smilingsynic trading observations etc.

By Lawrence

smilingsynic’s trading observations, techniques, etc.

*** this is part of our archive, complete thread now moved to forum under same name ***

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  • Anna Karenina January 15, 2012 at 11:55 am

    thanks everybody for posting.

  • HiggsBoson January 17, 2012 at 4:10 pm

    smilingsynic

    I am growing tired of his lack of evidence for his conclusions, the charts with no losing trades and with plenty of inconsistencies, and with his poor writing ability, as if every sentence has to be a two independent clauses linked together with a coordinating conjunction.

    I am guessing it would be hard to find evidence to support his conclusions because if you backtested his setups, they wouldn’t work, and then the story would be that setups are only valid in context with context being a subjective evaluation of what the market is doing, which is only clear in hindsight, and it is hard to backtest something like that. Still, two-legged Al got me to thinking about each bar’s contribution to the larger picture and that was a good thing.

    People don’t care about proof anyway they just want a guru to tell them what to do because they are afraid to make buy/sell decisions on their own (I know I am), and it is just like hitting a curveball because no one can tell you how to do it, and you just have to stand in the batting cage and keep swinging until you get it right, and trading is the same way because you have to stare at charts and practice on the simulator until you become profitable, and most people don’t want to do that because they lack confidence in themselves (like me), so they look to gurus to tell them what to do.

    I tried to limit the preceding comments to awkwardly constructed independent clauses with lots of coordinating conjunctions just to annoy you, but it turns out that writing badly is as challenging as writing well. I don’t know how Al does it.

    • smilingsynic January 18, 2012 at 9:45 pm

      Thanks for the effort to write poorly and awkwardly, but I still say Al has you beat. He definitely has a gift, lol!

  • smilingsynic January 18, 2012 at 9:46 pm

    Brooks, book two, continued:

    If the market is in a clear bull trend, do not look for low 1 or low 2 shorts, because those setups are only for bear trends and trading ranges. If the market is in a clear bear trend, do not look for high 1 or high 2 buys, because those are setups only in bull trends and trading ranges.
    In fact, if the market is in a bear trend, you can often look to short above the high of the prior bar because buying a high 1 in a bear trend is a low probability trade. That means that if it has only about a 40 percent chance of being a successful long, it has about a 60 percent chance of hitting a protective stop before hitting a profit-taking limit order.
    The most reliable high 1 or low 1 entries occur when there is a false breakout of a micro trend line in the spike phase of a trend, which is the strongest segment of the trend.
    The most common reason for a trader failing to buy a high 1 pullback is that the trader was hoping for a larger pullback. However, it is important to get long when there is a strong bull trend, and traders should place a buy stop above the prior swing high, in case the pullback is brief and the bull trend quickly resumes.
    You should buy a high 1 long setup only when the trend is very strong, which usually means only in the spike phase and only when the market is clearly in a trend.
    Do not buy a high 1 after a climax or a reversal, or at the top of a trading range.
    High 1 and low 1 patterns are with-trend setups, so if one occurs within a pullback in a trend but in the direction of the pullback and not the trend, do not take the trade. Instead, wait for it to fail and then enter with the trend on the breakout pullback.
    It is risky to buy a high 2 above the moving average in a trading range.

  • smilingsynic January 18, 2012 at 9:47 pm

    Brooks, more…

    Two-legged pullbacks set up excellent with-trend entries.
    When a pullback is contained by a trend channel line and it ends at a higher time frame support or resistance line, this is a dueling lines pattern, and it often results in a reliable trader in the direction of the larger trend.
    All head and shoulders tops and bottoms are really continuation patterns because they are trading ranges and, like all trading ranges, are much more likely to break out in the direction of the trend and only rarely reverse the trend.
    In a trading range, many bars have prominent tails and overlap half or more of the previous bar. There are many dojis. The moving average is relatively flat. They often follow an impressive buy or sell climax.
    Trading ranges have two-sided trading, where the bulls are stronger near the bottom and the bears are stronger near the top.
    Every rally/selloff in a trading range is essentially a bear/bull flag. Because of this, traders trade the top/bottom of the range the way they trade a bear/bull flag in a bear/bull trend. They sell/buy above and below bars, and above/below resistance and support areas, because they see each more up/down as an attempt to break out of the top/bottom of the range, and they know that most breakout attempts fail.
    Trading ranges are always trying to break out, and because of this, the swings toward the top and bottom often have strong momentum with one or two, and sometimes three of four, large trend bars with small tails.
    Never get trapped by the strong momentum surges toward the top or bottom of a trading range. You need to be following what the institutions are doing, and what they are doing is selling strong bull trend bars at the top of the range and buying strong bear trend bars at the bottom.
    As a trader, you should follow the institutions, and if they are driving the market up, you should follow them and be a buyer. If they are driving the market down, you should follow them and be a seller.
    The best entries are second entries at the top or bottom of the range where the signal bar is a reversal bar in your direction that is not too large and does not overlap the prior bar too much. However, the appearance of the signal bar is less important for trading range reversals than for trend reversals. Short setups at the top of the range often have signal bars with bull bodies, and buy setups near the bottom of the range often have bear bodies. A strong reversal bar is usually not mandatory unless a trader is looking to take a reversal trade in a strong trend.

