Futures I Trade Show & Brooks Book

[Dinerotrader 10]

My experience leads me to hold a contrary opinion: Price nearly always telegraphs where it is likely heading, regardless of the extent of that move.

 

Best Wishes,

 

Thales

 

Thalestrader-

Could you please elaborate on what you mean exactly by "telegraphs". Chart mark up of your ES trade would be even better if you could show how you see/interpret the movement.

Thanks.

[thalestrader 14]

Thalestrader-

Could you please elaborate on what you mean exactly by "telegraphs". Chart mark up of your ES trade would be even better if you could show how you see/interpret the movement.

Thanks.

 

I think that if you look at the ES chart, you'll see it is sufficiently marked to see what I was seeing: Price gapped open lower, rallied back to resistance (as DB points out in his post). From there, price declined back to the LOD, ultimately making a choppy push to a lower low that reversed relatively quickly to trade back above the first 5 minute low. Price formed a line, from which it broke to the upside, and a logical profit target was resistance at 892-894.

 

Basically, all I meant was that price shows where there is resistance and where there is support. If a rally fails at resistance, you can expect a test of the nearest support. If a decline fails to push lower at support, you can expect a rally to test the nearest resistance. I do not really know if a particular resistance or support will hold or break. But price does show you where these points are, and when price gets there, the market will make a decision. I do know that much. Since I know that there are only two possible outcomes, I can be ready for either, and what's more: price already has placed a road map before us telling us what to expect depending upon which of the two outcomes come to pass.

 

Here is another example on the current 15 minute EURUSD: If EURUSD trades below the back line, price will have printed a High, a low, a lower high and a lower low. I would sell a break of that line. If price breaks and holds below that black line, I'd expect it to reach at least the first blue line. Will it? Maybe. Maybe not. I do not know. But, I would expect it to reach that line. If it breaks and holds below that blue line, I'd expect price to reach the next blue line, and so on.

 

Will the EURUSD break that low? I do not know. That black line was a minor support level, and therefore, it may have marked the end of a rather shallow pullback and the rally in the EURUSD may be set to resume to retest and possibly take out today's high.

 

If it does break below that line, will it at least reach the first profit target? Probably, but maybe not.

 

Does price always do what it has led me to believe it is about to do?

 

No.

 

That is why I always trade with a hard stop in the market against my position.

 

Best Wishes,

 

Thales

[szubaark 10]

"Here is another example on the current 15 minute EURUSD: If EURUSD trades below the back line, price will have printed a High, a low, a lower high and a lower low. I would sell a break of that line. If price breaks and holds below that black line, I'd expect it to reach at least the first blue line. Will it? Maybe. Maybe not. I do not know. But, I would expect it to reach that line. If it breaks and holds below that blue line, I'd expect price to reach the next blue line, and so on."

 

What do you consider "break" and what "holds"? Do we have to Close below the black line for it to break? or just Poke through it? Price doesnt just Break S/R. It will usually do fakeouts back and forth LOL, especially low Volatility summer days

[forrestang 10]

Argh I hate exits. I think all trades taken today were reasonable, but still down on the day.

 

EXITS.....the hardest part about trading.

 

First trade I let myself get taken out waaaaay too soon after having 3 points on the table for 2 tics.

 

Second Trade I think was also a good one, just stopped.

 

Third Trade, I think was also a sound trade as it was a WITH TREND Double Top Bear Flag, came within 1 tick of 2 point target.

 

Note: All 3 trades were good for at least 1 point, which would have been a good day.

 

Just the way it works out at times it seems.....no reason to be discouraged:crap:

[Mr_black 10]

Nice scalp on micro trend line FBO...+17 pips .... my stop was set for -11...

[guyfibonacci 10]

edit delete

edit delete

Edited July 7, 2009 by guyfibonacci

[guyfibonacci 10]

I'll get it right eventually.

[thalestrader 14]

Here is another example on the current 15 minute EURUSD: If EURUSD trades below the back line, price will have printed a High, a low, a lower high and a lower low. I would sell a break of that line. If price breaks and holds below that black line, I'd expect it to reach at least the first blue line. Will it? Maybe. Maybe not. I do not know. But, I would expect it to reach that line. If it breaks and holds below that blue line, I'd expect price to reach the next blue line, and so on.

 

Will the EURUSD break that low? I do not know. That black line was a minor support level, and therefore, it may have marked the end of a rather shallow pullback and the rally in the EURUSD may be set to resume to retest and possibly take out today's high.

