Al Brooks on Probabilities, Timing, Scaling

hey guys I’m Big Mike and today we have al Brooks and this says I believe it is fourth or fifth time to do a presentation on BMT today he’s actually presenting from a coffee shop so we hope that everything goes normal we’ll find out here in a few minutes today he wants to talk about probabilities market timing and scaling like scaling in or scaling out I presume also at the end of today’s presentation we’re going to give away 5 autographed copies your choice of one of Al’s three new books and what I’m going to do is ask some quiz questions that al has put together that is based on the content that he’ll be covering today so pay attention to what he has to say today and then when he’s done with the presentation when we’re done with the QA that I’ll bring the quiz questions on we’ll take five winners and I’m going to ask everybody for their BMT username that’s how I’m going to get in touch with you to get the book in your hands so if you came to this webinar through Al’s site and you do not have a Big Mike trading username just go to Big Mike’s trading comm and click on register it’s free it takes about 30 seconds and then that way you’ll have your username ready in case you’re one of the five lucky winners as always this record this webinar will be recorded and I will post it on VMT sometime tomorrow I will also email a copy to out as always for his guys that’ll be sometime tomorrow as you guys have questions you can type them into the questions box but I’m pretty sure the owl as soon as I give him Mike control again in a second he’s probably going to ask you to hold questions until the very end of the presentation so give me one second guys and I’m gonna turn the Owls mic back on and give him control I might hi everyone okay great okay well thank you for giving me the opportunity to speak I always enjoy talking much to the dismay of my daughter’s they get tired of listening to me talk too much I have written a number of books on price action I’m a price action trader I’ve been training for my own account for about 25 years and now that my girls are all in grad school I have time on my hands so I decided to do some other things like write books I prepared a video course as well and I also run a daily chat room whenever ease the computer is going very slow and may be due to the internet connection as I said I’m gonna coffee shop and my internet is down at home okay let me do it this way okay I have two websites one was designed by and set up and run by traders Brooks price action calm and on that site there are articles and free videos of daily emailing analysis and they also run a chatroom and they pay me to speak throughout the day about what’s going on in the markets primarily the email on a five-minute chart I have a second website brooks training course calm i’ve been talking so much over the years that i decided to put a lot of my slides together into a course it runs about twenty seven hours and it’s fifty three videos and it’s at the website brooks trading course calm and it’s about our price action trading and today what I’ll be saying is in large part from that course today I’ll be talking about a subject that I call the 60/40 rule and it’s pretty much the basis of everything that I do all day long it’s my belief that nothing works all of the time everything works some of the time anyone who’s been trading for any length of time knows that that’s true the key for me is I think most things work forty to sixty percent of the time and that is very important when it comes to trading okay five percent of the time the markets in a strong breakout up or down and the direction is very clear and there’s no decision you’re going to trade in the direction of the trends you know for example when you see something like this all right you got a market gapping up big and then three strong big bull trend bars closing on their highs I’m only looking to buy all right so this is breakout mode five percent of the time the market looks like that and when it does all I want to do is buy and you know how do i buy the pink right here I buy at the close of strong bull bars I buy the clothes of bear bars

okay I buy with limit orders below bars so when a bar closes I place a limit order to buy the low of the bar that’s what these blue boxes are i buy with stops above bars so when a bar closes I placed a buy stop above the height of the bar to get long I don’t take all of these buys but if I’m flat and I see the market is extremely strong like this I’m constantly looking to get back in and these are the ways that I do it so 5% of the time the market is like this and a very strong trend up or down about 95% of the time it’s not 95 percent of the time there’s a profitable way to sell and a profitable way to buy in other words the market has enough two-sided trading that both the Bulls can make money and the Bears can make money and the key is management I’m gonna talk briefly about the traders equation and this is the basis of every trade you know every trader at least subconsciously thinks about this you know they only take a trade if they think they will make money and there’s a mathematical way to describe that belief you know you need the probability of success times the reward that you’re trying to obtain to be significantly greater than the probability of failure times the risk that you’re exposing yourself to the risk that’s number of ticks to your stop the reward the number of ticks to your profit taking limit order and the initial risk you know every trader has a different initial stop so if you’re buying you might put a stop below the signal bar you may use a money stop like two or three points below you may use a stop based on a moving average on some other support level right but once the market goes your way everyone has the same actual risk right so everyone’s initial risk is different everyone has a different initial stop but once the market starts to go your way everyone agrees on what the actual risk is of the trade and I always base profit targets on my actual risk okay so what is the actual risk it’s the actual it’s the number of ticks needed to not have been stopped out of a trade so if you take a trade regardless of where your protective stop is the trade starts to go your way you have to look back and say huh what was the number of ticks I had to have for a stop to not have been stopped out of the trade and that is your actual risk okay and what’s the smallest reward necessary for a good trade for a trade with a positive traders equation if you know the probability and the risk you can calculate what the smallest reward you need to have for the traders equation to be positive right so you need a target that is at least as big as that risk and that risk excuse me you need a target at least as big as that risk assuming you have a high probability trade in your risk is let’s say two points you need a target at least two points okay whenever the probability is not clear which is most of the time go for a profit that’s two times your actual risk and that will 95% of the time result in a positive traders equation so in other words if you’re not in a strong breakout mode and you’re taking a trade and you’re not sure how probable your success is just simply go for a reward two times the actual risk okay actual risk okay so let’s say you see a chart that looks like this and you see a bull reversal bar new law you say oh I’m gonna buy this but this bull bar might not be strong enough to reverse that bear bar so maybe it’s not that high probability trade well if that’s the case then you go for a reward two times your risk but where’s you stop are you going to put your stop below the low of the signal bar if I take this trade I look at it and I say and it looks like we’re trying to form a trading range but we may have another push down or two in general when I take this trade I do not put my initial stop here I’ll use the wider stop somewhere down here you can say well if you’re using a wide stop are you trading smaller well for me most of the time I do not but for most trade you know you know money is fungible I have a whole bunch of accounts and you know I should try to do pretty much the same thing every time but for most traders if they’re if their accounts are not very large and they have to be worried about the dollars on every trade and they end up needing a wider stop then I think they should be trading smaller so you know you could use a stop below the low of the signal bar but in a situation like this we could have one or two more pushes down I

