al-brooks-course
50B - Scalping
Raw transcript and slide notes for 50B - Scalping.
Overview
- Slides: 12
- Transcript segments: 401
- Status: 自动按 slide 时间线归档；核心概念和长期笔记可以在每个 slide 的
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Transcript 001
Time: 00:02
Bilingual Transcript
00:02 - 00:03
EN: I’m Al Brooks.
00:03 - 00:05
EN: Thank you for watching the Brooks Trading Course.
00:05 - 00:09
EN: This is the second of five videos on scalping.
Slide 001
Time: 00:11
Bilingual Transcript
00:13 - 00:16
EN: I want to make the important point that beginners should avoid scalping.
00:16 - 00:19
EN: It’s just way too easy to lose money.
00:19 - 00:22
EN: They have to win at a very high percentage rate,
00:22 - 00:25
EN: and that’s impossible for a beginner to do.
00:26 - 00:29
EN: Some scalpers use two timeframes.
00:29 - 00:32
EN: They look for the setup on one timeframe,
00:32 - 00:36
EN: and then they look for an earlier entry on a smaller timeframe.
Slide 002
Time: 00:37
Bilingual Transcript
00:39 - 00:41
EN: Why do you think beginners scalp?
00:41 - 00:44
EN: It’s because it’s the smallest risk per trade.
00:44 - 00:46
EN: They focus on risk.
00:46 - 00:49
EN: They work very hard to get an account that allows them to trade,
00:49 - 00:53
EN: hoping to become a profitable trader, hoping for a career change,
00:53 - 00:56
EN: and they want to consistently make money.
00:56 - 00:57
EN: They want to make a lot of money.
00:58 - 01:01
EN: However, they usually start with a small account,
01:01 - 01:03
EN: and they had to work very hard to get that account,
01:03 - 01:07
EN: and then there are also family pressures – your spouse, your kids.
01:07 - 01:11
EN: You have to take care of them and you have to be very protective of the money.
01:11 - 01:14
EN: You don’t want to lose a lot of money quickly.
01:15 - 01:19
EN: As a result, beginners naturally focus on risk.
01:20 - 01:23
EN: That’s a problem because there are three variables
01:23 - 01:26
EN: that they have to consider: risk, reward, and probability.
01:27 - 01:29
EN: Whenever a trader structures a trade,
01:29 - 01:33
EN: he has to make sure the combination of three variables makes sense.
01:34 - 01:37
EN: He has to make sure that the Trader’s Equation is positive.
01:37 - 01:42
EN: That means that the probability of winning times the expected reward
01:42 - 01:44
EN: has to be significantly greater than the probability
01:44 - 01:46
EN: of losing times the expected risk.
01:47 - 01:51
EN: But you hear in that equation three variables: probability, risk, and reward.
01:52 - 01:56
EN: The problem that beginners have is they focus on risk.
01:56 - 02:00
EN: They should be focusing on risk/reward ratios compared to probability.
02:02 - 02:03
EN: These are all reasonable scalps.
02:03 - 02:07
EN: Every red rectangle is an entry price for a short.
02:07 - 02:10
EN: Every green rectangle is a reasonable scalp buy.
02:11 - 02:12
EN: This is the Emini chart.
02:12 - 02:15
EN: Minimum scalp size, 1 point.
02:16 - 02:20
EN: You can look at some of these bars and say, why would anyone ever buy this close?
02:21 - 02:24
EN: We have consecutive bear bars, trying to break out below a Trading Range.
02:25 - 02:27
EN: The reason why traders buy that close
02:27 - 02:30
EN: is the bears need 1 or 2 more bars to take control.
02:31 - 02:33
EN: They have not clearly broken below the range,
02:33 - 02:35
EN: and they do not have a follow-through bar yet.
02:36 - 02:40
EN: As a result, bulls buy the close betting that the bears will fail,
02:40 - 02:43
EN: knowing that most Trading Range breakouts fail.
