smilingsynic trading observations etc.

[smilingsynic]

Can’t do it. ET let me, however.

[Lawrence]

Let me check with my web programmer.

[Lawrence]

Just some comments on the notes, not book 2 itself.

The construct on the trading techniques seems to be the details of engagement, not an overall strategy or principle applied to various situations.

My guess is that Al finds it getting very difficult to summarize his techniques in some organized way thus decided to go down this path on the book.

For those who play (or played) chess or go seriously, the explanation is similar to those books written on championship games with each move explained in a lot of details and the winning side, always have the righteous strategies … you guys get what I mean?

[geosing]

So, why not some webinars to explain the multi-volume published work …

http://www.bigmiketrading.com/webinars/

“join us for a Webinar presentation with master trader Al Brooks. Al will present chart analysis of ES, EUR/USD, Cl, GC, plus major stocks like AAPL, GS, GOOG and talk about how to trade trends, reversals and ranges. We will also be giving away five autographed copies of your choice of any of Al’s new books. There is also a Q&A session.”

[smilingsynic]

From Brooks, book three (Trading Reversals):

Al Brooks, TRADING PRICE ACTION: REVERSALS

If the breakout looks stronger than the reversal attempt, the reversal attempt will usually not succeed, and the attempt to reverse will become the start of a flag in the new trend.

Most trend reversal attempts do not result in a strong, opposite trend and instead lead to trading ranges.

The best reversal attempt is the end of a pullback when the short-term countertrend move is ending and reversing back into the direction of the major trend. In other words, the best reversals are a bull flag in a bull trend just as it is breaking out to the upside and a bear flag in a bear trend just as it is reversing back down. Major reversals are less common since most reversal attempts fail and become flags.

Since trading ranges are flags and usually break out in the direction of the trend, most reversal patterns do not lead to reversals.

Since most reversal patterns fail, many look to fade them.

Anytime the market goes above a swing high, it is a sign of strength.

A rally after a strong break below the bull trend line is likely to become part of a larger connection with at least one more leg down. The probability is that the market would form either a trading range or a trend reversal.

Both strong bulls and strong bears like to see a large bull trend bar in an overdone bull trend, because it often leads to a two-legged pullback to below the moving average.

Three things are needed for a major trend reversal:
1. A trend
2. A countertrend move (a reversal) that is strong enough to break the trend line and usually the moving average
3. A test of the trend’s extreme, and then a second reversal that has gone far enough for there to be a consensus that the trend has reversed.

Virtually all major trend reversals begin with either a trend line break or a trend channel overshoot and reversal.

As with all breakouts, wait to see how strong the breakout is. If it is strong, then look to enter on the pullback.

A trend line break alone does not make a reversal.

The better traders become at assessing whether a breakout will succeed or fail, the better positioned they are to make a living as a trader. Will the breakout succeed? If yes, then look to trade in that direction. If no, then it becomes a failed breakout, and look to trade in the opposite direction.

Climaxes are caused by the absence of traders in the opposite direction.

Strong traders love reversal attempts, since they know most will fail. Whenever countertrend traders are briefly strong enough to create one, the with-trend traders will come in and fight it, and will usually win. They see these sharp countertrend moves as great opportunities to enter in the direction of the trend.

The key to understanding climactic reversals is to realize that they are just failed breakouts.

[smilingsynic]

Interesting link regarding dividend-paying stocks:

When Stocks Declare Their First Dividend – Look Out!

[Lawrence]

All the stocks shown in the list have the ref dates within 2011.

Will need more stocks, prefer from bear mkt period, to collect stats on what happened after they started giving out dividend.

What I am thinking is that the results shown could be just broad market lift as oppose to a bias.

[smilingsynic]

Zero Hedge’s error concerning NFP:

http://www.calculatedriskblog.com/2012/02/employment-not-in-labor-force-actually.html

[smilingsynic]

OPEN GAPS ON MARCH ES:

1322.75
1308

1253
1244.25
1236.25

1198.50
1191
1146.75

SPX: 1353.82 (from July 7)

[Lawrence]

The real issue is the seasonal adjustment applied has been a discretionary and non-systematic method that is not disclosed.

http://www.zerohedge.com/news/trimtabs-explains-why-todays-very-very-suspicious-nfp-number-really-down-29-million-past-2-mont

The non-adjusted # is actually down.