would rather use a wider initial stop all right so my initial stop might be somewhere down here I’m not talking about how to play stops on this webinar today but I do want to talk briefly about actual risk all right so let’s say a couple bars later the market does this right I’d still be long because on when I stopped would be somewhere down here but now what has happened okay the market tried to reverse the prior low one time here okay and now it’s trying to reverse it again for me if the market goes above this second signal bar this becomes a good trade a strong trade in other words the probability if it goes above this bar is now 60% and why is that important because once the probability is 60% I I trade the trade differently if my probability is low 50% or 40% I go for a reward to time that’s my risk but and which was the case over here but now the market has changed right and now the probability is up to 60% if it goes above the high of this bar so if I bought above the high of this bar initially my reward would be two times my risk somewhere up here but at this point if it goes above the high of this bar the probability has changed and I probably will go for just one times actual risk all right again where’s my stock probably somewhere you know down here right at this point what has taken place right we have a strong bold breakout bar a 2 bar reversal as far as reversing that bar we have a second entry long at this point most traders put their stock below the low of this bar alright maybe below over here the traders who bought above the high of this bar this first signal right now they would put their stop certainly below the low of that bar so their actual risk is one tick above their signal bar – one tick below the low of that bar and at this point once the market rated above this bar they say yeah this is probably going to be successful so probably successful I mean 60 percent or better that they’ll make a profit one times their actual risk is up here so these bulls are hoping that the market will come up here for them to take a profit one tick below their new stop which is below that bar one one tick above their entry bar their signal bar they got long here one times the risk is here these traders at this point probably have their stop down here as well you know at the close of this bar they probably have the stop down here they might have this stop below here if it’s down here you know they could go for one time that profit target good for them actual risk is now one tick below this bar right there actual risk is one tick below this bull bar so they entered here their actual risk is here two times actual risk is here you know theoretically they could scalp out there to me that’s not enough profit I would go for more profit so I would probably go for a measured move based on the height of the signal bar okay so the traders have bought here one times actual risk is here they’re trying to get out the traders are bought here they may go for one times the signal bar height in this area and traders will take profits here you know I don’t want to spend a lot of time on actual risk but in general you’ll find a lot of profit taking at one and two times actual risk and that tells you that a lot of computers are taking profits based upon actual risk and not upon initial risk because everyone’s initial risk is different you know I said that everybody that 95% of the time you can make money buying and and you can also make money selling you just pick one or the other and manage your trade correctly I’ll take a look at this chart okay we have a bear trend and we have a strong break above the top of the the bear channel the top of the trendline right so at this point traders are thinking that the Bulls have taken control and they’re looking for a major trend reversal you know a higher low wish we got a double bottom or a lower low in any case once we’ve had this strong breakout above the Bear Channel traders are going to start looking to buy and here we have a good second entry by we have a micro double bottom the market went down in this bear bar down in this bar reverse up reversed up you can call the wedge bull flag three pushes down one two three strong bull reversal bar to bar reversal higher low breakout test of this the high of this initial signal bar right so you get a lot of things going for you if you’re a bull right now I do in this channel and this looks like a higher low major

trend reversal and it is alright but if you look back at the past 20 or 30 bars it could also simply be a trading range right a bull trend has higher highs and higher lows we have a higher high we went above a prior high alright but since the trend has turned up we have not yet gone above a prior high we have a higher low which is good but a bull trend needs a series of higher highs and higher lows so we do not yet know if this is a bull trend it’s clearly a trading range right we’ve been sideways for 20 or 30 bars it’s also still a bear trench we’re still forming higher lows and higher highs and you know it’s still working lower I do think this is an excellent buy setup you know higher low major trend reversal right so you can buy one tick above behind this bar right so let’s say you get long there okay in general you should always take partial profits at the minimum target necessary for A+ traders equation so if you do the math and you say yeah I got if I take profits here it’s it’s a it’s a mathematically sound thing to do alright anytime a trade goes your way to the point that the the math is favorable you have a positive traders equation you should always take partial profits in general since probability is hard for most traders to determine with any degree of certainty up the traduced equation becomes positive at two times your actual risk you should always take at least some off let’s say half off at two times your actual risk I also have a minimum if your actual risk is only one tick I’m not going to take profits at two ticks so I always in the e-mini want to take profits of at least one point I never scalp for less than a point I never Scialfa less than ten cents and stocks or ETFs okay so the trade starts to go your way two times actual risk once this bull bar closed you know your actual risk was one tick below it’s low right if you bought one tick above the high of this signal bar right and then you had this strong bull bar you would not have been stopped out if you had a stop one tick below the low of that bar you know at this red line right here right so your actual risk was from your entry price this little red line to the stop Christ which is this line and two times actual risk is right there right so that would result in a positive traders equation and you should always take at least half off once you have a positive traders equation few times actual risk so you should always take partial profits there and look what happened when the market got there you’ve got a bear reversal bar that tells you that lots of traders took partial profits there now I said that 95% of the time there’s a bull case and a bear case so just as foolish as you are here bears are saying no lower highs lower lows still a bear trend right I drew in these lines and it’s deceptive you know just because the lines are there does not mean that all the computers that are controlling the market are using those same lines there are other ways to draw lines and you should always be aware of the bear case as well you can’t simply say lower hi major trend reversal great trade I’m just gonna swing the whole thing up no you’ve got to take partial profits when you have them especially when you have at least two times your actual risk all right so this is how the Bulls look at this chart however there’s a bear way to look at the chart as well right here okay but the Bears this bear reversal bar is at a bear trend line so you know you have Bears who are shorting betting that would just forming another lower high and will continue down it doesn’t matter how strong this rally is all right the Bears to see another lower high and the market is reversing down at a trendline so they’re shorting here so the Bulls are taking profits here and the Bears are shorting here we have a moving average gap bar a bear trend the first bar with a low above the moving average usually results in the final leg of the bear trend it’s possible that the final leg of the bear trend ended here it’s also possible that it’s way down here we don’t yet know but I do know that if I bought at this at this red line and my stop was here I’m taking at least half off here the Bears you know they’re actually going to short here they’re at a bear trend line and a bear trend and what followed this is what followed the Bulls would have been

stopped out of the second half of their position somewhere around break-even they may have stopped themselves out below that bear bar the Bears who shorted below that bear bar you know they make a profit on the way down and within trading ranges that’s always the case there’s always a bull argument and a bear argument and usually it does not matter which side you take right there’s a way to make both sides work okay 60/40 rule you know 60 95 percent of the time the probability of every trade is between 60 and 40 percent or 40 and 60 percent every time you buy there’s an institution selling every time you sell there are institutions buying okay since institutions are profitable I think that’s a basic assumption that you have to hold on both the buyers and the sellers are taking profitable trades and there’s a profitable way to manage both a short and a long trade there are always firms mourning goodbye and there are always firms wanting to sell and they both need a way to do it and that’s why the market exists you know the market exists for one reason alone it allows buyers and sellers to achieve their goal you know the buyers want to buy the sellers willing to sell hey let’s create a market and both of us can do what we want to do okay in general buyers and sellers balance each other pretty closely and that’s why the market is sideways so much of the time and anytime there is an imbalance if there are too many buyers guess what the prices the market has to go up to find enough sellers neutralized those fires anytime there is an imbalance the attends to get neutralized pretty quickly okay since I can’t as a slideshow of whatever reason it’s not allowing me to run it as a slideshow I’m having to do it by clicking on slides one by one and so sometimes I click on the long slide and I have to go back a little bit okay in a direction in the market you know ninety-five percent of the time it’s not all that certain okay it’s never as clear as anyone wants you know buyers they look at a trading range and they always want to buy a little lower sellers they look at the market trading range or a channel they always want to sell a little bit higher when the price falls a little bit buyers get more aggressive sellers become less aggressive that makes the market go up a little bit when the market goes up a little sellers become more aggressive and buyers become less aggressive and that pushes the market back down and the result is that most of the time the market is pretty much sideways and with within the trading range that spends most of the time toward the middle okay in the middle of the range the buyer the Bulls see the market is a good value to buy and the bear see it as a good value to sell okay sometimes they both agree that the price is too long and the market has to move higher and it does so quickly in the form of a breakout sometimes they think the market the price is way too high and then the market has to move lower when both the Bulls and the Bears agree that the price is too high you get a bear breakout and it moves down quickly and when it’s moving quickly you know the 6040 rule does not apply okay I talked about the traders equation risk reward and probability of the three variables probability I think is the most important and it’s the reason why it’s so hard to make money probability is the source of all emotion in trading and results in traders not making fully rational decisions your beginners end up not taking potentially great trades because they wonder if the probability is not high enough it also makes them exit great trades too early or too late okay in general you should just give yourself two choices with probability you can never know with certainty all right sometimes you’re looking at your tray or trading to say it probably will work in that case assume the probability of 60% when that’s the case go for a reward at least equal to your risk so if you’re risking 50 cents in a stock go for a reward of at least 50 50 Cent’s most of the time you’re really not that certain and the probabilities 40 to 50 percent in that case and when that’s the case go for a reward two times your risk so if you’re risking $1 and Apple make sure to go for a profit of at least $2 okay again if you think a trade probably will work assume the probability is at least 60% because it has to be at least 60%

