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Book Discussion: Reading Price Charts Bar by Bar by Al Brooks
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At the risk of NOT winning the book, let me express my concerns. Though perhaps I'm most deserving if only to disprove those concerns. Also, let me point out that I was one of the very first "spreaders" of Al's methods, webinars and articles, and suffered the wrath on some forums of secretly being Al in disguise. I did so, though, in my sincere desire to help other traders, with what at the time I indeed hoped to be a beneficial methodology. After all, what trader wouldn't salivate at the idea of a single chart with just :05 bars and one EMA on it!
My concerns, however, are:
-a 5-minute bar, or any one timeframe or trade/volume frame - is arbitrary, and to ascribe some importance to where it opens or closes doesn't make much sense as long as everyone isn't using the same timeframe and being synched so that they see the same thing. In fact, in a thread here someone commented how Al has said at his site that you have to watch until the bar closes, bec. in the last few seconds in can move quite a bit and change its closing position. Exactly; so what does that tell you? If someone else's bar has already closed, he's going to see it differently, and hence say that it didn't close (for instance) as a doji after a down move, but rather on its low.
- A prior entry in this thread made reference to the length of wicks, which is an adjunct to the above observation. And that poster opined the conventional wisdom (and true) that buyers had come in and pushed the price back up. The "problem" again, is on this timeframe. A few seconds later they may have pushed it back down, too. It was odd, bec. Al noted some tonight in his webinar and referred to them as doji's, given their near equal open and close. Again, on daily timeframes doji's logically are very significant, but on :05? And he didn't note the fact that it portended an up move, possibly bec. after-the-fact one could see that it hadn't resulted in it, but rather in barbed wire. But I truly do wonder, in real time, if one wouldn't have said that it was bullish, rather than the doji inconclusiveness.
- I'll have to look again at the charts used in this webinar, but from those posted in his first Futures magazine articles, there appeared to be many trades that following his methodology would have resulted in losers, but that weren't notated as such. Now, this may simply be a matter of not knowing of a filter that Al would have used at that time which would have invalidated those trades, a filter that he later elucidated in his book but that wasn't mentioned in the articles. But unless that's the case, that concerned me.
- Finally, the fact that Al was now writing articles, doing webinars and writing an entire book when he's said repeatedly that he can't be distracted from his trading sounded a bit false. The book was supposedly merely to answer questions that arose from his articles/webinars, but then he followed with a website. Perhaps he's very dedicated to teaching people to trade, clearly the best take on this situation and hopefully the truth of it, but as he hadn't mentioned that as his guiding purpose, the articles/webinars/book & website do give me pause as to his true desires, and also his success with this methodology.
Sorry, that wasn't very creative, nor likely the boisterous praise that I imagine was hoped for. But I need to take the traders' version of caveat emptor at all times. Likewise with my own view of charts, and to always be wary of the human proclivity towards a Confirmation Bias, to only see things which agree with how I already perceive them. And to see patterns that aren't truly there and to ascribe undue meaning to them.
Good trading.
Example of a micro trend line break up talked about by Al Brooks today.
Additionally, his 1-5 pip (inst dependent: ES is usually 1 while CL can be 5) failed break down/up is one great entry signal that I use more and more. Even with a 50% success rate, it is hugely profitable.
Will post examples over the next week as I see them.
R.I.P. Andy Zektzer (ZTR), 1960-2010.
Please visit this thread for more information.
I’ve thought about all those concerns because I’m putting a lot of effort into learning this and trading it on my own live account.
I don’t know how correct. My conclusions are –
Dividing the movement of the market is arbitrary but practical. It gives me a chart that I can digest. It allows me to track what price levels are important to the market and why and how long ago. I can see price constriction and expansion. It is also easy to see when price makes back to important levels again, how much strength it is showing, how much weakness. If you believe that horizontal support and resistance levels are important than you should be able to see why 5m candles are a good choice for daytrading.
I don’t dismiss the fact that candle’s change quite a bit in the last minute. That shows me that real forces are at work trying to manipulate the market as much as it can. One observation as an example of this is when price does not trade below the low of the previous candle and is more likely to trade higher. Then the next candle does the same and the same. When bulls can no longer protect the lows a candle will trade below the previous and attract bears. This can shift sentiment and set off a reversal. Or bulls can stop taking a break and push to new highs and attract more bulls.
Sometimes on small timeframes price movement really is just noise to a daytrader and it’s important to recognize that it is untradeable.
Al is making himself more available. I attribute it less with money and more to do with comradely. He is also becoming a better trader by explaining his approach and discussing it with other traders.
I can understand your skepticism about anyone who is selling “trading education”. I think the old rule of 95% of traders fail can be applied to people peddling their “trading system/education”. 95% just ends up being snake oil and 5% is well-intentioned people who want to help others become better traders.
My personal take on this is that Al has reached a point in his career where he needs something new to help him stay in the game. I know that after 20 years of doing same thing I would need some variety. Having worked in the publishing world for a few years, unless Al is selling millions of books he would need to get a job at a local coffee shop to help his income. The website you mention is run by a trader, not Al and is free to anyone. The website was up and running many months prior to his live “chat room”, which is also run by a different trader. I did spend 2 months in his trading room. There where many things I like and disliked about the chat room. While I did find a lot of value in the room, it also distracted me from watching the chart.
