect - shame he is no author though!
Reminds me of Douglass Taylor's book - don't Wiley employ editors or something?

In an effort to aid the H1 H2 L1L2 debate I find it easier to think of it like an ABC retracement of an impulse wave

I have notated his own chart to demonstrate an example of this - I don't yet know if it applies to all of these patterns ( I suspect not) but it is yet another way of looking at things

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  #156 (permalink)
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Mindset - Thanks for explaining that. I've heard of A-B-C and even read that C is a good low risk trade. SO it makes sense that C is also H2.

How's this setup on ES? I went short around here and later noticed the H2 just as I was getting stopped out!

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H2 vs C

cunparis

Your chart is a good example of where the trend is potentially v strong so ABC's don't form - but H1's and H2's do.

I have NOT read everything yet but here is a chart where the H1 H2 pattern is right but chops you up a little - just being devil's advocate here.
Is there a filter/pattern that I may be missing to prevent some of these whipsaws?

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  #158 (permalink)
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Another H2 on ES 5min:

Please correct me if any of these are wrong.

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PS: I got tired of tradestation's crappy charts so for 5min brooks trades I use NT..

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A High2 That Worked Well (Plus I Need to Add A Runner)

Here's a screenshot of a High2 that played out very well. Sometimes what helps me with the High2 is to remember what it actually is. That being, in this case, the market making two attempts to push down within an uptrend. After failing the second time the bulls are still in control.

Also, I do need to look into adding a contract so I can run one. I pulled my trade near 80 as there was overhead resistance but right after I sold it cranked right through 80. Though it presents additional monetary risk a second contract would allow me to sell one, move the stop to breakeven on the second and see if I can hit a runner which this one clearly would have been. Up 84 ticks from my entry as I right this.

Oh well, there will always be others.

Blz

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Blz17 View Post
Also, I do need to look into adding a contract so I can run one. I pulled my trade near 80 as there was overhead resistance but right after I sold it cranked right through 80. Though it presents additional monetary risk a second contract would allow me to sell one, move the stop to breakeven on the second and see if I can hit a runner which this one clearly would have been. Up 84 ticks from my entry as I right this.

Nice trade. My ES H2 didn't work out, I exited with 1 tick. Then went short on the reversal. Not sure about that either. I guess I'd reverse again (to go long) on a H3. This is also forming a EMA gap.

Good trade on CL.

For ES, I don't like having a 2 pt stop and taking profit at 1 tick. Had I had done that though my trade would have worked. But it seems risky. I guess I should try it and see.

For the runner on CL.. what's your initial stop and target? I shoot for 1:1 on CL too. I find anything more than 30 ticks it's better to take the 30 cause it usually reverses. CL was violent today because of the inventory report, plus ES had a nice move up.

Euro couldn't crack 1.5000 and ES can't crack 1100.. We're at a very interesting point here and that's one reason the markets are a bit choppy.

There I go analyzing again.. I try not to do that..

I'm going to read up on the H2 trade. Gary's notes said to focus on that and a reversal after TL break so that's what I"ll do...

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