for you to think that it that the setup looks good you know we all swim in a sea of constant uncertainty and you know clarity only briefly happens and it does so in the form of strong breakouts most of the time trading is unclear and the probability is between 40 and 60% for any trade okay so let’s say you take a trade right 40 to 50% chance of working well there’s also a 40% for tea to 50% but the opposite will happen all right so most of the time there’s a valid way for the Bulls to make money and for the bout and for the beers to make money all right okay straightest equation if the probability is not all that great 40% and you go for a reward two times your risk you have a positive traders equation most of the time the Bulls and the Bears if they go for a reward two times the risk they can lose more than 50% of the time and still make money okay institutions they have advantages over individual traders you know they can do things that most certainly look things that most beginners cannot do they can enter at any tick during the day if you look at any chart on any day let’s say a five-minute chart you know the volume on an M&E any bar in the e-mini it’s between five and ten thousand contracts it doesn’t matter what time of the day it is it doesn’t matter if the markets in an extremely tight trading range all right the volume is going to be you know five to ten thousand contracts that means that institutions are trading all day long and there and whatever they’re doing they have a profitable strategy or else they would not be taking that trade all right so institutions can trade profitably on any tick during the day which is something a beginner certainly cannot do and they can scale in as the trade moves in their direction they can scale in as the trade moves against them they can also hedge and other markets if they think the spider is stronger than the Nasdaq you know they’ll buy the spider and they’ll sell the Nasdaq or they’ll you know or those short the queues right and they have all kinds of ways to trade profitably that we cannot do all right our alternative is to use setups right in general traders especially traders starting out should wait for setups they should not be trading every pic of the day the way institutions trade instead setups setups are always near support or resistance and they give you a positive traders equation either because the risk is small for example you’re shorting at the top of a trading range with a stop just above the top right so you don’t have your risk is small compared to your reward you’re planning on taking profits near the bottom of the range and also sometimes the probability is high so when traders are looking to buying your support or selling their resistance you know they’re either doing so because the probability is high is a tremendous reversal maybe a second entry or the risk is small compared to the reward and that’s why traders wait for setups like as soon as you have enough profit for the traders of equation to make sense in general whenever you have a reward two times your actual risk you should always take off at least half because remember the other side always has a valid case so if you’re shorting and the market Falls and it’s two times your actual risk you know buy back at least half of your position can you buy back your entire position will that still be mathematically valid absolutely right you know you’ve already determined that the trip that the traders equation is positive so you can take the entire position off as well but sometimes you get a big swing and therefore if the setup has that possibility it’s worth swinging as well okay should you went to with stops or limit orders if you’re a beginner you should only enter either with stops or market orders right you want the market to be going your way if there’s a strong breakout and you’re beginner the probability is very high that the market is going to continue in your direction you can enter at the market beginners in general should not be entering with limited or ordered orders if the market is falling they should not be buying if the markets rallying they should not be shorting okay at the high of every bar you know buying on a stop one tick above the high that bar is betting that the breakout above the high of that bar will be successful remember the market can do just the

opposite so when you’re buying on a stop at the high of that bar there’s an institution selling at the market or on a limit order at that same price and that institution is betting that the break up will fail when the market looks like it does in green over here you can enter with stop waters by above the high back bar you can sell below maybe this bar or that bar all right this bear bar right however once the market starts to look like this stop orders are going to lose all right so if you’re a beginner and you should only be entering on stops and the market starts to look like this lots of overlapping bars prominent tails lots of reversals you just stop trading how long do you stop trading you start trading again over here or over here no you just stop trading until the character of the market gets back to this alright your goal is to make money and you should wait until the market offers the kinds of trades that allow you to achieve your goal and if you can only enter on stops you should only be trading when the market looks like this and this is for beginners they should only be entering on stops and they should only be trading in here they could sell at the market when the market is falling strongly like that but maybe you know they should not be selling on limit orders you know for example they should not be shorting the high of that bar they should not be buying if the market falls below the low of that bar you know experienced traders who are consistently profitable and strong and reading on price action they can enter with stops they can ensure with market orders they can enter with limits but people starting out they should only trade when the market looks like this as soon as the market starts to look like this you start trading even if that means for the rest of the day most of the day the charts will look like this chart and the next several charts that I’m going to show right here and the market sold off sharply and then it rallied sharply and then it went sideways starting to channel up alright once you think that it’s starting to channel up you know it’s still two-sided you know at this point in the day you can argue it’s still a trading range right here you can argue ability rings right if it’s channeling up and you know that it’s channeling up you know you know it’s two-sided you can buy and sell in general you should try hard to take the buys and not worry so much about the sells on the other hand if it’s doing the opposite channeling down right you can take the buys but you should really concentrate on the cells especially at this point you know the moving average is falling the market spending most of the time below the moving average you can take bias but I would really try to concentrate on cells up to this point if you look to the left you know the market was really in a trading range which is the case you know most of the time you know you print it out at the end of the day and say oh yeah it’s clearly a beer Channel well most of the day it was not clearly a better channel most of the day it was the trading range and it was not so clear you know for example look at this chart okay okay at this point in the day he said well we sold off on the open but then we rallied very strongly and then we sold off again and the sell-off is probably stronger stronger than the rally look at these two large bear bars all right very little overlap closing they’re low that bear spike is stronger than this bull rally so there probably will be additional selling so at this point you don’t know what the market is going to do but you think it’s probably going to go at least lower a least a little lower in the near term oh then we have this additional bear bar closing on that slow okay let’s say you want a bet that you’re going to get a spike followed by a channel down right and you that sort of that is a rational bet so let’s say you’ve sold the close of this bar taking a chance that we’re going to get good follow-through and channel down you know that we went down we went off we went down we could also be in a trading range and you could be shorting near the bottom of the range however it is reasonable to take this short right but if you do you always have to be aware of the opposite okay if ever you take a short based on the theory that the market is going to be in a strong bear channel all right and then it starts to reverse off you have this one reversal here then reversal here and a reversal here all right you have to think about getting out of your short and you have to start considering the possibility that your theory is wrong or that your premise is wrong that we’re getting way too much on two sided trading to be holding shorts on near the bottom of this we might be channeling down but we’re getting way too much two-sided training in general if ever ever I take a position a short and a high two triggers I exit my short so had