02:48 - 02:50
EN: Beginners spend too much time worrying about risk,
02:51 - 02:53
EN: and if you only look at one variable,
02:53 - 02:57
EN: you’re going to ignore the other two variables, reward and probability,
02:57 - 03:02
EN: and you’ll lose money because every trade has to have all three lined up
03:02 - 03:04
EN: in a way that makes sense mathematically.
03:08 - 03:11
EN: Beginners, they’re just very afraid of losing their dream.
03:11 - 03:14
EN: It’s the death of their dream if they lose their account
03:14 - 03:19
EN: - or if the account falls to a level that is too small to meet margin requirements.
03:19 - 03:21
EN: That’s called a blown account.
Slide 003
Time: 03:25
Bilingual Transcript
03:26 - 03:29
EN: Consequently, beginners only look at risk, as I said,
03:29 - 03:33
EN: and they ignore reward, and they especially ignore probability.
Slide 004
Time: 03:45
Bilingual Transcript
03:46 - 03:48
EN: An average 5-minute Emini chart,
03:49 - 03:53
EN: the average bar is bigger than a minimum scalp size.
03:53 - 03:55
EN: Minimum scalp size, 1 point.
03:55 - 03:58
EN: That means there’s enough room for a scalp on almost every bar,
03:59 - 04:04
EN: and a really experienced trader can see potential entries on every bar.
04:04 - 04:06
EN: That does not mean he takes every entry,
04:06 - 04:08
EN: but it means he sees lots of opportunities.
04:08 - 04:12
EN: He only has a matter of minutes, sometimes seconds, to process risk, reward,
04:12 - 04:18
EN: and probability, and if he feels like he’s not satisfied with his conclusion,
04:18 - 04:19
EN: he does not take the trade.
04:19 - 04:23
EN: 81 bars per day (5-minute chart, Emini).
04:23 - 04:26
EN: At least 40 reasonable 1-point scalps.
04:26 - 04:31
EN: Most experienced scalpers take between 10 and 20 scalps a day.
04:34 - 04:37
EN: These are average looking bars in this area.
04:37 - 04:40
EN: This is 12 ticks tall, maybe a little bit bigger than average.
04:40 - 04:43
EN: Here, an average height bar, 9 ticks tall.
04:43 - 04:46
EN: And this bar, one of the smallest bars on the screen,
04:46 - 04:50
EN: is still 6 ticks tall, which is 50% bigger than a minimum scalp.
04:50 - 04:52
EN: 4 ticks, 1 point.
04:52 - 04:56
EN: Even a small bar like this has opportunities for scalpers.
04:56 - 04:59
EN: For example, after 3 consecutive bull bars,
04:59 - 05:02
EN: reversal up from the bottom of a range, they’ll buy the close,
05:02 - 05:04
EN: and they’ll try to buy more at the low of the bar.
05:04 - 05:06
EN: They did not get filled.
05:06 - 05:08
EN: The market tried to get there once,
05:08 - 05:11
EN: tried to reverse down twice, failed twice, and reversed up.
05:11 - 05:14
EN: The bull scalper will then take his profit somewhere up in here.
05:23 - 05:28
EN: It’s very difficult to win 90% of the trades unless you are willing
05:28 - 05:31
EN: to use wide stops and scale into your position.
05:31 - 05:35
EN: Even then, it’s difficult to do, but most skilled scalpers
05:35 - 05:39
EN: are willing to scale into a position, and a lot of them will use wide stops.
05:40 - 05:44
EN: By doing that, they’re increasing their risk – the stop is further away.
05:44 - 05:48
EN: They’re increasing their position size, which increases their risk as well.
05:48 - 05:50
EN: Their reward is fixed.
05:50 - 05:51
EN: They’re looking for a scalp.
05:51 - 05:53
EN: In the Emini, 1, 2, 3 points.
05:53 - 05:58
EN: But what they’re doing is in exchange for accepting more risk,
05:58 - 06:01
EN: they’re getting a much higher probability of success.
