My 25 chapter How to Trade Price Action Manual will help you learn how to trade consistently like a professional using price action trading, and I based it on the material in my Brooks Trading Course, my four books, and what I say every day in my Trading Room.
I discuss Emini price action and trading throughout the day in my trading room. Here is a sample video that shows what takes place. Access is $99 a month through BrooksPriceAction.com.You can request a Free 2-day trial.
Al Brooks Trading Price Action Trading Course
After laying out the fundamentals, Al Brooks dives into the meat and potatoes of his price action trading system. This exhaustive series of video lessons covers nearly every aspect of day trading price action, including patterns, trading different times of the day, scalping vs. swing trading, and proper risk management.
While there are times throughout this course where things may seem to get a bit repetitive, this is entirely by design. The course is structured in a way that continually reinforces the concepts Al introduces, and as you work through each module, you will begin to see the topic of price action through the lens of a true master.
Following the two main sections of the Brooks Trading Course, there is a follow-up module of bonus videos which includes more than 8 hours of additional content. Covered in this section of the course are some extremely valuable lessons, including trading the open and final hour, end-of-day traps, channel trading, psychology, day trading options, and more.
Can you tell which is which? Of course not, and the reason is that the same people and computers are trading all of them. And, they are using the same techniques for all markets and time frames. Each is simply a representation of rational human behavior. (The answer is: the chart on the left is a daily chart of General Electric (GE), the middle chart is a 1-minute chart of the EUR/USD foreign exchange market, and the one on the right is a 5-minute chart of gold.)
The charts below show that it does not matter what type of chart a trader uses. This is because they all are just different representations of what is taking place in the market. Consequently, traders can see the same price action setups on all of them.
What is price action? Every little move is an example of price action, and traders never dismiss anything as unimportant. Sometimes, something very small leads to a big move. Traders who understand what is going on will often take these trades. The stop is sometimes very tight, which means that the risk is small. Small risk always means low probability, but the reward can be so large that it more than offsets that low probability.
Something very minor often leads to a strong trend, as happened here within the tight trading range near the high of the day. There was a small double top within that tight trading range, and it formed just one tick below the high of the day.
Markets are simply forums for buying and selling. They are entirely controlled by rational human behavior, which is in turn controlled by our genes. This means that price action has been the same since markets began. Furthermore, it will remain the same unless we evolve into a new species.
Computers make decisions faster than we do, but ultimately, they come to the same logical decisions as us. This means that price action has not changed, even though 75% of the trading is now automated.
Although trading is not a zero sum game in the long run because the economy has grown forever, the total dollars in the stock market today are about 10 times more than during the 1987 crash. There is vastly more wealth today. It is essentially a zero sum game over the course of the next several weeks.
People are naturally hopeful. We want to believe that the world is good and fair. Also, we want to believe that we will succeed in whatever we are doing. The trading world is filled with websites, videos, and books that make trading sound easy. The message is clear. All you have to do is just memorize a dozen candle patterns or use a secret indicator and you will get rich.
Above is a EURUSD 60-minute forex chart with many indicators, which make it very difficult to see the price action. Beginners are often afraid of the market and try to hide it with lots of indicators.
Traders correctly believe that Goldman Sachs, high-frequency trading firms, and hedge funds make a fortune. However, they are not using candlestick patterns and indicators to do so. So, what do successful traders do instead?
They also talk about whether a trend is strong, or if the market is in a trading range. In addition, they mention higher highs and higher lows in a bull trend, and lower highs and lower lows in a bear trend. Also, they assess buying and selling pressure, probability, risk, and reward. Finally, they often talk about trade management, like where to put stops and when to take profits.
Markets have inertia and tend to continue to do what they have been doing. My 80% rule is that 80% of trend reversal attempts will fail. Also, 80% of trend breakout attempts in trading ranges will fail. Trends have a strong tendency to remain as trends. In addition, trading ranges are very resistant to change as well.
They therefore like to bet against those other traders and buy reversal attempts in bull trends. Betting that they will become bull flags. Furthermore, they sell bottoms in bears, betting they will become bear flags. They also buy low, sell high, and scalp in a trading range. Here, they are betting that all of those strong rallies and selloffs will fail and then reverse.
There is nothing magical to trading, and the institutions cannot hide what they do. It is all right in front of all of us every day and on every chart. This is called price action. What is price action? It is the key to successful trading.
However, trading well takes much more work than simply memorizing a handful of candle patterns or relying on a secret indicator. But, if a trader takes his job seriously and works very hard to learn his craft, the reward can be everything that he hoped it could be.
Moreover, traders should accept that 75% or more of all trading is being done by computers. The math is too perfect and the speed is often too fast for anything else to be true. Still, every tick is important, especially in huge markets like the E-mini S&P 500. If you spend a lot of time studying the market, you can see a reason for every tick that takes place. In fact, you can see a reasonable trade to consider on every bar during the day.
What about all of those one-lot orders in the E-mini or the 100-share orders in Apple (AAPL)? The majority of them are being placed by computers conducting various forms of computerized trading (including high-frequency trading), and it often involves scaling in or out of trades and hedging against positions in related markets. Some firms are placing millions of orders a day across many markets. Scaling into a trade means to enter more than once, either at a better or worse price, and scaling out means to exit the trade in pieces. They are taking a casino approach, making a big number of small trades, each with a small edge, and this can result in tens or even hundreds of millions of dollars in profits each year.
The third variable is the one that causes the greatest problem for most new traders. They quickly discover that all of those books and courses that make trading look so easy hinge on a fallacy that there are a lot of perfect trades where the probability is high and the reward is much bigger than the risk. Perfect or nearly perfect trades cannot exist because every trade needs institutions on both sides.
How can computers not have affected the price action? It clearly has some effect, but algorithms simply look for logical patterns and then structure trades where there is a mathematical edge. That is what all traders have done in all markets since the beginning of time.
Trading has always been part of civilization and crucial to the survival of society. The more fit traders have an advantage. Trading is genetically rooted, and computers simply move trading further along the evolutionary path. This is why the charts are the same as they were 100 years ago and why the charts of all markets and all time frames look the same and always will.
If trading is moving toward perfection, how can anyone make money? Simple. We live in a competitive world, and some will always be better than others. Better traders will always have an edge, which is a mathematical advantage, and they will make more than everyone else. What about the argument that trading is a zero-sum game and that no one can ever really make money long term? Over the next day or two, trading is essentially a zero-sum game. However, the world economy has been growing at about 3% a year forever, and this means there is 10-times more money in the world today than in 1987, and 100-times more than in 1927. The pie will always grow, so everyone can have a piece; the better traders will have the biggest pieces.
If a three-tick goal is too small, what is reasonable? It varies with every market, but traders can quickly figure it out by looking at the price action. If there are a lot of six-tick moves in the E-mini, then a lot of traders and computers are scalping for four ticks. (If they enter on a stop one tick beyond the signal bar, the market usually has to move five more ticks to secure a four-tick move). If there are a lot of 22 moves on crude oil, many are scalping for 20. If there are a lot of 12-pip moves in the EUR/USD, then traders are scalping for 10 pips. If a trader is looking at limit order sets, everything will be one tick less. For example, if there are a lot of nine-tick moves in the E-mini, then many traders are scalping for two points (eight ticks).
Al Brooks, MD, has traded for his personal account for 27 years. He is a regular contributor to Futures and the author of a three-book series on price action published by Wiley. He also provides live intraday E-mini price action analysis and free end-of-day analysis at www.BrooksPriceAction.com. 2ff7e9595c
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