I shorted this close and we have an attempt up here reversal here and then the second attempt up here so this is a small – bye so to me I would either go long or exit my short love behind this bar right if I didn’t if I did not do that if I decided to give the market more room on the upside and I held and the market sold off here and started to turn up again I definitely would have gotten out above the high of this bar right if ever I’m in a position a short and a high two triggers I want to get out right because to me I assume I’m wrong and I get out so I would either get out about this small high – right – pushes down 1 & 2 so – reversals up or I would get out above this larger high – but there’s no doubt in my mind that had I shorted that bear close or had a shorter than anything in here and I got this I would I would get out because my premise that the markets in a stronger trend at this point is not not likely to be true ok let’s say on that same chart you did not take the short and you decided that yeah you know maybe it’s gonna be a beer channel but we have enough to side of trading in here so on a matter also be a trading range I’m gonna approach it as the trading range so instead of taking shorts like shorting the clothes of that bar you wait for a buy signal here you have a micro wedge 3 pushes down there’s one there’s two the second pair of are this third Bear bar is 3 and you basically have an i/o I type of pattern yes the oak the outside is 2 bars but it’s basically an i/o I basically a high two second signal I’m good-looking bull inside bar closing on its high I think you can make a case for a buy here what I swing no because to me this long is not based on the premise that the markets on a bull trend right it’s based on the premise that the market is in a trading range I think it’s way too early to be looking at this as a bull trend if I’m buying in a trading range in general my rule for a trading range is buy low sell high scalp alright we’re so I want to buy and I want to scalp so if I take this long I’m looking at the long as a scalp however right anytime a low – triggers all right if you’re if you’re if you’re short and a high – triggers in other it’s the second reversal up occurs I get out of a short if I’m long and a low – triggers I get out of alone right so is this a low – well we got a double top with this high and this high so I think it would be reasonable to get out below this full bar certainly below that bear bar it’s also a triangle there were three pushes up the market went up on this bull bar and then went up on this bull bar up to the tail of this bear bar so two pushes up and then up here for a third push it does it have a great shape for a triangle no but it’s still it’s still a triangle most patterns do not have great shapes so for me had I bought this and if there was not enough room up here for a scalp I would get out if I’m buying in a bear and a low – triggers I would get out if I were flat and low true triggers in a bear I very often go short and that’s one of the reasons why low twos are such reliable patterns and later trends all right because most of the Bulls will get out below to traders and they will not buy again for another bar or two and therefore if a low – triggers here there’s a low to a double top so it’s the low – it’s also a triangle it’s a reasonable short for a scalp okay um I wanna I want to show this chart in a different way okay another general rule this is that same chart that I’ve had up for the past several minutes okay at some point in here you have to start thinking it’s not a bear trend it’s not a bull trend and therefore it’s a trading range once you decide that it’s a trading range if you’re individual you have to buy low sell high and scalp so what’s low as a guideline for me I look at the prior leg I try not to take trades in the prior in the middle third of the prior leg so here’s the leg up okay the middle third is this gray box so markets selling loft so I want to buy I don’t want to be buying in the middle third of the power leg so I would not buy up in that gray box okay on the way down okay mark is starting to turn up again middle

third of the prior leg I don’t want to be doing much in that area okay mark is trading up here I certainly don’t want to be doing anything in here so now I usually avoid trades when the market starts to reverse I avoid trades in the middle third of the prior leg institutions you know are they buying and selling in here yes they’re buying and they’re selling all right there are institutions that are buying for whatever reason in here and if the market quickly goes up their way they’ll take their profits and they’re fine if they buy and it does not go their way they’ll scale in lower if they’re bearish and they sold in here well guess what if they believe the day is a trading range day are they going to get out right here most of them will not they’ll add on higher they’ll add on on the close of strong bull bars they’ll add on below bear bars they’ll add on for all kinds of reasons so the institutions are shorted here will sell more here market comes back to their entry price well guess what they’re going to do they’re going to get out break-even at their first entry and they’re going to get out with a profit on their second alright that’s part of the reason for this little bounce in here the Bears are buying they’re going to exit their first entry and they’re buying to take profits on their second entry in jammu of individual traders I think most traders cannot do that I do scale in pretty much every day you know you know at least once or twice but it takes a lot of practice to do that I personally would not have taken this short right but I might have sold above the high of this bear bar and and sold more below the low of this beer bar you know that’s something I might have done okay in general avoid trading in the middle third of the prior bar once the market gets below the middle third of the prior I mean prior leg once the wire gets below the middle third you can start looking to buy here or here once it gets above the prior the middle third you can start looking to sell okay middle third of that prior leg you can start looking to sell up in that area so buy low sell high and scalp and try to avoid the middle third unless you’re able to scale in and certainly trader starting out cannot scale in institutions they can you know it’s you know if you look at the volume of all the bars inside the gray box the volume is pretty much the same as the bars above and below right that tells you that there is a lot of institutional buying and selling within those areas but as an individual you know it’s very hard for you to make money trading in those areas unless you can scale in you know so if you’re selling right here alright and market goes up there what are you gonna do in the market starts to come down you probably get out break even or you leaving it out right here you know thank you God for letting me out with without too much pain alright so the only way you’re going to make money taking trades within these great areas is if you have the ability to add on as the market goes further against you so in general avoid trading on the middle third of the prior leg in a trading range day trading range day everyone wants the market to get a little bit lower they want to buy low everyone wants the market to get a little bit higher they want to sell high the reality is the market spends most of the time in the middle third so most of the time you’re waiting tight trading ranges okay when trading ranges are very very tight and the swings are very small lots of overlapping bars very prominent tails very small bodies this is deadly to enter on stops except in one circumstance right so in general once you start to see this use you just stop trading and wait until on the character of the market changes the only time you can take a stop entry within a tight trading range is if you get a small bull bar near the bottom you can buy it for a scalp or a small bear bar near the top you can short for a scout but most of the time you don’t have it ok you got bull bars making you buy at the top a loser you know bear bars making yourself at the bottom a loser all right but rarely you’ll get a small bull bar at the bottom or small bear bar at the top in general tight trading range don’t do anything this is not a stop order market it’s a limit order market all right experienced traders that are buying below the low of the prior bar they’re buying below swing lows all right market drops below this bar they’re buying ok these green boxes market goes above the higher the prior bar they’re selling these blue boxes all right and they’re also willing to scale in you can say ah ok this green box here you bought the low of this bar okay but you didn’t have enough room for a profit and on the market does this you know

you’re screwed well you are and you are not yeah if you know what you’re doing you’re not so let’s say you bought the low of this bar right this is the e-mini 5-minute chart you know your plan might be to buy more one point lower and buy more one point below that and maybe risk four or five points right you stopped maybe way down here so let’s say you bought this low you bought more one point lower you bought more one point lower okay and so you bought twice during this very Big Bear bar during that Big Bear bar what are you thinking are you thinking oh it’s going to rally quickly from here or do you think after the size of that bear bar it probably has to go more sideways to down and I want to scratch my entire position in general when I see something like this unfilled here on the second long field here on the third one I’m thinking that’s strong enough beer bar we probably have to go more sideways down at that point I’m looking to get out breakeven on my entire position what’s breakeven it would be this blue line where I put on my second position right so they’ve what’s on here what’s I’m here I bought someone they’re my average entry price is right there I would try to get out there and you can see that a lot of traders did just that right the market went right around to that price and fell down a little bit more again you should not be doing this if you’re starting out ok let’s say the market is continuing down and you’re saying it’s trending down but it’s not all that strong lots of overlap probably still mostly two-sided trading the market fell below this low and had some buying it fell below this low and has a pretty big tail on the bar and it’s followed by a bull bar is there any way to make money on this well there is ok again not something that you should be doing if you’re starting out but with an experience you can say okay if I did not fall I as the market fell below the prior low right every time it fell below a prior low it found buyers right all right okay that’s been the nature of the day and I would assume that it would continue that way forever and ever and ever until I see evidence that I’m wrong so I do think it’s probably ok to buy the low of that bar but if you did not buy the low of that bar and then you see this bull inside bar what are you thinking you’re thinking we’re converting into a strong bear trend I’m in a short below the low the bar or are you thinking you know traders keep buying low we keep getting tails from we keep getting reversals at new lows this is a terrible signal bar for a short therefore I would never short below the low of that bar okay if you would never short below of all of that bar what does that tell you about opportunities it tells you that well instead of shorting place a limit order to buy the load of that bar how much you risk for a stop you know maybe somewhere down here you can look at how far in the market fell below the prior low here how far I fell bull the prior low here and place a stop a little bit more than that so maybe down here maybe right here you can do a stop below this law if you wanted to use a tight stop um anyway you could buy you could say that’s a terrible sell signal below the low of this bar so instead you place a limb in order to buy there and you get filled here the market starts to turn out you know your entry is right here if your initial stop is right there to a new low two times your initial risk is one time two times right there okay so two times that risk you and everyone else in the world took profits and that’s why the market sold off right can you doubt with just a one-point profit given that your actual risk was probably only a tick or two yeah you could get out with a one-point property if you wanted to but buying at the bottom of a bear channel or a trading range it should come up to the middle in the middle of the range somewhere so I’m thinking it would be okay to try to take profits a little bit more than one times risk maybe at the moving average you know maybe at two times risk one final series of charts that I want to show okay markets in a bull trend we had a strong bull spike and then a channel a little bit of parabolic move still arguably forming a low higher low higher low high higher high right so still a bull trend it’s clearly a trading range but you know there are different ways of handling this you could my at the market insists say it’s a bull trend I’m gonna buy at the market they’ll put a stop to