06:03 - 06:06
EN: Remember, probability is the flipside of risk/reward.
06:07 - 06:11
EN: You cannot have a great risk/reward trade with a very high probability of success.
06:12 - 06:15
EN: There has to be an institution willing to take the other side of your trade,
06:16 - 06:19
EN: and that means constantly there’s always a problem
06:19 - 06:21
EN: with either probability or risk or reward.
06:21 - 06:23
EN: If you’re trying to get higher probability,
06:23 - 06:27
EN: you have to pay for it with a worse risk/reward ratio.
06:27 - 06:32
EN: The institution taking the opposite side of your trade has to get something
06:32 - 06:34
EN: in return for giving you higher probability.
Slide 005
Time: 06:40
Bilingual Transcript
06:42 - 06:44
EN: When a trader scales in, he increases his risk,
06:45 - 06:48
EN: but he also increases the probability of making money,
06:48 - 06:52
EN: and that’s the main reason why skilled traders often scale in.
06:52 - 06:56
EN: They’ll use wide stops and scale in to increase their probability of success.
06:56 - 06:58
EN: The market’s in a Trading Range here.
06:58 - 07:02
EN: On any chart, in general 90% of the bars are either
07:02 - 07:04
EN: in a Trading Range or in a channel.
07:05 - 07:10
EN: When that’s the case, a trader can make money buying or selling at any time,
07:10 - 07:13
EN: as long as he manages his trade properly.
07:17 - 07:21
EN: For example, the market is in a tight range, reversing repeatedly in here.
07:21 - 07:26
EN: The bulls have a pretty good bull bar here, and a second good bull bar here.
07:26 - 07:28
EN: Trying to reverse up from the bottom of a range.
07:28 - 07:30
EN: It’s reasonable for a trader to buy
07:30 - 07:35
EN: on a stop just above the high of this bar, looking for a scalp.
07:35 - 07:38
EN: But he has to use a stop below the bottom of the range.
07:38 - 07:40
EN: The market reversed up, reversed up again.
07:40 - 07:44
EN: Now has a Micro Double Bottom in addition to this Double Bottom.
07:44 - 07:48
EN: It’s reasonable to buy here if a trader can put his stop down here,
07:49 - 07:50
EN: just below the bottom of the range.
07:50 - 07:51
EN: Here’s the stop.
07:56 - 08:01
EN: Many skilled traders will look to buy more 1 or 2 points lower,
08:01 - 08:04
EN: expecting that the reversal down will fail.
08:05 - 08:07
EN: Think about it from the perspective of a bear.
08:07 - 08:10
EN: Does he really want to sell below the low of this bear bar?
08:10 - 08:12
EN: He’s selling at the bottom of a Tight Trading Range,
08:12 - 08:15
EN: where the market reversed up, up, up.
08:15 - 08:18
EN: Probably going to reverse up again, especially given
08:18 - 08:21
EN: that this bear bar has a very big tail.
08:21 - 08:23
EN: It’s a bad looking sell setup,
08:23 - 08:26
EN: and therefore it’s probably a decent looking buy setup.
08:27 - 08:28
EN: Experienced traders know that,
08:28 - 08:32
EN: and if they bought on a stop above the high of this bar,
08:32 - 08:37
EN: they might buy more at the low of this bar, scaling into the trade.
08:42 - 08:46
EN: If a bull did that, he would try to exit breakeven
08:46 - 08:49
EN: if the market gets back to his original entry price,
08:49 - 08:54
EN: and then he’ll end up with a 10 tick scalp on his second entry.
08:56 - 08:59
EN: He buys here, just above this bull bar.
08:59 - 09:02
EN: Buys more at the low of this bar, which is 10 ticks lower,
09:02 - 09:04
EN: and then when it gets back above the high of this bar,
09:04 - 09:06
EN: he gets out breakeven on his first entry
09:06 - 09:09
EN: and then with 10 ticks profit on his second buy.
09:14 - 09:17
EN: I want to talk a little bit about trading on two timeframes.