  • smilingsynic January 18, 2012 at 9:47 pm

    Brooks, last one from book two:

    Trading ranges always look like they are breaking out, but the majority of breakout attempts fail. That is why one should never overstay any trade hoping for a successful breakout. Look to exit longs on scalp profit targets or on tests of the top of the range, and take profits on shorts on limit orders that give a scalper’s profit or exit on a test of the bottom of the range.
    Trading range = bears are strong at the high of the day
    Trading range = bulls are strong at the low of the day.
    So when did traders conclude this was a trading range day? First bar of the day was a doji. The first three bars had tails at the lows. Four or five reversals in the first hour.
    When you see a breakout, ask yourself: Will it fail or succeed? Most will fail—expect it.
    In a tight trading range, wait for a spike or for a broader channel before trading again.
    Your job is not to place trades. It is to make money.
    If you are looking to take only the best one or two setups of the day, expect two legs and a move of at least ten bars. Scalping makes no sense.
    Swing trading is much more difficult than it appears when a trader looks at a chart at the end of the day. Swing setups tend to be unclear, or clear but scary.
    Most swing trades enter on reversals, because they need to get into a trade early if they hope to make four or more points. When a trend is especially strong, they can often make four points by entering on a pullback or even on the close of a bar in a strong spike, but these situations arise only a couple of times a week.
    It takes a long time to trade profitably and even once you do, you have to stay sharp and maintain your discipline every day. It is challenging, but that is part of the appeal. If you become successful, the financial rewards can be huge.
    Why does a measured move target often work so precisely? Because it is the minimum needed by institutions to have a positive trader’s equation, and they would not otherwise take the trade.
    In a tight trading range, enter only (1) a large trend bar breaks out of the pattern by at least three ticks AND you have waited that bar to fail; (2) there is a small bar that you can fade near the top or the bottom of the trading range.
    When a channel is tight (strongly bullish or bearish), wait for a second signal.
    Don’t assume that a breakout is the beginning of a big move. A breakout is a TEST. The market is searching for value, and the breakout is simply a contest between the bulls and bears, and usually not the start of a big trend. The market runs this test all of the time.
    All pullbacks and reversals begin with profit taking. Experienced traders look to exit on strength and then to reenter on a pullback.
    80% of reversal attempts will fail and evolve into flags. That makes it almost impossible for most traders to enter countertrend trades on stops and consistently make a profit.
    Scaling into a trade is usually best in a growing pullback in an always-in market (a clear trend).

  • smilingsynic January 18, 2012 at 9:51 pm

    Finished my notes on book two today. Got book three in the mail today.
    Book one was better than book two, so does that mean that the worst is yet to come?

    Please note that I included only those notes that I considered helpful and insightful.

    I did not post notes that I had flagged as being “really stupid” or “another dumbass statement” .

  • smilingsynic January 18, 2012 at 10:54 pm

    Trying to upload Brooks’s TRADING RANGES notes in a PDF.

  • smilingsynic January 18, 2012 at 10:54 pm

    Can’t do it. ET let me, however.

  • Lawrence Chan January 22, 2012 at 10:03 am

    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 January 22, 2012 at 8:37 pm

      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 January 27, 2012 at 2:03 pm

    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 February 2, 2012 at 3:16 pm

    Interesting link regarding dividend-paying stocks:
    http://www.thereformedbroker.com/2012/02/01/when-stocks-declare-their-first-dividend-look-out/

    • Lawrence Chan February 3, 2012 at 8:23 am

      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 February 3, 2012 at 8:13 pm

    Zero Hedge’s error concerning NFP:

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

  • smilingsynic February 3, 2012 at 8:31 pm

    OPEN GAPS ON MARCH ES:

    1322.75
    1308

    1253
    1244.25
    1236.25

    1198.50
    1191
    1146.75

    SPX: 1353.82 (from July 7)

    • smilingsynic February 10, 2012 at 9:42 pm

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

      The SPX from July 7 no longer exists

  • smilingsynic February 10, 2012 at 9:50 pm

    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 Chan February 12, 2012 at 3:49 pm

    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.

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