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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks
it's simply because I am trading other methods which work for me. I think brooks's setups are pretty good and I plan to come back to them but for now I have to limit my focus. You can see my work with ES in my cycles thread in the VIP section for that I use tick charts. I also trade CL and up until this week I was using range charts and couldn't use the brooks setups. I'm now trading CL with 3min chart and so I could add in some brooks setups but one thing at a time.
The possibilities are endless, once a trader has learned to trade it will seem like any strategy will work. The challenge is in getting to this point and to do that I believe one should stick to one setup/method until they're successful with it. I've been working on my cycle trading method for 10 months now. And have become consistent with it just 5 months ago.
As someone who posted in this thread a lot but doesn't trade Brooks setups I'll add to what cunparis said in his last post. I don't trade the Brooks setups but I am very happy that I am aware of them as I'll watch the 5 min chart all day and I've found that being aware of Brook's setups can help you get confidence in a particular trade or can help keep you away from a bad one. In my opinion you can never know too much but you can definitely try and use too much. I prefer to use little and know a lot.
I have not read all the posts on this thread but I too have got the book and have read some of the chapters. I have also seen Al's I-Trade Show presentation a year or two ago and was impressed with his work, however, for some reason I do not feel commfortable trading of off just a single 5 min time frame!
I just feel that one has to be aware of the bigger picture and I would find it hard to believe that Al only uses a 5 min chart.
I currently trade with 2 timeframes. i look for a setup on the larger timeframe and then fine-tune my entry on the lower timeframe. I think it helps. But I also think it depends on your trading style. it's very possible to just work on one timeframe. Brooks will go for a scalp and then if the trade could be the High or low of the day he'll leave a runner. I imagine that runner will get stopped out many times for each big score but the big score should be worth it. Joe Ross does a similar approach and i'm working on using this approach myself. Up until now I've never scaled out.
So for Al's method of scalping a point, I think you don't need two timeframes to do that.
I personally use only a 5 min time frame. It works very well for me. I trade like Brooks does using some of his setups, and have also came up with some of mine. I trade crude oil only and average +150 ticks daily and when the markets really trending +200 ticks. In the past I've tried every single chart possible (range, volume, delta, renko, etc.), I've also tried every combination of a these. For example, a range chart to find trend lines and a smaller minute chart to enter on. I've also tried a 15, 60 min chart with the 5 min and did not find it that useful. Just a plain 5 min chart is what works best for me, and I will never try anything else again. Also I scalp larger amounts, I've tried scaling in and out, multiple targets, but find that one target is what does best for me.
You have to remember though if you find something that works for you use it. If you make money off of it keep doing it. Everybody is different and will have different points of views, likes and dislikes.
Congrats on your success cbratton. Would you be interesting in sharing more about your approach. I know I'd be interested to learn more and I imagine some others would be as well.
I was thinking about starting a journal on futures.io (formerly BMT) within the next couple of months, or when I have sometime, just to post end of day charts of my trades.
My approach is pretty simple, at least I think it is. I use a 5 min chart with a 20 EMA and volume. I posted the chart template that I use in the downloads section awhile ago. I trade crude oil only, because I like the trendiness of it. If the market is chopping I will not trade (meaning a lot of over lapping bars). If there is low volume (under 600 per 5 min bar) I will not trade.
I've noticed that the same setups seem to occur over and over again. If you look at a chart long enough you will see this. I don't think it matters so much on what type of chart you use, but that you spend enough time on that chart learning to see how the market moves. Any chart, any time frame can be traded profitably.
The setups I use are failed breakouts of new highs or lows of the day or recent swing highs/lows, but not all swings (must fail on next bar on a 5min for me to take it), I take breakout pullbacks, I take high/low 1 and 2's every time(might want to read Al's book). I know H1's and L1's fail sometimes, but I think it is better to take a string of small loses then miss a move. I also take trades where other traders are trapped, if you look at enough charts you will eventually know where they are and enter when they exit. When the markets trending, if there's an inside bar within a larger trend bar that is sometimes a reversal, but can also be a pause to push further, so thats why I always enter on stops. Except for one trade where you see a climax top or bottom and VSA confirming it, I will try to get a better price by placing a limit order, to reduce risk because sometimes the reversal will fail. I take double bottoms, double tops, with either a higher high/low, or lower high/low. If it's close it's close enough. I also take key reversals, where price trades to new highs/lows and reverses with a down/up close bar. Another setup is what I call a fake-out, where we trade higher then the previous bar and then reverses below causing people to exit/enter.
Those are most of my setups, I don't trade by the book all the time, like I said if its close to these I will still take the trade. For money management I use only one target. I've looked at several targets, multiple targets, scaling in and out, etc, and find that one target is what does best for me. My target is 30 ticks, I found that, that seems right in crude oil for most days. Some days you wish it was higher, some lower. For stops I use a 60% stop of the setup bar (I use the fib tool), the setup bar is the bar before the bar you enter on. For some of the setups I will change this especially for the VSA climax trade where I will put the stop one tick below the bar. On average that makes my Reward/Risk ratio ~3:1, some days its higher some days a little lower, that means I only have to be right 30% of the time and still make money, most days I trade 80% better. For example, Friday I traded, it was kind of a messed up day because of the rollover, I had a sting of losers, 4 in a row, but by keeping the losses small and a larger target I still ended up +121 ticks for the day, and that was one my worst day of the week.
On the profit targets, you must force yourself to be patient to wait for the targets to be hit, no panic or fear to take a small gain, because if you have small gains and small losses you will lose money or not make very much. Almost everyday I have +20 ticks in the profit on a trade and then the market reverses and I end with a 5 tick loss. So I ask myself why I don't go for a smaller profit, but I know if I did that then I would be like most people and then lose money. Also my R/R would be lower and I would have to be right more of the time. You must be patient, must have discipline to follow your plan. Before I became profitable I always went for a small target lets say 5-10 ticks, I was happy that I actually made money, then I had a couple of losses, even small losses it still hurt enough to turn the net profits into net losses. I think someone is always tempted to make the profit targets smaller and stops larger, when one should make there profit target larger and stops smaller.
Hope this helps. In my opinion the best way to learn to trade is to pick a chart and look at it and observe it. They is no easy money in the markets, it takes a lot of time and hard work.
I forgot to say, that I trade between 8:00am - 1:30pm CT, I don't have a daily target I just take what the market gives. Also, I always wait until the bar closes before placing an order. I don't move my stops to breakeven because I noticed that the market likes to come down and test the break even a lot of times, probably because there are many stops there. If I'm +20 ticks into the profit then I really tighten my stop up to about 5 ticks or so. Also, most times when the setup bar closes I will tighten my stop one tick away from the setup bar, if that bar is tighter then the 60% stop.
Thank you for taking the time to share your setup ideas. I do hope you will start a journal, that would be very interesting. I'd love to see some of your trades.
My current CL template has 2 contracts, first comes off at +15 and I move stop to breakeven. I'll bail on the 2nd contract if I see it reversing so I can get out with a small win on that one. The second contract I'm experimenting but I currently have it at +25. I like to keep my stop away from the setup bar and if the stop would be more than 20 ticks I won't take the trade.
I think we have some things in common and I'm looking forward to sharing CL charts if you start your journal. I keep debating between 1 target or 2, and what to make the stop. I am glad you are able to get 30 tick targets filled, that makes a good case for having a single target.