Slide 006
Time: 09:15
Bilingual Transcript
09:18 - 09:21
EN: Some traders like to find setups on one timeframe
09:21 - 09:24
EN: and then entries on a smaller timeframe,
09:24 - 09:29
EN: hoping to get in as early as possible, thereby reducing risk.
09:29 - 09:32
EN: For example, some traders will look at a 60-minute chart,
09:32 - 09:34
EN: and then when they think they have a setup,
09:34 - 09:38
EN: they’ll look at a 5-minute chart to see if they can enter with smaller risk.
09:38 - 09:43
EN: Likewise, a trader looking for patterns on a 5-minute chart might try to enter
09:43 - 09:48
EN: on a smaller chart, like a 3-minute chart, a 2-minute chart, or a 1-minute chart.
09:48 - 09:53
EN: In general, most skilled traders trading on the 5-minute chart
09:53 - 09:56
EN: will rarely ever use a 1-minute chart for entries.
09:56 - 09:59
EN: Maybe 10% of the time or less.
Slide 007
Time: 10:00
Bilingual Transcript
10:02 - 10:05
EN: I talked about this buy setup where traders buy that high,
10:05 - 10:07
EN: scale in more, and exit.
10:08 - 10:11
EN: But I also said that a trader could sell there as well,
10:11 - 10:14
EN: and if he manages his trade correctly, he would make money.
10:20 - 10:23
EN: It’s a Tight Trading Range, and therefore if a trader sells
10:23 - 10:28
EN: and sells more higher using a wide stop, he probably will make money.
10:32 - 10:35
EN: Let’s say he places a limit order to sell at the high of that bar.
10:35 - 10:36
EN: He’ll get filled here.
10:36 - 10:38
EN: It fell more than 2 points.
10:38 - 10:40
EN: He could’ve scalped out.
10:41 - 10:43
EN: Let’s say for some reason he did not exit.
10:43 - 10:48
EN: Let’s say maybe he was hoping for a swing down, and then we got the reversal here.
10:48 - 10:50
EN: He then would conclude that instead of a swing down,
10:50 - 10:54
EN: it’s in a Trading Range, and he’s going to switch to scalping mode.
10:57 - 11:00
EN: No matter what he’s doing, if he’s taking this short his stop belongs
11:00 - 11:02
EN: above the top of the most recent selloff.
11:02 - 11:03
EN: Strong selloff.
11:03 - 11:06
EN: 3 consecutive bear bars, 2 of them pretty big.
11:12 - 11:15
EN: And then he gets disappointed by this reversal up.
11:15 - 11:18
EN: He might decide that instead of a swing down,
11:18 - 11:21
EN: it’s going to stay in a Tight Trading Range instead.
11:21 - 11:23
EN: He’ll then look to scale into his shorts
11:24 - 11:28
EN: - for example, sell at the prior high using that original stop.
11:29 - 11:34
EN: So he sells here at the high of this bar and then sells more at this high
11:34 - 11:37
EN: as long as it’s at least the size of a scalp higher.
11:37 - 11:41
EN: In this particular case, it’s 8 ticks higher, so it’s 2 points higher,
11:42 - 11:44
EN: and that’s twice as big as a minimum scalp.
11:44 - 11:46
EN: 8 ticks is 2 points.
11:52 - 11:55
EN: When the market comes back to his original entry price,
11:55 - 11:57
EN: he can exit breakeven at his first sell
11:57 - 12:00
EN: and then with a 2 point profit on his second sell.
12:01 - 12:03
EN: Remember my 90% rule.
12:03 - 12:08
EN: 90% of the bars on a chart are in Trading Ranges or channels,
12:08 - 12:11
EN: and a skilled trader can make money buying or selling
12:11 - 12:13
EN: if he manages his trade correctly
12:13 - 12:16
EN: - which usually means scaling in and using a wide stop.
Slide 008
Time: 12:18
Bilingual Transcript
12:20 - 12:23
EN: Here’s a 5-minute chart and a 1-minute chart.