load the most recent higher low here or maybe below here that’s valid but you could also say huh it’s a trading range but look at this training range look what’s happening here there’s something subtle going on we have a low and we have a lower low we have a high we have a lower high we have another lower high and in fact this high is even below that high so something’s funny about this trading range it’s a trading range and it’s a bull trend but it’s also a bear trend we’re forming lower lows and lower highs and therefore you could short and take a chance that you get a bear breakout and a reward at least two times greater than your risk right so even though it’s a trading range Anibal trend it’s also a bear trend so if you shorted there and you know taking a chance that it’s a trading range and you got this breakout on what do you do um you can argue three pushes down possible parabolic wedge still a higher a series of higher highs and higher lows so the Bulls could buy here I think you know I personally would not and the reason I would not is for a couple of reasons Cyril you get these two very big bear bars and this bull bar the body is not big compared to those two bear bars and it has a tail on top so to me this is not strong enough signal bar to overcome these two bear bars so I would not buy for that reason also you have a surprise a surprise means a low probability event anytime the market does something that appears unlikely it usually will have at least a second push down so for that reason alone I would not buy that okay markets sold off a little bit more now we have a micro edge you have three little pushes down on one and then two on this tail and then up and then down so we’ll probably get some kind of a bounce here um is it still a bear trend sure is still a bull trend arguably so you will have Bulls buying here saying you know we’re still above the prior low we’ve got a small microwaves or a little double bottom the market went down on this bar then up and down again and now another bull body so you’ll have aggressive Bulls buying here alright you know so it’s possible the Bulls could goodbye the swing bears they’re probably still short with a stop above the high of this bar to me if had a short shorted for any reason up here I certainly have a reward at least two times my actual risk I would get out of at least half of my position okay so what happens right here all right the Bulls they’re happy to buy reversal the market lay down here for a bar or two and up here for a bar or two so you know maybe the market is reversing up still another higher low alright so the Bulls have bought here or even right here are happy betting that the markets gonna go higher if you buy right here your initial stop is below here which is far below this is a weekly euro versus the dollar a Forex chart right so that’s a huge distance for stop so if you do buy this close you stop this way down here however this is also a sell setup right setups and not always on what they appear to be all right I mean sometimes you think Excel I need a bear reversal bar well in fact a lot of the Bears will look at this and say well great this is probably a bull trap at least the math is good for it so I’m going to short this closed put a stop above this high right so that’s my risk not very big betting that we’ll get a new low so my reward is more than two times my risk the logic is good performing lower lows and lower highs and therefore to me this is a sell setup just sell the clothes of this bar most traders don’t like to sell the clothes of strong bull bars so they would wait to sell below a bear bar okay so here we have a 2 bar reversal alright and another lower high so they might sell below the low of that bear bar they might sell below the low this bear bar alright the Bulls they’re still long betting that the market is going up if had they bought this close or above the high of this bar they’ve already taken at least half off all right they may they may get out of everything after this additional lower high with the 2 bar reversal but you know they certainly would have made at least a little bit on the scalp up the Bears if they were short initially and are still swinging part with their stop above this high they’re happy they’re still short it had this sort of there

the clothes of this blue bar they’re short had they shorted below the low of this beer bar they’re short so right now you have bulls who have a rational reason for being long and you have bears with a rational reason for being short to me I would if I were choosing between the two I would choose bear case because we’re starting to form or we let in a series of lower highs and lower lows market continues to sell off right trying to reverse up here below alone alone the Bulls are hoping is transitioning into a trading range can they buy that they can I think the markets still always in short and that we’re probably going lower to bar reversal down in this bar up on this bar um you know micro edge three pushes down to me I think this is not a strong buy it’s not good enough for a major trend reversal we’re in a bear trend if I’m taking a long and a bear trend I’m only going for a scout initial risk is below if let’s say you bought above the high of this bar or above the high of this bull bar right you get in at this red line your initial risk is maybe below the low of this bull bar so the initial target two times actual risk is up here by the close of this bar to me I would be pretty uncomfortable going for that much of a target I probably would start looking at actual risk by the close of this bar had I bought right there at that red line one tick above the high of this bull signal bar I know my actual risk was here one tick below the low okay of my entry bar and I would be looking to exit based upon actual risk okay so if I got one and on this red line at the close of this bar I know my actual risk was to one tick below it’s low two times actual risk is right here so had I taken this long I would I’d be getting out of at least half probably all right here at two times my actual risk on the 2 bar reversal on the 2 legs up at the moving average beer bar closing on it slow Bears could short here you know in general I might take that short the upward momentum is enough so I probably would wait to see if we go sideways and get a better cell signal maybe we’ll get a higher little major trend reversal but to me I would probably not take that short I would wait to see what plays out over the next several bars and this is what we got a triangle three pushes up we went up on this bar we’re up here we’re up here and then our bear bar closing on this flow low below the moving average to me this would be a reasonable short you can argue a double bottom and a higher low major trend reversal we have a bear trend we have a bull break of the trendline and we have a triangle or double bottom higher law the Bulls could take that long betting on the swing up I think it’s an OK swing by above that bull bar for me I would probably not take the lung and I probably would take the short especially after the long trigger because once that long triggers I know there are bulls in the market who will get trapped if it reverses down so I think that’s a reasonable short for swing down market selling off I personally would not buy this five consecutive bearable parts and a bear trend to bar reversal up and down in this bar up on that bar I’m not strong enough for me to report on not strong enough to reverse that selling however at this point I probably would consider taking a scalp I probably would buy about the height of this bar you could buy above this high of a wedge bottom three pushes down one two three it’s trying to get some two-sided trading possible small final flag here larger final black here triangles often become final flags and magnets and in the market probably will try to get back up into the middle there so I do think it’s okay to scalp along here I would be much more interested in exiting shorts so I’m going to get out there I’m running out of a voice let the be most important point I wanted to make today is that 95% of the time you can enter a trade from the long side or from the short side and if you manage your trade correctly you can make money and that’s what institutions are doing if the markets trying to go sideways and it’s clearly in a trading range it’s better not to be buying in the middle third of the prior leg instead wait