 

If it does break below that line, will it at least reach the first profit target? Probably, but maybe not.

 

What do you consider "break" and what "holds"? Do we have to Close below the black line for it to break? or just Poke through it? Price doesnt just Break S/R. It will usually do fakeouts back and forth LOL, especially low Volatility summer days

 

I trade on stops a tick above a pivot high resistance and a tick below a pivot low support. I am primarily a breakout trader. I am rarely the victim of the fakeouts you cite as being the "usual". I would suggest that you search some of DBphoenix's posts on identifying support and resistance. Not all pivots are significant enough to offer a tradeable opportunity.

 

Here's a hint: Think Highs and lows, higher highs and higher lows, lower highs and lower lows.

 

Here is the EURUSD chart I posted last night along with the EURUSD now. As you can see, price broke below the black ine, easily reached the first profit target, and reversed within ticks of the second target. Not a large profit, but a profit nonetheless. And the key to hitting the big ones is to be in as any of the moves as you can identify, because all big moves start out small. All big moves start with a chipping away of support and resistance.

 

If I'm not mistaken, you were the same one who said that price never signals the big moves before they happen, to which I responded that my experience has led me to believe the oppposite is true. You may have found a decent book to read, but there is a big difference between reading a book and reading price. I mean no disrespect to Brook's or his book, but his book is a book of "set-ups." I have not read his book, but I have read his recent article in Futures magazine. Such set-ups, in my opinion, strike me as an attempted short cut to trading success. Instead of learning his set-ups, you should first learn to read support and resistance in the market. Only then will you really be able to enjoy the success deploying Brook's set-ups might offer. Then again, if you learn to read support and resistance properly, you will likely find that you do not need an arsenal of such "set-ups."

 

Best Wishes,

 

Thales

[bakrob99 11]

THales - I can not find the chart you referenced. Could you re post please?

[DbPhoenix 42]

Given the hundreds of posts in this thread, it is likely that this one will be lost. However, given that so many of the people posting here are new, I'll point out once that ignoring overnight activity is a mistake since this is so often where the movement of price after the NY open is "telegraphed". There are no "gaps" in instruments that are traded around the clock. We can create them by choosing not to collect data for a certain time period, but the trades are nonetheless being made and the buying and selling behaviors which result in price movement are nonetheless being illustrated.

 

The boxing match does not begin with the bell. The race does not begin with the flag or the starter's pistol. There is a great deal of preparation that must take place before one even approaches the field or the track or the ring if he is to have any hope of success. If he does nothing until the signal is given, he will very likely have little or no idea where he is or what's happening around him, much less what to do about it.

 

This morning, for example, the ES has once again, by its own action, reiterated the importance of 890 and 892. Is the trader aware of that? Does he know what it means? Does he know what to do about it?

[Shamal 11]

Thales

You certainly have valid points regarding S/R and mechanical setups.

You mentioned that not all pivots, S/R are significant.

How do you you determine which ones are and ignore the others?

Secondly do you identify support/resistance levels on the timeframe chart you trade with eg. 5min or refer to say 15min or 60min to determine those levels.

 

Dbphoenix,

Could you expand on the importance of the levels you mention ie. 890-892, What does it mean and what to do about it?

Premarket ES found support around 890 and prices rose to 898 before retreating

[zdo 20]

Does Brooks use SR?

If Yes, then how?

If No, then we'd probably be better off not trying to integrate it in this thread (it's like if I started posting about Brooks, RSI, or whatever over in a PriceVolume thread. Most likely it would be removed...)

[DbPhoenix 42]

 

Dbphoenix,

Could you expand on the importance of the levels you mention ie. 890-892, What does it mean and what to do about it?

Premarket ES found support around 890 and prices rose to 898 before retreating

 

If I "expand", I'll likely hijack the thread since "trading price action", to me, means trading the movement of price regardless of how the movement is illustrated. The Brooks approach -- like any approach which focuses on indicators or candles or bars or some other form of illustration -- is a contradiction in terms, i.e., if one is trading price action by trading bar by bar, then he's trading bars, not price action, substituting the bars and whatever setups are created with them for the indicators that he's worked so hard to put behind him.

 

Understanding support and resistance and how they're created by traders is essential to trading price action. Otherwise, one is limited to trading setups and what may be meaningless lines, and repeated failures can lead one to think that support and resistance are bunk and "don't work". But I've gone into all this elsewhere in exhaustive and probably boring detail, so I won't go into it again, particularly since I've probably already offended most of the people who post to this thread. Rather I'll just provide an example, and those who are interested can pursue the link just above.