12:24 - 12:26
EN: This blue area is right here.
12:26 - 12:29
EN: This is the entire blue area right there.
12:29 - 12:30
EN: This is the 1-minute chart.
12:30 - 12:34
EN: A lot of traders will look for a trend on one timeframe
12:35 - 12:38
EN: and then look for an entry on a smaller timeframe,
12:38 - 12:41
EN: hoping to get in earlier (reduce risk).
12:46 - 12:49
EN: For example, we have two legs down – one, pullback, two.
12:49 - 12:52
EN: Arguably three pushes down – one and then up
12:52 - 12:55
EN: and then two and then up and then three and then up.
12:56 - 12:57
EN: It’s reasonable to buy this.
12:57 - 12:59
EN: It’s about a 50% pullback.
12:59 - 13:01
EN: We have a spike, pullback, channel.
13:01 - 13:03
EN: It’s a pullback to a slightly Higher Low.
13:03 - 13:06
EN: We had about 7 or 8 bars up without a bear body,
13:06 - 13:08
EN: and we’re pulling back to the Moving Average,
13:08 - 13:11
EN: plus there’s a very good-looking bull bar.
13:12 - 13:15
EN: It’s reasonable to buy on a stop just above the high of this bar,
13:15 - 13:18
EN: and you get filled right here, 1 tick above the high of that bar,
13:19 - 13:20
EN: looking for trend resumption up.
13:25 - 13:29
EN: Most traders look at this as a pullback and not the start of a bear trend,
13:29 - 13:32
EN: and a pullback means you expect trend resumption up.
13:32 - 13:36
EN: You expect it to become a bull flag, and therefore some traders
13:36 - 13:39
EN: will look for as early an entry as they possibly can get.
13:44 - 13:49
EN: For example, if a trader, instead of placing an entry based on the 5-minute chart,
13:49 - 13:55
EN: zoomed in and looked at the 1-minute chart, this area here is this area here.
13:55 - 13:59
EN: He’d see a spike, pullback, second push, pullback,
13:59 - 14:01
EN: third push, and then a reversal attempt.
14:01 - 14:04
EN: He would buy above the high of that 1-minute bar,
14:04 - 14:07
EN: and he’d get filled somewhere down here instead of up here.
14:10 - 14:12
EN: This is the entry on the 5-minute chart.
14:12 - 14:14
EN: That green box is right here.
14:18 - 14:22
EN: And a trader using the 1-minute chart would enter 5 ticks lower.
14:29 - 14:31
EN: The same is true with higher timeframe charts as well.
14:32 - 14:36
EN: Some bull scalpers will look at 15- or 60-minute charts for setups.
14:36 - 14:38
EN: They look for support and resistance,
14:38 - 14:41
EN: and then enter on a 1-minute chart or a 5-minute chart.
14:41 - 14:46
EN: In general, I think traders should not be entering on a 1-minute chart.
14:46 - 14:49
EN: I think it’s perfectly reasonable to look for a pattern,
14:49 - 14:52
EN: a test of support or resistance, on a 60-minute chart,
14:52 - 14:54
EN: and then entering on a 5-minute chart.
14:54 - 14:58
EN: I think it’s much harder to be trading on a 5-minute chart,
14:58 - 15:02
EN: looking for patterns on a 5-minute chart, and then entering on the 1-minute chart.
15:02 - 15:05
EN: You don’t have much time to make decisions, and you’ll make too many mistakes,
15:05 - 15:08
EN: and you’ll find yourself only looking at the 1-minute chart
15:08 - 15:11
EN: and not paying enough attention to the 5-minute chart.
15:13 - 15:16
EN: Therefore, most traders should not be doing this
15:16 - 15:19
EN: with a 1-minute chart except in rare circumstances.
15:28 - 15:31
EN: Remember, the trader on the 1-minute chart is trying to reduce his risk.
15:32 - 15:35
EN: If he buys above the high of this bar, he gets filled here.
