Reading Price Charts Bar By Bar

[Caesar]

I'am starting the price action trading and all my strategies are based on "Reading Price Charts Bar By Bar: The Technical Analysis For The Serious Trader" by Al Brooks.

This style of trading requires japanese candle sticks on time frame of 5 minutes usually but can be used on any time frame. Price is all one requires and there is not any indicator other than 20 EMA.No need of volume at all and adding any indicator is nuisance and also there is not any fancy terminology.No hanging man or hammer or bullish engulfing pattern or any fibonacci retracement level or any oscillator.

Switch OFF the Television while trading because you dont want your judgment to be impaired by what charlatans are saying on business news channel when actually they should be trading at that hour.This is what Al Brooks express consistently.

This book by Al Brooks is for all those who are looking for better trading success and who innately believe that price is all that matters.

 

[Caesar]

When to enter counter trend?
Wait for the trendline to be broken on strong countertrend movement.Usually after this countertrend move, with trend move tries to test the high in case of bull and low in case of bear and results in higher low or lower low(in case the trend had been a bear) and lower high or higher high(bull trend).
If there is higher high, then the bear trend about to start will be two legs down with on up leg in between.
If there is lower high there will be one down leg .
Similar is the case with lower low and higher low.
The most important thing for trading counter trend is first there has to be a trendline break and then test of the high in case of bull and test of the low in case of bear.

 

[Caesar]

Let us consider price action based on my earlier post.
"In a bull,if there is a trend line break with good counter trend momentum,then a higher high gives two legs down."
The down move from bar 4 high is strong and also broke trend line from yesterday's close.Hence there is a break in up trend.
Still one has to look to enter in up trend till there is a higher high or lower high.
Bar 8 has given higher high and hence the end of bull move.
Bar 7 has given lower high on which many would have entered keeping a stop loss above 7 or 4 and SL is hit on the move or bar 8.
It not only trapped out the bears but also trapped on the bulls and hence a very good shorting opportunity.The move should be expected to have two legs down
with one intermediate up leg.Bar 9 is only a pause bar and hence the move down from 8 is only one leg.

 

[Caesar]

The move down from bar 2 is a three push pattern and hence one could expect a prolonged move of two legs up.(one to one and a half hour)
After the up move there will be a test of the end of three push.All the bears who entered on bar 3 are trapped because only one up leg is completed and hence a proportional up leg is still awaited.Price action traders are aware of this and hence would increse their long position.The huge bull bar is the result of not only bears exiting but also more bulls coming in.
Side ways bars around bar 4 represent brief equilibrium between bears and bulls.After the two up legs with a target of twice the height of three push pattern reached one can expect to short if and when there is a good reversal bar.After bar 4 bulls tried to regain control once again but could not go above it.That is all needed for bears to go short .
The short from bar 4 is with good momentum and well below the EMA and hence bears will be ready to short for a swing move which occured at the higher high of bar 8.Bars 6,7,8 complete three pushes up and also trend channel line overshoot and also tested the high of the day.With so many factors one could also add some puts.

 

[Caesar]

The last three posts are those that I posted in Romeo and Elliott's thread and since it better not to break his approach with mine I have reposting it here.
Will go into analysis of trend line breaks with one more illustration in the next post.
People who are interested in reading Al Brooks can start by looking into glossaries first.Once comfortable with his terminology can start with first chapter.This is not easy read since he is not a professional author but a pro in day trading.This will be the last book anyone will read to be successful in their trading life and I can vouch for that.

Terminology used by Brooks is out of the blue and hence will take time even for a seasoned pro.
Anyone who finishes first chapter is on the path for an illustrious career and mind you understanding the first chapter itself will take a lot out of you, but by then you are confident that his approach is what all one requires to make hell lot of money in a day.

 

[Prashant Patel]

When to enter counter trend?
Wait for the trendline to be broken on strong countertrend movement.Usually after this countertrend move, with trend move tries to test the high in case of bull and low in case of bear and results in higher low or lower low(in case the trend had been a bear) and lower high or higher high(bull trend).
If there is higher high, then the bear trend about to start will be two legs down with on up leg in between.
If there is lower high there will be one down leg .
Similar is the case with lower low and higher low.
The most important thing for trading counter trend is first there has to be a trendline break and then test of the high in case of bull and test of the low in case of bear.

Can u explain the above with help of chart?
Would be helpful ....

 

[Caesar]

Can u explain the above with help of chart?
Would be helpful ....

