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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks
Thanks for the plug cunparis and I'll hopefully start trying to put my interpretation of Brooks methods in here again with some accompanying charts. Just been a bit busy lately.
Just for a little update I have still been working hard at applying Brooks methods, primarily to CL. Unfortunately I've had a bit of a rough patch in my trades over the past 2 weeks, not for lack of identifying valid setups but rather for only electing to take the ones that have been duds. I'll just log it under the shit happens category and keep working at it.
I'll try to post a chart tomorrow with what I saw throughout the day and hopefully start turning a profit. I'm also toying with Mike's new fib bands indi and how I might incorporate that into some price action setups.
One lesson that took me forever to get right was to make sure I am very careful when placing blame for my losses. (blame is not really correct, maybe I should say identifying losses correctly). When you place blame incorrectly, you don't learn from it (ie: blaming market, rare event/occurrence, etc). So there is most certainly a 'shit happens' category but you've got to be careful when throwing items in that box
I usually find myself to be the problem. Stupid entries, stupid exits. Why did I trade against the EMA 20? etc.
I like the new nexusfi.com (formerly BMT) Envelope bands w/fib, it is now on my trading charts and is the only other indicator other than the EMA 20 that is on my charts, if you don't count prior day high/low (which I don't). I find the bands give me better entries by giving me a reason to practice patience. It visually lets me know to wait for a pullback before making an entry.
But in the end, price action is king and I was doing quite well before the bands and I think it is solely based on being able to finally see past indicators. So why create the fib bands? Because I want to help other traders, and I thought this was a good tool that I "approve" of using, and I wanted people to trade with-trend which the histogram function really helps them do, so long as they don't go crazy with the settings. On the nexusfi.com (formerly [AUTOLINK]BMT[/AUTOLINK]) Envelope Expansion thread I actually wrote that I almost released it with hard coded SMA and EMA only, and only settings of 9, 34, 100 and 200 for the period, just to force people to conform to what I thought was profitable trading. But I decided against imposing my opinions on others, and decided opinions are best left unforced.
Anyway, this turned into a long post with not much to do with Brooks so my apologies.
A retired pit trader (Feb) once wrote that one should not try to cherry pick setups, because we'll end up picking the bad ones. He said we should define our setup and take EVERY ONE.
I think this fits in with TRO's rat idea not to complicate things.
I appreciate all the feedback and I couldn't agree more. I haven't been trying to cherry pick my setups, rather I attribute it to a lack of confidence in my own interpretation of a setup. I might sit here and say this looks like a nice reversal bar setup right at the 20ema but then I'll think of some reason why my initial thought is wrong. So, I'll pass on the trade and watch it work out just as my initial interpretation suggested. It's an emotional issue where I need to recognize my own ability in observing these price pattern setups and just pulling the trigger.
Like Feb said, that we should just focus on one setup and take every one, I am working on figuring the price action setups that I am most comfortable with and just sticking with those (probably only 1 or 2 setups). I'll add other setups to my arsenal over time but for now I want to be focused on something I can be confident in.
Got the book Saturday and took Al's advice and after the introduction read chapter 15 first. Then went back to chapter 1 and started to figure out his pattern jargon.
Al advised looking at only a 5 min candelstick chart. This put me so far out of my comfort zone that I didn't make any trades. When I went back and looked I found 2 great signals on the 233 tick chart for the day. See attached charts (one of my indicators is real time and I saved this after backing up my data, so that field is empty). Like Monday (11/16), when there are price patterns that are super orderly you get good set-ups.
The first chart shows a multiple test of 1098.25, then a move up to 1100.50, the buy is after the pull back to below the moving averages and then chart makes a new short term high to 1100.75. Although a buy before this as the price crosses both the moving averages has only slighly less probability of succcess, with a tighter stop.
The second chart is an above the range failure. I have found in the past that these are trades have very high probability of success, with a easily defined risk of 3 ticks. Sell at 0.50 below the previous range high after making a higher high with a Buy stop at 0.5 above the new local high.
Needless to say I sticking with multiple time frame charts. Today I got a buy signal on the 30 minute chart @ 1102. The market did a double test of a trendline going back to 11/5/09. This is kinda of an anit-David Ryan (US investing Champ in the 90's, worked with William O'Neil @ IBD). David would prefer a penetration of the trendline moking a slightly lower low. But I find that with ES after a slightly higher low the market will reverse 3-6 points. Which is always a nice trade.
I've included 2 charts to continue my last post. Right now we are in a downward channel after a 4.25 point move up from the buy point @ 1102.
If you look at the Buy Bar, in Gold at the bottom, The buying pressure is less so a stop loss at +3 points worked.This is a 2 week old trend line, so I'm watching for the next strong move.
Your trading setups look interesting, but if you don't mind I'd really like to keep this thread focused on the Brooks book with his timeframe and his setups. I highly recommend starting a thread where you can explain your method and post trades, I'm sure a lot of people (many of whom are not interested in Brooks) would find it interesting.