15:35 - 15:36
EN: His stop is a little bit below.
15:36 - 15:41
EN: If he buys on the 5-minute chart, his entry is here and his stop is further below.
15:43 - 15:46
EN: Whenever you do something to improve your risk/reward ratio,
15:46 - 15:49
EN: you pay for it with reduced probability.
15:50 - 15:54
EN: The 1-minute chart, it’s a less reliable chart.
15:54 - 15:59
EN: The probability of trading it well and the probability of setups working is lower.
Slide 009
Time: 15:55
Bilingual Transcript
15:59 - 16:03
EN: For example, here, if you buy above the high of this bar on the 1-minute chart,
16:03 - 16:06
EN: you’re buying after 5 bars without a bull body,
16:06 - 16:09
EN: and 3 of the bars are bear bars, 2 closing on their lows.
16:09 - 16:12
EN: This is not a strong buy setup on the 1-minute chart,
16:12 - 16:19
EN: even though it’s a Wedge – one, two, three or one, two, three.
16:19 - 16:21
EN: This is not a high probability buy.
16:27 - 16:28
EN: Another problem is time.
16:29 - 16:32
EN: On a 1-minute chart you could have a great looking setup become
16:32 - 16:35
EN: a very bad looking setup in a second or less than a second.
16:36 - 16:37
EN: Or the opposite can happen.
16:37 - 16:40
EN: You can have a terrible looking setup become a very great setup
16:40 - 16:44
EN: in a second or less, before you have time to act on it.
16:47 - 16:50
EN: Also, if you’re trading really well, if you’re a good trader,
Slide 010
Time: 16:50
Bilingual Transcript
16:50 - 16:53
EN: you’re not going to make significantly more money
16:53 - 16:56
EN: by going down to a 1- or 2-minute chart.
16:56 - 17:00
EN: If you’re trading well, you can make a lot of money on a 5-minute chart.
17:06 - 17:10
EN: Very often at the very final second or two of a chart
17:10 - 17:15
EN: - a 1-minute chart, for example – the institutions can quickly create a tail,
17:15 - 17:17
EN: a reversal, or erase a tail.
17:17 - 17:22
EN: You had a reversal and then it becomes a trend bar in the final second of the bar.
17:22 - 17:23
EN: For example, look at this bar.
17:23 - 17:25
EN: It’s a strong bear bar closing on its low.
17:25 - 17:29
EN: We don’t know for a fact, but it might’ve been a bull bar
17:29 - 17:33
EN: with a 1 tick bull body and a big tail below until the final half-second,
17:33 - 17:35
EN: and then it did that in the final half-second.
17:35 - 17:39
EN: That does not give you much time to think about what to do next.
17:44 - 17:46
EN: If you’re a beginner, you’re not accustomed
17:46 - 17:49
EN: to thinking of the exact opposite within a second.
17:50 - 17:52
EN: You’re looking to buy and all of a sudden it becomes a sell,
17:52 - 17:55
EN: or you’re looking to sell and all of a sudden it becomes a buy,
17:55 - 18:00
EN: and you end up making decisions without giving the decision enough thought.
18:01 - 18:04
EN: You end up making too many bad decisions and you lose money.
18:05 - 18:09
EN: There’s just not enough time for most traders to make good decisions,
18:09 - 18:11
EN: and then physically to place orders.
18:11 - 18:14
EN: You have to place your order, you’ve got to place a stop,
18:14 - 18:15
EN: you’ve got to place a bracket order.
18:15 - 18:19
EN: You’ve got to make sure you do it correctly, and there’s just not enough time.
18:27 - 18:31
EN: Another common problem with 1-minute charts is you quickly decide
18:31 - 18:33
EN: that you’re going to buy or you’re quickly going to sell,
18:33 - 18:38
EN: and you’re so eager to get in just for that instant that you enter at the market,
18:38 - 18:44
EN: and the order gets filled 1 or 2 ticks above or below where you wanted it
18:44 - 18:48
EN: to get filled, and that means that if you think the profit target
18:49 - 18:53
EN: was based upon your original entry price and you got filled a tick or two worse,
18:53 - 18:56
EN: all of a sudden you’re getting less reward and increased risk.