Consider the above graph.
The move from yesterday's swing low at 2:30 to bar 4 today is bull move and the move down from bar 4 to bar 5 is the counter
trend move.Is the counter trend move strong?Yes, because there are good bear bars going well below the EMA and it has broken
a trendline.
So everyone expects the bull move to resume but are more cautious because of counter trend strength.So a test of the high
at bar 4 will provide good indication of the course of action.
Test of the high at bar 4 after trendline break is Higher High at bar 8.
But the move from bar 5 to bar 8 is not strong and there are lots of bear bars and lot of hesitation and this is what is required for bears to enter.
A higher high after trendline breaks gives two legs down and hence the strong down move.Next day gave higher low at 9:35 with the outside bull bar and this completes the beat move from bar 8.

 

[comm4300]

Consider the above graph.
The move from yesterday's swing low at 2:30 to bar 4 today is bull move and the move down from bar 4 to bar 5 is the counter
trend move.Is the counter trend move strong?Yes, because there are good bear bars going well below the EMA and it has broken
a trendline.
So everyone expects the bull move to resume but are more cautious because of counter trend strength.So a test of the high
at bar 4 will provide good indication of the course of action.
Test of the high at bar 4 after trendline break is Higher High at bar 8.
But the move from bar 5 to bar 8 is not strong and there are lots of bear bars and lot of hesitation and this is what is required for bears to enter.
A higher high after trendline breaks gives two legs down and hence the strong down move.Next day gave higher low at 9:35 with the outside bull bar and this completes the beat move from bar 8.

how did you number these bars ? what parameter is used.

thanks.

 

[Caesar]

how did you number these bars ? what parameter is used.

thanks.

The numbering is based on swing points and to start explaining about swing points is too early.To make clear some air,here it is.Any swing move will have ABC pattern.Whether taking a trend move or countertrend scalp it will be there.
Will explain these in due course after giving some other basic concepts.

 

[Caesar]

Let us see why one shouldnt trade based on news.
The chart is of the budget session which has been very volatile and provided excellent trading opportunities purely based on price action.
If you have read Al Brooks then you will get through the logic being explained,if not relax and go through but dont bother.I will take through all the concepts in detail in due course of time.But here is how one traded brooks price action.

The move up to bar 3 yesterday has broken a strong down move from bar 1 and the test of swing low of bar2 gave higher low at bar 4. This shows that bears have lost conviction to push below bar2 and hence will be ready to exit at one tick above bar 4.They would have exited above the bull inside bar after bar4.

Today opened at the swing high of yesterday at bar 1 and the move up to bar 7 is in two legs.Enter above the opening bar with stop loss at below the opening bar.Bar 7 is a swing high and also there is minor trendline break on the move down to bar6.Hence bar 7 is higher high enter short 1 tick below it. But the entry did not trigger and hence move the entry price to one tick below the small inside bear bar and would be holding a short position.The move down did not have momentum and gave moving average second entry long (M2B) at bar 8.Reverse the postion to long on one tick above the bar 8.Since M2B gives two legs one should swing all their position on long.
Bar 10 overshot trend channel line and is Low2 at the swing high after a trend line break from the low of bar 2 and bar 4.So go short on one tick below the low of bar 10 with the stop loss at one tick above the bar 10 high.Entry did not trigger on the next bar which is small bear inside bar and move the entry price to one tick below its low and would be holding short position.
Bar 13 is higher low and High 2 after a small trendline break on the move upto bar 12.Higher low, High 2 and a trend line break (however small) all add upto reversing the position to long.
However since trend line across bars 2 and 9 is broken on the move down to bar 13 one should be ready to go short at Low2.Bar 14 is low 1 and one can add more to their position on the inside bull bar two bars later.
iii pattern at bar 15 caution traders to be ready to short and but entry is not triggered.So one will be anticipating a Failed Final Flag to go short which occurred on bar 16.Also it is a three push pattern (5, 10, 16).There is a trend channel overshoot across bars 5, 10 and Low 2.The signal bar 16 is a good bear bar with a top tail and good body.This is also Up Down reversal.
Two reasons are enough to enter a trade and here we have 5 reasons.This is the trade of the day and one has to swing full size. A more aggressive one will go for buying all puts.
Bar 18 high2 and test of the swing low of bar 13 and also target of testing the start of three push pattern is achieved and hence one should exit all their short position.
Should you enter long after bar 18 because it is high2 and tested swing low of bar 13?
No.
There is no trend line of any sort that is broken on the move down to 18 and hence no longs can be initiated after such a strong move.
Is there any reason to watch television when there is such a clear logice to this volatile move?