until it’s below and then buy and then when it gets above then sell let me take a look at questions hey al thanks for the presentation I asked everybody to hold questions until the end so I’m going to go ahead and ask everybody to go ahead and start typing and get those questions entered in now and we can see how many we can answer okay I will try to keep up on John wants to know why don’t you use volume because especially in the e-mini volume is deceptive and misleading sometimes in my trading room I’ll put up a 1-minute chart and I’ll say huh look at that spider volume you know all the prior bars had 200,000 shares three in those jars of shares and this bar has over a million shares traded on the market you know some some institutions just made a big bet also sometimes so the weekly options for the spider I’ll say huh look at that somebody just bought you know 7,000 calls and the markets been selling selling selling selling and now we have a single order with 7,000 calls that’s a big institutional bet that the market is going on so I’ll use volume in that instance I’ll also use volume sometimes just to illustrate a point on the 1-minute chart in the spider if we get like a wedge bottom and ticks are less on the second push down unless again on the third push down so we’re trying to get a divergence in ticks very often though via diversions in volume as well so the first push down will have a big big volume second push down smaller volume third push down smaller volume still both Steven if I’m looking at that assigned a lot of times sired going a lot of times if I see that I’ll just buy at the market I had a friend fifteen years ago I used to trade with him online I never met him and all he did all day long was wait for particular versions and volume diverges I used interested in ticket aversion TSA’s you know and if the market is selling off in here’s a divergence and then the second divergence like a microwave he would buy 25 contracts and I forgot if he’s trying to get one point or two points and he was taking two to three trades a day and he was trying to make he’s trying to net about a point a day so he’s trying to make twenty five hundred dollars a day on small tick divergences to me you know I I’m just going off topic here sometimes I’ll take that trait if I’m looking at the time it happens but I much prefer if there’s also divergence there was that that that actually took place on early today on the e-mini there was a very micro edge with volume divergence and ticked at versions but in general volume on the e-mini is totally misleading if you look at I think you’re gonna get screwed both Steven and Jeff have a similar question they say how can you or how did you arrive at the 60 percent favorable probability number you know nobody knows you know probability is the one thing that’s always unknown and trading right all I know is that most of the time the market is pretty balanced and so you know pick a number is it does that mean 60/40 does I mean 70/30 I don’t think it’s 77 70/30 I think the market is usually not 70 percent certain you know just think of it think of it during the day if you’re looking at the chart how often are you 70 percent certain that the market its money to do something alright I think most of the time it’s closer to 5050 you know forty sixty so that’s why you know that’s why I use sixty forty it doesn’t matter you can you can say you know sixty two percent thirty eight percent you can say forty five percent fifty five percent the important point is if you’re taking a trade and you’re pretty confident that the trade will work though for a reward at least one times your risk okay if you’re really not sure if the trade will work go for a reward two times your risk the 60/40 is irrelevant it’s more an issue of drive am i confident am I not confident if you’re not confident go for a reward two times your risk and that will result in a positive trades equation whether or not the probability is thirty eight percent forty four percent it doesn’t matter right it’s very interesting and I think that’s counterintuitive for some people because they’ll think you know lower probability I need to lower my target Dave says Dave says do you have a different strategy when you’re swing trading or is it the same in general if I’m swing trading it’s rare that I’ll

take a trade a day trade with the intention of swinging an entire position okay in general on most days I scalp most of the time but a lot of the times you know if the market is moving pretty well I’ll take half off that let’s say two points in the e-mini and then I’ll swing the other half usually I’ll take off 25% more at four points and if you know rarely the market of go ten points I always get out at ten points and if you look back over the past six months at any entry where the market went ten points you’ll see that the market will start to get profit-taking and right those sideways you know almost all the time right at ten points 11 points that’s because everybody’s taking profits right resets a question he says do you draw a trend lines using the tops and bottoms like the high and low or do you use the open and close of the candles I use everything you know 99% of the time when I’m drawing trend lines I’m using highs and lows of bars you know rarely I’ll look at other things closes and opens and I’ll look at a high as kind of an outlier or spurious price but most of the time almost all the time I just use highs and lows I often use parallels so if I’m looking for let’s say the markets going up and I can see clear lows and I can draw a trendline below but I’m not sure that there’s a good channel line on the top what I’ll do is I’ll create a parallel of the trendline below and drag it above and anchor it to a high try to generate the channel right Hugh asks regarding the ema20 moving average a lot of moves seem to revert back to the mean do you use that in your trading decisions I’m sorry I’m sorry I didn’t hear you sub the aggression for the main training if the market gets too far from the moving averages will I look too short yeah he just says you know regarding the EMA 20 if it does fall back to the to the EMA 20 line how are using that information in your trading decision it depends on the situation if let’s say it’s a bull trend it’s a reasonably strong bull trend the first pullback to the moving average there are always buyers there so I’m always looking to buy the first pullback you know Linda Raskin used to call it her Holy Grail trade and I don’t know if she still does I don’t know if she still calls it that it’s mean there’s no holy grail in training but her point is good if the trend is very strong and you get a pullback to the moving average they’ll be buyers there so depending on how strong the trend is that determines how I will buy there if the pullback is very calm and two-sided I may place a limit order to buy at the moving average if the sell off to the moving average is a sharp reversal I probably will wait for a few bars and see what happens before I look to buy but in general I’m trying to buy it the moving average and a strong bull trend is there anything special or magical about the ema20 maybe like versus a V WAP or versus some their number no I you know I don’t think it matters what moving average you use and I don’t think you have to use a moving average at all you know the moving average is the only indicator that I use is I could use other indicators I can use Bollinger Bands I could use oscillators and everything else right and I can generate signals I can use range charts volume charts charts based on ticks you know it doesn’t matter right no Renko charts I can use any kind of momentum charts it doesn’t matter right there are signals taking place all day long on every chart and on every indicator and every time frame and you know I miss thousands of signals every day on other markets right I don’t care I do note that on if I pick one chart and I work really hard to take trades on that one chart I’ll find enough signals during the day to make a good living right master that I don’t worry about I don’t worry about everything that I’m missing I just worry about what’s in front of me Sorrell asks do you have a an opinion on or do you have a formula or some type of way to determine the type of day early on like it’s going to be a trend day or a range day or a trend reversal yeah you know I talked about that yeah I talked about that in the course and in the book and I look at the first bar of the day and if it’s a small bar with prominent tails at that moment I think the day will be a trading range today if yesterday was a trading range day in the past five days we’re trading range days I think today is going to be a trading range day if the first three or four bars are doji bars with two or three reversals I think today is going to be a trading range day if the first 10 or 15 bars are in a tight trading range I think three is