18:57 - 18:59
EN: The math becomes bad.
19:03 - 19:07
EN: Whenever the math is bad, institutions are going to take your money.
19:07 - 19:08
EN: You’re going to lose money.
19:13 - 19:17
EN: One guideline that I use is traders should not be trading on any chart
19:17 - 19:20
EN: that has more than 20 bars per hour.
19:20 - 19:24
EN: So for example, if you’re trading on a time chart, that’s a 3-minute chart.
19:24 - 19:27
EN: A 3-minute chart has 20 bars per hour.
19:27 - 19:30
EN: So I think most traders should not be trading charts
19:30 - 19:33
EN: less than 3 minutes, 3-minute charts.
19:33 - 19:37
EN: Then the same is true if you’re trading on charts based upon ticks or volume.
19:38 - 19:41
EN: I think you should not be trading any chart
19:41 - 19:43
EN: where you have more than 20 bars per hour.
19:49 - 19:52
EN: Very often, at the beginning of the day – let’s say you’re trading the Emini
19:52 - 19:56
EN: and you’re using a chart that has 5,000 ticks per bar.
19:56 - 20:02
EN: Early in the day, 5,000 ticks per bar might be 30 or 40 bars per hour.
20:02 - 20:07
EN: I think that is too many bars, and I think you should not be trading that.
20:07 - 20:11
EN: Later in the day, from maybe 9:00 to 10:00 or 11:00,
20:11 - 20:14
EN: 5,000 ticks per bar could be fine.
20:14 - 20:16
EN: You may only get 10 bars per hour.
20:16 - 20:20
EN: That’s another problem with using charts that are based upon ticks or volume;
20:21 - 20:23
EN: the number of bars per hour fluctuates a lot,
20:23 - 20:27
EN: and I personally like to be thinking about time.
20:27 - 20:29
EN: I think all the time about time,
20:30 - 20:35
EN: and I don’t like the bars having a different time before they close.
20:35 - 20:37
EN: If you’re using a tick or volume chart,
20:37 - 20:40
EN: sometimes a bar will last a matter of seconds.
20:40 - 20:42
EN: Other times it’ll last 10 or 15 minutes.
20:42 - 20:46
EN: I like to know when a bar is about to close.
Slide 011
Time: 20:50
Bilingual Transcript
20:54 - 20:58
EN: When you look at the chart – this 1-minute chart of the Emini – it looks easy.
20:58 - 21:03
EN: But you often end up buying early, above bad signals.
21:03 - 21:06
EN: For example, you might buy above here for a High 2,
21:06 - 21:07
EN: and then you argue, oh, it’s a Wedge.
21:07 - 21:10
EN: Three pushes – one, two, three – and you quickly buy there,
21:10 - 21:12
EN: and you use too tight a stop.
21:12 - 21:14
EN: You get stopped out here instead of using a wider stop
21:14 - 21:16
EN: and looking to scale in lower.
21:18 - 21:20
EN: A lot of setups just don’t look good enough,
21:21 - 21:24
EN: and you have very little time to make up your mind,
21:24 - 21:27
EN: and a lot of times you’ll take the trade and not use a wide enough stop,
21:27 - 21:30
EN: and you get stopped out, and then the trade goes your way.
21:30 - 21:33
EN: That’s another common problem with 1-minute charts.
21:36 - 21:38
EN: You can end up losing money buying in a bull trend.
21:38 - 21:41
EN: For example, let’s say you buy above the high of this bar
21:41 - 21:44
EN: and then you got a bear bar, a bear bar closing on its low,
21:44 - 21:45
EN: another bear bar closing on its low.
21:45 - 21:47
EN: 3 consecutive bear bars.
21:47 - 21:51
EN: You may end up exiting, and it turned out to be a bull trend.