 

Leading up to yesterday, note here that after a nice rally to 95/96, traders began poking the 93/92 area. You don't know why, and it's not necessarily important. What is important is being aware of this testing and the fact that traders keep bouncing off the same levels. When price eventually breaks through these levels, the best it can do on a rally is work its way back to 91.

 

 

 

 

These two levels become potential levels of importance because traders turned price there. When price shot northward at the open, it stalled at 91, then advanced to 92. The trader who had noted the R levels ahead of time would be ready to act.

 

 

 

 

Now given this particular "setup", the most logical place to enter would be below the bar that tested 92. But this would mean a five-point stop, and that's a lot of stop. It benefits the trader, therefore, particularly one who is following price action, to "open" the bar and see what's going on inside. After all, trading a bar, particular one that summarizes quite a lot of time, involves watching price slide up and down in the same place, like running up and down stairs. If one wants to see what price is actually doing, it becomes necessary to use a smaller interval.

 

 

 

 

Here one can see more of the activity that's creating the 5m bar, and he can enter a short at a higher level, one which provides a much tighter stop.

 

But, again, placing the entry is only the latest step in a series of steps that one takes when preparing for the trading day, in this case going back several days to find those levels of support and resistance which are most likely to exert an influence on the morning's trading action. Today, that same 92 level that was tested yesterday morning and yesterday afternoon (and from above, this morning, premkt) provided a clean short at 0955 this morning.

 

Even though this isn't Brooks, understanding it may help the Brooks followers to distinguish among those setups which are most likely to pay off and which are more likely to fizzle.

 

Now back to your regularly scheduled program.

 

And my apologies to zdo.

[thalestrader 14]

THales - I can not find the chart you referenced. Could you re post please?

 

Sorry about that - here are the two charts I referenced.

[Mr_black 10]

8 good setups so far

[RichardTodd 10]

The Brooks approach -- like any approach which focuses on indicators or candles or bars or some other form of illustration -- is a contradiction in terms, i.e., if one is trading price action by trading bar by bar, then he's trading bars, not price action, substituting the bars and whatever setups are created with them for the indicators that he's worked so hard to put behind him.

 

Well said. In my view, when people say they've sworn off indicators, they usually mean they've sworn off lowpass filters. Many of them still use bars and all kinds of further derived info like trendlines and fibs and pivots. And to me, any derived information not on the tape itself is just as much an indicator as age-old oscillators.

[Shamal 11]

If I "expand", I'll likely hijack the thread since "trading price action", to me, means trading the movement of price regardless of how the movement is illustrated. The Brooks approach -- like any approach which focuses on indicators or candles or bars or some other form of illustration -- is a contradiction in terms, i.e., if one is trading price action by trading bar by bar, then he's trading bars, not price action, substituting the bars and whatever setups are created with them for the indicators that he's worked so hard to put behind him.

since I've probably already offended most of the people who post to this thread. Rather I'll just provide an example, and those who are interested can pursue the link just above.

. The trader who had noted the R levels ahead of time would be ready to act.

 

If one wants to see what price is actually doing, it becomes necessary to use a smaller interval.

 

Even though this isn't Brooks, understanding it may help the Brooks followers to distinguish among those setups which are most likely to pay off and which are more likely to fizzle.

 

Thanks for the explanation. Anything that helps understanding price behavior is useful and provides an extra edge to a trader , there is no need to be blinkered in this business. If somebody does not find use of S/R or volume, leave it out of your trading. Personally have no problem incorporating sound, logical concepts. Think it is totally childish to squabble over my and your thread.

 

As for the many Al brooks setups, it is relatively easy to mark them up in hindsight, like all patterns and indicators, but in realtime it is not that easy to read and act upon with confidence but if these patterns setup against some of the significant support/resistance levels that would certainly provided that much needed confidence.

[DbPhoenix 42]

 

As for the many Al brooks setups, it is relatively easy to mark them up in hindsight, like all patterns and indicators, but in realtime it is not that easy to read and act upon with confidence but if these patterns setup against some of the significant support/resistance levels that would certainly provided that much needed confidence.