In my opinion, I think that Al falls into the 5% of well-intentioned people who want to help others.
Now if his style works for you, that is up to you to decide.
Jack - I don't have the knowledge of Al to have an opinion on your concerns about his motivations but it's a good idea to have that skeptical querying of anyone selling trading services or materials and it shouldn't offend that person, as there are so many charlatans out there and it's reasonable to question.
From what I see though -- I have 5 years of stock index futures trading experience and 12 of stock -- the 5 minute chart route is as good as any to follow, in an attempt to use a consistent charting method to track price direction. It allows you to see all the different levels of short term support/resistance, 'big bars', wicks, and trends and a pretty fair amount of day traders do use it, if you're talking 'self fulfilling'. I'd use it in conjunction with some longer term charts, pivot/r1/s1 etc. also, to keep an eye on the major price areas.
I couldn't finish the seminar yesterday and haven't been through the recording yet but I'm curious how he uses the 20 period ema, just to establish a long/short bias or as an actual signal entry trigger when price crosses above/below, but maybe in conjunction with 'the bars' setups?
Since I have arrived at the place where what I really want to do is just 'follow price', with a minimal opinion of where we are going, I am very interested in this. Still, you have to decide if you want to spend the screen time necessary to work with day trading a 5 minute chart ... you can work up a pretty profitable and simple MA crossover strategy also, working with a 15 minute and averaging about 1 trade per day.
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I want to address Jack's question's. First off, let me say I have been following Al's method very closely for well over a year. I bought his book on the day it was released and have been a member of his websites from nearly day-one. So, I do have both an opinion and a bias in this discussion.
- Re: 5 min charts. You're right... this has been one of my biggest problems with candlestick patterns esp. off the daily chart. In my earlier days of trading forex, I found it nearly impossible as the patterns were entirely different depending on what time zone you chose. IMO, i think the 5M chart represents the most common period watched by those trading a similar timeframe as us. Watching live for over a year now, I do believe there to be a statistical significance to the action in the last seconds of the 5m bar. I believe this is simply due to the short-term traders who wish to get a jump on order entry before the bar closes. In the electronically traded markets, a 5m bar will match regardless of time zone or broker as all fed the same data & 5min after is going to be 5min after regardless of whether you are in Chicago or Dubai. I've listened to all of Al's webinars hundreds of times (no joke!). He repeatedly mentions that this works on all timeframes. He is fond of pointing out that sans a scale, it is very difficult to tell a 5 min chart from any other timeframe. This supports your point if anything. He states that he chose the 5m because it gives him the ideal number of setups per day... that's all. The 15min is too boring and the 3min provides too many trades resulting in cherry picking. (His words not mine).
-I agree that many of his "setups" appear to be losers looking back on the historical charts. All I can say is that price action, NOT chart patterns, is what Al trades. How a bar forms is just as significant as what the bar looks like on the chart. There are countless trades that look like A+ setups in hindsight that I know Al cautioned against trading in the live room. Usually it's a trend bar that had very two-sided behavior while forming. In hindsight one wouldn't hesitate to take the breakout of the bar. Live, Al warned against it.
If anything, this is the greatest benefit of the live room for me. Al is constantly looking for reasons NOT to take a trade. It has made me a much more cautious trader. Where I used to take 6-10 trades a day, now I take 1-3.
-Al has been very open and honest about his intentions. He closed albrooks.com when it became too much of a distraction from his trading. He ran that one himself mostly. Many of us begged him not to do so and he opened brookspriceaction.com with someone else running the site. He was very honest about the live room and said he would consider it if it was financially worth his time. A poll was taken amongst the forum members and we negotiated an offer with Al... He accepted & here we are. The members decided the price, not AL. I can tell you that should membership dwindle and the fee be re-negotiated at a higher price, I wouldn't hesitate to pay much more.
It's nearly impossible to tell those who are educating solely for the financial gain from those who are doing it for personal gratification. The very reason for this is that many of those who succeed are driven to help others. That's the factor that the snake oil salesmen exploit. But, studies have proven that financial compensation pales next to personal satisfaction as a driving motive for where we place our energies. Why am I spending my time writing a response if I get nothing in return for it? (To the point that I just missed the market open in fact ) It's because trading is the loneliest profession on earth. As a species, we crave human interaction. We also have a need to make a positive impact on the world around us.
In my opinion, the greatest leaders are those who have to be begged into the position by those around them. By contrast, those who really desire and want the position are the poorest leaders. I've applied the same logic to the educators I follow. So far, Al is the only one I've found who fits the bill. I'm sure there are others, but this just works for me. And that's what it's really about after all.
Brooks method will either work or not work. I do caution against drawing any conclusion about the methodology without first attending the live room for at least one month. Without doing so, you will have an incomplete picture of the approach. There are aspects that absolutely cannot be taught in a book or webinar.
without a doubt, Al is a top 1% individual trader.
But I think his methods don't work for everyone. For starters, Al likes to look for reversals in strong trend, like ES yesterday and today. Yes, you still can make money, but probably some people don't "like" it. I just wonder if Al also looked for reversals on those big down days in 2008.
PA applies to currencies as well, on paper. But I don't think you can make a living in currency trading by looking for reversal. Maybe I am too naive.
) It's because trading is the loneliest profession on earth. As a species, we crave human interaction. We also have a need to make a positive impact on the world around us.