probably going to be a training range today if on the other hand we have a big gap up above a resistance level and a bull trend bar closing on its high and it’s followed by another bull trend bar closing on its high I assume today will probably be a bull trend day or on the other hand let’s say where it’s been in a trading range for the past three days and then the first four bars of today are big bear bars closing on their lows I’ll assume that today would be a bear trend but most of the time the first bar or two or five or ten I’ll tell you a lot about how the computers are going to trade the day Steve asks regarding futures looking at the Nasdaq the SP in the mini Dow do you have a preference on which one is better for a beginner to start with you know I don’t have a preference you know I think of the three I think the e-mini is the most difficult to trade on you know the issue with the the mini Dow is you have more slippage right and I don’t think it matters which one you pick I also don’t think it matters if instead you want to trade stocks you know a lot of stocks if you buy if you trade a stock that like a $20 stock you know Bank of America or Citibank you can get great trades on those if you want another alternative which i think is a good alternative for people starting out you lose money you know for the first year or two training I mean I there’s no way around it you may win for six or seven days in a row or two or three months in a row but you have to assume that you’re going to lose money for the first year or two and that’s that’s your tuition you’re going to school trade school to learn how to trade and one thing you should be doing is trading real money not paper trading greatest you lie we all lie and then the other thing you have to be thinking about is how can I lose the least amount of money and get the most amount of education to her and one way to do it I want one the way to do it is look at weekly Spyder options at the money weekly Spyder options in general you know you know if you trade one contract and you lose and it goes 20 cents against you you lose 20 dollars right and you know 20 cents against you that’s the equivalent of a four point move in the e-mini alright so don’t lose four points in the e-mini which is $200 or do you want to lose 20 cents on a spider call which is 20 dollars so you know I think one of the nice things about weekly spider options is that if you’re starting out it so I think it’s a great way to get practice real time without much risk you can say well how can i how can I make much money trading weekly Spyder options well that’s not your goal your goal is to not lose much money until you learn how to trade right and even if you do learn how to trade really well you could still trade Spyder options forever sure I can tell you from personal experience you can trade hundreds of Spyder options at the market and and and not and you can get really good fills all right you know so you can handle as much volume as you can throw at them you advanced wants to know if there is one single attribute you know the the single biggest attribute for successful price action trading what would it be I don’t care and that’s that’s the reality if you want to be able to trade price action you got to be objective and the best way to be objective is to not care about the result of your trade all right if you take a trade and you say oh my gosh I you know I’ve lost past two trades I’ve lost three days this week my wife is gonna get really mad at me she’s gonna make me quit all right if you care you will not be objective and you will lose money so you have to trade small enough so that you really don’t care if I lose I don’t care I can be objective on my next trade I don’t care if I lose five in a row it’s not gonna be that much money all right until you get good even when you’re good you know I still think you have to be trading the I don’t care sighs so you trade small enough so that you really don’t care if you lose money in that way you can feel comfortable and to do the right thing you know you’re always gonna be doing the right thing always always always have to be doing the right thing you know is what I’m doing sensible is it Matt doesn’t meant is it mathematically sound Andy wants to know have you ever tried to automate your trading methodology yes yes four years I probably spent twenty thousand hours you know writing systems and testing systems I haven’t done it in over 10 years but I spent a lot of time doing it and I I

have tried automating trades and what I learned is that you know I’m extremely compulsive you know extremely controlling you know I have a whole bunch of of traits that don’t aren’t good for for automated systems right every time the market the system put me in a trade and it starts to go my way or go against me I start looking about all the exceptions you know I could have programmed this other this one little filter in there so I would not have taken this trade or I would have been out a little bit sooner or a little bit later so I don’t have a personality that’s suited for that it’s very important in training I think to be trading within your comfort zone and I don’t care if there are trainers out there who are great computer traders I don’t care if there are traders out there who are really comfortable taking low probability trades where the reward is much bigger than the risk and they get rich right that’s not my comfort zone you know I want to be doing this long term I’ve been doing for 25 years and happiness is very important to me and I just you know a lot of your training especially early on is trying to figure out where you’re comfortable I remember years ago 15 years ago 20 years ago when day trading was beginning you’d have the institutional traders saying all these terrible things about day traders you know like you know like with the scum of the earth and you know I used to feel bad and over time I came to accept that the goal of this business is to make money and it’s hard to make money doing this and if institutions are making money great good for them well guess what I scalp a lot and I make money and good for me and you know I don’t care how anybody makes money as a trader if they’re making money as a trader I think that’s great and you know I think nobody should be embarrassed about their style of trading and no one should worry about somebody else’s style oh I saw this guy on television he’s doing blah blah blah blah blah and if I don’t do that I’m not that’s not true there are tons of ways to make money trading and as long as you find one that suits your personality don’t worry that you’re not doing what somebody on television is doing or what you read in a book or you know what you heard in a webinar you’ve got to be doing something that suits you you got to be comfortable doing this you if you’re trying to do this for a career it has to be fun so you got to find a style of training that’s fun you know when I get up in the morning I can’t wait to turn the computer on and get to work I love it it’s a lot of fun Stephen says he’s a beginner and he’s read all three of your books I’m gonna assume that’s your new three books but he’s not profitable yet and as suggested in one of the books he’s trading two contracts the first one for a point and then moving the stop to break-even and closing the other contract at a resistance or metric move and he wants to know is this still the best idea at this stage of his trading if he’s starting out and he’s not profitable I would not be trading two of anything I would be trading one contract and I would only be going for a reward two times the risk and I would be very selective about what I’m trading and I would also instead of training a meaning if that’s what he’s doing I would switch to another market for example you know what I like would would be you know weekly options in the spider right and just trade small something gene or just it’s just cheaper just trade one on a contract and again you can say well I can’t get rich doing that that’s not your goal your goal is to learn how to trade and it doesn’t matter what path you take to achieve that goal and you know to me I want to take a path where I’m losing less so you ready options or a cheap ETF a low-priced ETF or high-volume stock Bank of America but what I found is that not a lot of people though they they start losing you know whatever it doesn’t matter if it’s months or years then they have this this built up loss and kind of unwilling to you know reduce their size or change their market because they feel like well I’m never gonna make it back you know and how can I ever make it back right the goal the goal is to stop the bleeding yeah that’s step one right yeah to me you know the money is no longer yours once you’ve lost it it’s somebody else’s money and you can’t be worrying about somebody else’s money you know all you can do is be go all you can do this go forward and do what is best for you at the moment and you know not worry about the losses and I would I would try hard to start doing the right thing as soon as I possibly could okay mike has a question

he says can now elaborate for those who have read all of his books on what the differences are or the advantages to subscribing to the online video training course from the books I think it’s a matter of personal preference you know some people like books you know I’m an old guy so you know I tend to like books you know I can quickly you know page around through stuff other people like videos the videos have a lot more charts which is good if you really like charts the books have a lot more text which is good if you really like books I’ve had a lot of emails from people who read books and watch the videos and I not yet had one say that he prefers books over chart over videos so you know it appears to me that most people prefer the videos right but you know I you know recommending one way though I don’t know I have several I have four sample videos on on the website the Brooks training course website and one of the videos is one of the fifty three videos in its entirety and now also you know I got guarantee in the video service so Sony by sitting here saying yeah I know I don’t like this stuff you know I’ll just give you my back so you know so that’s so so so there’s a way to check the videos out either with the samples or simply by buying it and asking for a refund right and see if you like it to let you know you know works for you Noah says or asks canal give a brief explanation as to the exact difference between a stop order in a limit order and why one would use one versus the other okay let’s say we have a bull bar and I’m looking to get long alright I could buy I could place a stop a buy stop one tick above the high of that bar and if the current bar gets one tick above the high of the prior bar I’ll get stopped into the market my stop order will be filled and I’ll get long so the market is going up and I’m buying as it’s going up so I’m betting that the market will continue up on the other hand let’s say that single bar did not look all that strong and the context was not all that strong for the market to go up instead of buying on a stop at one tick above the hide that bar I might place a limit order at the high of that bar a limit order to go short so my limit order probably will not get filled unless the market goes at least a tick above the high of that bar because limit orders usually do not get filled unless the market goes through them so if I’m bearish I’ll place a limit order at at the high of that prior bar betting that if the market gets up there the attempt to go up will fail and then the market will reverse down and that’s that slide that I showed earlier where if the market is going mostly sideways you know I can find it if the markets going mostly sideways I don’t want right here okay okay just look at what happens to the starboard or traders let’s say you sold on a stop one tick below this bar or once you below that bar or one tick below this bar or one-take below that bar you lost money that means the limit order traders made money all right so this is that’s a perfect example of a limit order market when I when I think the the market is going to be mostly sideways and if I’m going to trade it I’m gonna place a buy limit order at the low of the prior bar and I’ll get filled right here all right and it’ll scalp out all right and I’ll play sell limit orders above the highs of Mars so instead of buying on a stop one tick above this bar right and getting filled right there long instead I’ll place a limit order at the high of that bar so when the market gets one tick above the high of this bar right here we are getting short for scalp down so if I think the market is mostly sideways I don’t want to be buying on a stop above the prior bar or selling on a stop below the prior bar because I think then will not be followed through the breakout below the low of this bar I think it’s going to fail and the market will reverse up above this bar I think the markets gonna fail and I think it’s gonna reverse down I hope that I hope that answers the question so either you know a limit order is the opposite of a stop order right let’s do one final question since we’re running it running up against hour and a half already and Al is at a coffee shop and we still have to do the book giveaway so last question Andy says Al how long did it take for you to be become consistently profitable over ten years I