[Lawrence]

Checked the reported data myself, similar miracle drop happened in the past few election years.

Coincidence? =)

[smilingsynic]

Add 1348.25 to the list of open gaps on the ES.

The SPX from July 7 no longer exists

[smilingsynic]

On the ES we have not tagged the 20 period ema on the daily since 12/21.

One of my 5 minute flip rules is that if the other side is not tagged after making an early day move up[down], the market will retest the day’s highs[lows], if not close at them.

That means if the market is breaking out of the opening range, a great set- it-and -forget-it stop would be at the other side (for those who have to step away from the screen for hours). Which is not me anymore, on most days.

1333.50 was not tagged, even though the market made two efforts at it.

We have a six-day island in the making. If “God” rested on the seventh day after creating for the first six days, does that mean that we gap down hard on Monday, leaving that long, thin island up there for a time being?

Still say new ES highs by November, but we could really use a pb to the 20 ema, if not 50 ema, to fill at least a couple or three of those open gaps.

[Lawrence]

In 1998 SPX simply zoom up in the beginning of the year til April.

Although I am bearish, that scenario can play out if Feb does not pullback much into end of the month.

[smilingsynic]

Notes on BOB VOLMAN’S book on scalping.
Very similar to Al Brooks. I don’t trade with 70 tick charts and don’t even deal directly with Forex, but I still found some value here. I strongly recommend it for anyone who trades intraday and takes it seriously enough to realize that this is a business that requires hard work and commitment.

Forex Price action scalping:
Only scalp when the spread plus commission is one PIP or less.
Use a 70 tick chart with a 20ema and no other indicators.
Target of 10pips and a stop around 6 to 7.
Using indicators is a losing proposition that will only add confusion and doubt.
The market cannot be beaten. A trader can only strive to be those in it less proficient than himself. We have no guarantees; we just trade probability.
Those who strive for glory in trading are simply deluding themselves.

Double Doji break:
1. Look for a pullback to around the 20ema.
2. Look for two dojis or small candles in a row.
3. The key: temporary, compressed in decision.
4. Entry bar: takes out high ( for longs) or low ( for shorts)
5. For there is no point speculating over other traders’ motives. All he has to go by is what takes place in the chart on a recurring basis. And this task should be to exploit repetition.
6. Do not front run a break.

First Break:
1. First bar in a substantial pullback that gets taken out in the direction of the trend.
2. Enter with trend to capitalize on a quick resumption of the market’s original intent.
3. There are three conditions: (1) a strong trend with bigger frame participants; (2) full-fledged pullback; (3) the first pullback to go against the trend.

Second Break:
1. A superior setup than the First Break.
2. It is a pattern that could be seen as to first breaks following each other in relatively quick succession.
3. If the first break fails, this is the second with-trend attempt to end the pullback.
4. Enter at the moment the second signal bar gets broken in the direction of the trend.
5. As long as the market is trending and not running into obvious resistance, we should consider every orderly pullback a temporary event and use it to our advantage by trading our setups at every possible turning point.
6. And there is arguably no higher probability of a winning trade in the market than to take that trade with-trend after a pullback peters out.
Double Doji break, first break, and second break are with-trend entries.

Block Break:
1. A most simplistic description would be to characterize the pattern as a cluster of price bars tightly grouped together in a narrow vertical span. Preferably, the barriers of this block of bars are made up of several touches each, meaning that the top and bottom side of the pattern clearly represent resistance and support.
2. Think of a coil being suppressed by a now-weakening force that is bound to give in. If prices eventually break free in the direction of the path of least resistance, we immediately enter the market on a break of the box. That makes the broken horizontal barrier the signal line to our entry point.
3. There are three likely places where this can show up: (1) as a block of bars in the end of a pullback; (2) as a horizontal pullback in a strong trend; (3) as a block of bars in a non-trending market.
4. Although not nearly as detrimental to a trader’s overall results as the other case, giving in to a sudden burst of boredom after a prolonged spell of inactivity is like walking away from investment that is just about to sprout.