 

A suggestion. Once upon a time I became involved in a "Ross Hook" thread. The participants were having all sorts of trouble making them work, as well as the "1-2-3s". The key problem as I saw it was that they were finding these "hooks" all over the place, even in the middle of nowhere. Even worse, they were often getting trapped into a counter-trend-trading loop. I suggested that they first locate support and resistance in their charts (if they knew how to do so), then play only those Ross setups that occurred against one or the other, i.e., against either support or resistance. The success rate was, of course, much higher.

 

Moral of the story is that those who are having trouble making these setups work may want to plot support and resistance first, then take only those setups that bang up against one or the other, as you suggest. If it doesn't help, then at least the trader is no worse off than before.

[forrestang 10]

 

Moral of the story is that those who are having trouble making these setups work may want to plot support and resistance first, then take only those setups that bang up against one or the other, as you suggest. If it doesn't help, then at least the trader is no worse off than before.

 

That's why on my charts, I always have the HLC of prior day, O of current day and the Globex H/L on there. I also used to go and find levels from a 100K CVB chart.

 

I started to feel like I had too much information at that point and I felt like it was hampering my decision making process. Probably just too many levels?

 

I've always tried reading S/R threads but seldom do I get the info that works for me about good levels.

 

Maybe we need a thread in the candlestickcorner about S/R? I'd start it but I'm not knowledgeable enough to lead the discussion.

[DbPhoenix 42]

That's why on my charts, I always have the HLC of prior day, O of current day and the Globex H/L on there. I also used to go and find levels from a 100K CVB chart.

 

I started to feel like I had too much information at that point and I felt like it was hampering my decision making process. Probably just too many levels?

 

I've always tried reading S/R threads but seldom do I get the info that works for me about good levels.

 

Maybe we need a thread in the candlestickcorner about S/R? I'd start it but I'm not knowledgeable enough to lead the discussion.

 

There are already several S/R threads about, in various forums. Starting another may be helpful, but what would be even more informative is an explanation -- as brief as you want it to be -- of how you go about finding S/R, how you use it to evaluate real-time setups, and when and why it's helpful and when and why it's useless or even misleading to you.

 

In a nutshell, a "good level" is that at which traders balk and regroup, either retreating or busting through. If a given level is one which traders pay little or no attention to, then it's not a good level.

 

In the meantime, do a thread title search for "support" or "resistance". There may be an old thread somewhere that you can resuscitate.

 

Edit: You sparked my curiosity, so I did it for you. Here are several you may want to look at, including one here.

 

http://www.traderslaboratory.com/forums/f34/support-resistance-4171.html

 

http://www.traderslaboratory.com/forums/f32/support-resistance-volatile-market-4683.html

 

http://www.traderslaboratory.com/forums/f104/using-daily-support-resistance-intraday-trading-3720.html

 

http://www.traderslaboratory.com/forums/f30/what-support-resistance-161.html

Edited July 7, 2009 by DbPhoenix

[thalestrader 14]

A suggestion. Once upon a time I became involved in a "Ross Hook" thread. The participants were having all sorts of trouble making them work, as well as the "1-2-3s". The key problem as I saw it was that they were finding these "hooks" all over the place, even in the middle of nowhere. Even worse, they were often getting trapped into a counter-trend-trading loop. I suggested that they first locate support and resistance in their charts (if they knew how to do so), then play only those Ross setups that occurred against one or the other, i.e., against either support or resistance. The success rate was, of course, much higher.

 

Moral of the story is that those who are having trouble making these setups work may want to plot support and resistance first, then take only those setups that bang up against one or the other, as you suggest. If it doesn't help, then at least the trader is no worse off than before.

 

I have a friend who "finds" Ross Hooks everywhere, much to his and his equity's detriment.

 

Here is 1-2-3 "Ross Hook" that occurred on the EURUSD at what has shown itself to be an important S/R level in recent trade.

 

Almost any "set up" becomes remarkably easy and successful when it is applied while in agreement with support and resistance. The 1-2-3 is nice because price tests S/R and shows the validity of that level, prior to requiring a trader "fade" the move that is reversing.

[forrestang 10]

Trades and observations on the day for me.

[Guest Maletor]

DB - I've never heard Al Brooks say support and resistance is something he doesn't use.

 

He calls all support and resistance double tops, even though it may be triple of quadruply pivoted.

[Guest Maletor]

Here's what I found.

[Guest Maletor]

Hey forrestang,

 

How come you didn't take the L3/Double top/channel overshoot and decided to wait for L4?

 

Simply because you wanted a bear trend bar?