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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks
My initial stop is 1 tick below the setup bar and then 1 tick below the entry bar after the entry bar closes. I am looking at ways to reduce my stops if possible because they can get quite wide but I don't want to reduce them in a manner where I get stopped out too frequently. I still haven't designed my rules for a runner but what I will probably do is take off my first contract at plus 10ish (more or less depending on the momo) then move my runner stop to breakeven and manage it according to the price action.
I put some Brooks notes I have been using in the downloads section... you might find them useful. Cunparis you already saw this stuff at traders lab...I'm 2 days behind you.
Some Brooks notes which I have been learning -
Number one question: is the market trending or not?
A very large bar with small or no tails after a protracted move or breakout can represent exhaustion and no trade should be taken until more price action unfolds.
If the market tries to do something twice and fails both times, expect it to do the opposite and likely succeed.
Do not take a second entry that lets you in at a better price than the first.
Do not trade breakouts in a sideways market. Wait for price action to confirm the breakout or reveal it to be a failure.
Any time three or more consecutive bars mostly overlap and one or more is a doji stop trading and treat it like a trading range.
A big move in one direction that is followed by one that retraces the entire move often means the market will move into a trading range.
Always have two reasons to enter a trade: reversal bar, good signal bar pattern, EMA pullback in a trend, breakout pullback, breakout test, H/L 2 or 4, failure of anything, any second entry.
A tight trading range (largely overlapping bars) is like barb wire and acts like a magnet, drawing breakouts back towards its middle.
Doji bars are one bar trading ranges. Never buy above one in a bear or sell below one in a bull.
On a strong trend day trade every H/L 2 where the setup bar touches or penetrates the EMA.
Yet another pattern that I'm learning about. This pattern is incredibly new to me but perhaps it's just something to watch for. According to Brooks when price spikes and then channels you can typically expect that start of the channel to be tested sometime within a day or two. You can see from today that the oil inventory report created a big spike and then CL channeled upwards all day. It will be interesting to see if the 78.70ish area gets tested soon. If so that's more then 200 ticks of action to work with.
Blz
P.S. One additional note about today. After a big push I recall that you can expect three waves up. Note the first wave created by the inventory report then 2 more waves where CL finally lost momentum after the top of third wave. Just an observation.
Agree on the head-exploding feeling. There's so much in each chapter that it's almost mind boggling. Just started reading it yesterday. Took about an hour and a half just to "skim" the first chapter. I did, however, get a lot out of Chapter 11 (The First Hour). I tend to skip around when reading books and never really go from Chapter 1 to the end of a book consecutively. It's going to take a LONG time to digest all the material in this thing. One good thing about reading this book yesterday for today was that it made me think about NOT trading more than trading. Got in and out on a scalp this morning, went to work out with the wife, and then caught about 10 ES points in that last hour today. SCHWEET spreadsheet signal on the short side around 12:10 PST. Can't agree that I'm going to trade COMPLETELY without indicators LOL.....but I can see his point.
A lot of the H1/H2 or L1/L2set ups look like mini ABC setups as others have said. Here is an example. Got a "doji" after the H2 so should be nervous...? but we have takeoff....let's see what happens. Not the best time of day low volume, etc.
You already had 3 waves so we got a spike down... ouch. You could have snagged a few pips...
blz17 - I have added what I see as H1's on your earlier chart.
As you see they are great in the early stage and then again falter. I notice on the whipsaws though that there is a kind of climax bar before - v wide with a volume bloom so perhaps that should have said 2 leg retrace?
There is a TLB and a possible HL, one of the better patterns.
The volume in the down move is much less than in the up move before from the LL and it is shrinking.
So H could be a safe entry.
And when watching it bar by (volume)bar you could see even more.