Range Break:
1. The range will ultimately crack. The longer it lasts and the more defined the barriers can be drawn, the more players will spot the same break, which will enhance the likelihood of necessary follow-through. But not all breaks are created equal. As is the same with the BB setup, pre-breakout tension is one of the better leads to a dependable breakout.
2. What is a false break? When the market comes down from a high of pattern straight to the lower and it breaks the low almost instantaneously. Back is a terrible way to celebrate and often leads to a very classic trap, because there is no pre-breakout buildup. Prices that break through this barrier are already exhausted. There needs to be buildup.
3. Look for a proper squeeze: prices are literally being sandwiched between the 20ema and the barrier line.
4. The 20-bar ema can be an excellent aid not only in pushing prices through a barrier defense, but also in keeping them from slipping back into the box after a break.

Inside Range Break:
1. A range-break trade in the middle of the range.
2. It is not uncommon for prices, once broken free, to accelerate towards the nearest barrier.
3. At the end of the day, a scalper’s task is all about tuning in to the beat of the market with as little information as possible. In a scalper’s world, less is definitely more.
4. We should always bear in mind, though, that regardless of our wonderful setups, trades go sour all the time. New strategy could ever be devised to prevent that from happening. But once we understand that giving profits back to the market is part of the exact same process as taking profits from it, the whole idea of losing will become a non-issue. Losses are the costs of doing business as a trader, nothing more and nothing less.
5. This is a profession, not a constant game of win or lose.

Advanced Range Break:
1. To set up can be classified in two ways.
2. The first is as a clustering number of bars stagnating around the broken barrier level, but resilient enough to not prove the initial break false. The cluster basically hangs around the barrier, either on top of it ( for possible longs)or below it ( for possible shorts); sometimes the barrier level is running right through the center of it.
3. The second is more of a pullback variety. This is like a breakout pullback.

Tipping Point Technique:
1. The essentials are pretty easy. For example, the maximum loss on any trade will be determined before the actual trade is put on them will stand for as long as the position is active.
2. This last point to get out – the ultimate tipping point – usually lies a pip above or below a signal bar or at a level above or below the top or bottom in a particular pattern. In this scalping method, the average stop will be about 6 to 7 pip. The target objective at all times is 10. Whereas the target level should never be tampered with, the stop level, on the other hand, is free to be adjusted as the trade progresses, but only in the direction of the target and never the other way. The idea behind this, obviously, is to minimize the damage in case the market turns sour on the trade.
3. Not exiting an invalid trade is the cardinal sin of trading. It has been a recurring theme in many trading anecdotes, and this one folly will no doubt continue to entertain the public for as long as there are traders. Respecting a stop can never be a shameful act; disrespecting one, on the other hand is the true disgraceful feat.
4. To protect a trade from ever becoming a loser by pulling a stop to breakeven is simply asking for an early exit.
5. Bailing out of very healthy trades at the slightest sign of counter activity, grabbing whatever tiny profit, is a surefire way to remain forever stuck in the non-profitable phase of trading. A trader has to rise above his fears of losing and giving back profits.
6. It is not uncommon for a trade to come dangerously close to being stopped out. Such is the nature of trading. It cannot be stressed enough how important it is to not hit the X. button when confronted with these very typical counterattacks. When prices take your time, the power of demoralization can be excruciatingly strong. Fight it. Fight as hard as you can.
7. The urge to get out of the trade when it is still technically valid can be extremely powerful. And so can be the reluctance to pull the plug on a position when it is time to bail out. These two little quirks reside in each one of us. They can never be defeated. But, fortunately, there is a wicked clever enough to stop these little demons right in their tracks, and that his commitment. To simply do what needs to be done, even when it hurts.
8. A well-chosen tipping point is not just a spot on the chart. It must bear technical significance.

[Author]

Posts