took a long time and you know I used to think I used to wonder you know should I ever tell people that that’s embarrassing it makes me sound like a jerk you know how can I do this for 10 years and lose money for 10 years but that’s what it took me it took me that long before well knowing like knowing that you know now is there is there a way that you could cut that time down well I think I think most traders would not take that that long right for me it took that long because of the circumstances of my life I I started training you know 19 a couple weeks before the 1987 crash and then 1989 I had one daughter in 1988 and then identical twin daughters 15 months later so I had three daughters under the age of 15 months right that became a huge you know that consumed so much of my time so there are all kinds of everybody’s life is different plus I had all kinds of personality issues that I had to deal with you know you know you know I had to find my comfort zone I had to fight what the media was telling me about what a trader should be doing right I had to fight through all the this what the literature’s anytime you look at an article it’s just filled with all these indicators dragon I was trading using them thinking I was doing all the right things you know I went to medical school I practice medicine for ten years so in medicine the the rule is you do what everyone else is doing in training the rule is you ignore what I think is right right oh it took a long time just to change to change my mindset and you know about ten years out I decided I was gonna get rid of all my indicators and just pick one chart and look for signals at the end of the day that makes sense and then add indicators back in and what I discovered was I started making money consistently without the indicators just looking at the charts since then I never bothered with the indicators again I I’m gonna guess that during those learning years you were probably changing things all the time and that’s something that I see right I see that on the form you know it’s a it’s a very distinct very noticeable pattern that the the newer traders are constantly you know changing I mean they’re if they have if they have a journal which has already fantastic and a leg up against most people because they don’t but if they have a journal then it’s like every other day the chart is entirely different it’s because they’ll have a losing trade right and then they’ll they’ll think that it’s because something was wrong with their chart something was wrong with the indicator something was wrong with the signal generator so they go find a new one right and equalities and what about that changing yeah okay high-frequency trading firms well a lot of them lose money right you know but you know a lot of them make a lot of money and the ones that make a lot of money I think the majority of them are using algorithms and then every week or two they stop using an algorithm so they’re constantly changing according to the character of the market right so there’s nothing wrong with changing all the time but you know because you know the high-frequency trading firms are doing it constantly they’re constantly changing with the market and I constantly change the market as well you know the market looks like this I’m trading much more with stops when it looks like this I’m only trading with limit orders and at the market so I’ll buy the clothes of that bear bar all sites sell the clothes of this bull bar right whereas if it was over here I would be doing the opposite I’d be buying about bull bars and I’d be selling below bear bars yeah I changed my agrees upon the price – that’s why I’m a discretionary trader because I need that ability to adapt the ability to make my own decision you know okay so al we’re at an hour and a half I know your your outside your house I want to thank you for your time as always and the time to answer everyone’s questions there were over a hundred questions guys so obviously we didn’t have a chance to get everyone’s questions answered but stay tuned we’re going to do the five book giveaway and if you want to get in touch with al there’s two ways you can do it right there’s Brookes price action calm that’s his main website where he does his daily webinar in his daily room and then his video course they talked about is Brooks training course com2 get that right el yes that’s correct okay well thanks al and everybody else stay tuned and we’re gonna give away some books okay thank you Mike thank you and thank you everyone for listening thanks I’ll talk to you later alright guys so before I do this let me take control here okay I want to remind everybody that the way I’m going to get in touch with you if you are one of the five

winners is on BMT so if you don’t already have a BMT username just go to Big Mike trading comm and register real quick it takes less than a minute and then that way if you’re one of the five winners you can give me your B into username and I’ll contact you and I’ll get your your mailing address and any special autograph or anything that you want and then I’ll coordinate all that and get it over to L alright guys so the way that we do the prizes here in order to keep it fair the we have five books today so the first question whoever answers correctly first wins and then let’s say that by the time we get to the third question its whoever answers third in line correctly so we’re looking for the third to correct answer that person wins and then for the last the fifth book I’m looking for the fifth correct answer so that way it’s not just whoever’s got the fastest connection or whatever can type the fastest that’s kind of fair that way all right guys let’s get started everyone can see the screen yes okay look there we got question one if you’re not certain if Annie minis setup is strong what is your target I’m looking for the first person to answer correctly okay guys we have the answer so stop stop typing please there’s about 300 people here so the screen kind of flies by all right let me go back and find all right so the the correct answer is two times actual risk and the first person they got it correct is Brian Zimmerman so Brian Zimmerman if you would give me your BMT is your name please okay go into question two in a bull channel what is needed to short okay we have the right answer so guys I’m gonna ask you to stop typing so my screen didn’t stop flying by all right so the the correct answer is adequate selling pressure and let’s see the second person that got that correct is let’s go down John Mooney John Mooney I need your BMT username please okay all right going to question three so we’re going to be looking for the third correct answer most major trend reversals lead to okay guys but we have the answer the answer is small winners or losers now just need to figure out hey the third person was there’s a lot of them here so hang on please alright so small winners or losers looking for the third person that answered correctly there’s the first there’s a second and there’s the third Steve Estey Sabri VA ssin I guess Steve and each year into username so the answer with small winners or losers okay go into question four so we’ll be looking for the fourth correct answer here if the actual risk of a long is 7 ticks but the probability looks good because it is the second entry with a good signal bar what is my minimum profit target for A+ traders equation looking for the fourth correct and certain answer and okay guys we have we have it so please stop typing all right so the correct answer is 7 ticks and looking for the 4th one so give me just a second please I have 1 2 3 & 4 James Code I need your BMT username

please okay all right fifth and final looking for the fifth correct answer what are reasonable trades and a strong bull Channel alright guys we the answer so you can go ahead and stop typing please the quick answer is all of the above and now I just need to find the fifth person there’s one two three four and five Mike Deleasa a nature BMT username please alright guys so congratulations to the winners and okay thanks Mike and I’ll contact you on VM T in a few minutes via private message for everyone else I’ll be posting the recording on BMT sometime tomorrow it’ll be in the usual spot is click on webinars the top of any page you don’t see it then just check back later it’ll be there eventually I also send it over to Al tomorrow so he can post it on his web site Brooks price action calm all right guys I’ll see everybody on the forum