21:52 - 21:53
EN: The same with here.
21:53 - 21:56
EN: You can end up losing money selling in a bear trend.
21:56 - 22:00
EN: You sell below a Low 2 here, and then you get a reversal
22:00 - 22:03
EN: and you exit here or you exit here, above your entry price.
22:09 - 22:14
EN: Beginners have very little time to decide, and they see a Wedge – one, two, three.
22:14 - 22:14
EN: “I’ve got to buy.
22:14 - 22:16
EN: There’s a small ii.
22:16 - 22:21
EN: Maybe it’s an ii small Final Flag, Triangle – up, down, up, down, up
22:21 - 22:24
EN: - and maybe we’ll go up, a Wedge with a Triangle Final Flag.
22:24 - 22:30
EN: Maybe I’ll buy above that bar.” It’s just really too easy to make bad decisions,
22:30 - 22:33
EN: and you end up taking trades where the probability is too low,
22:33 - 22:36
EN: and you do not use a wide enough stop that would allow you
22:36 - 22:40
EN: to increase your probability, especially if you’re able to scale in.
22:44 - 22:48
EN: Let’s say you buy on a stop above this bar, you get stopped out below its low.
22:48 - 22:54
EN: You end up losing 5 or 6 ticks on that, even though the market ended up going up.
22:58 - 23:04
EN: Would an expert trader take this buy, arguing Wedge – one, two, three?
23:05 - 23:06
EN: Probably not.
23:06 - 23:10
EN: But again, even an expert trader does not have much time to make the decision.
23:10 - 23:15
EN: He would be ready to buy, but he would like to be buying above a bull bar,
23:15 - 23:18
EN: or he’d like to be buying at the close of a big bull bar
23:18 - 23:21
EN: or on the follow-through after a big bull bar.
23:22 - 23:26
EN: If he did buy this, he would probably use a 4 or a 5 point stop
23:26 - 23:28
EN: and look to scale in lower.
23:28 - 23:32
EN: Instead of getting stopped out below the signal bar,
23:32 - 23:35
EN: he might buy more below the signal bar or at the low of the signal bar,
23:35 - 23:39
EN: using a 3 or 4 point stop, betting that the bear breakout would fail.
23:41 - 23:44
EN: If he’s looking to buy on the 5-minute chart and he sees this
23:44 - 23:49
EN: as a probable bull flag, a bear leg in what will become a bull flag,
23:49 - 23:51
EN: he’s going to be willing to use a wider stop.
23:51 - 23:56
EN: Again, as you can tell, I’m recommending not using a 1-minute chart.
24:00 - 24:05
EN: An experienced trader who does look for the early entry on the 1-minute chart
24:05 - 24:08
EN: will use a wider stop – 4 points, 5 points, maybe 6 points,
24:08 - 24:10
EN: depending on the size of the day’s range
24:10 - 24:13
EN: - and he probably would be willing to scale in lower.
24:16 - 24:17
EN: How far a stop?
24:17 - 24:21
EN: Well, we have a reasonably good bear breakout here,
24:21 - 24:24
EN: so maybe use a stop just below the Measured Move down.
24:24 - 24:25
EN: Here’s the Measured Move down.
24:25 - 24:27
EN: Maybe put a stop just below that.
24:27 - 24:31
EN: It might be 2 or 3 points down below the original entry.
Slide 012
Time: 24:35
Bilingual Transcript
24:36 - 24:40
EN: I made the important point that beginners should avoid scalping
24:41 - 24:42
EN: because it’s just too easy to lose.
24:42 - 24:46
EN: They’ll focus only on risk and they’ll ignore probability and reward.
24:46 - 24:50
EN: They’ll especially ignore probability, and whenever you trade,
24:50 - 24:53
EN: you have to consider risk/reward and probability.
24:53 - 24:57
EN: If you only look at one of the variables, you are going to lose money.
24:58 - 25:02
EN: Finally, traders sometimes like to use two timeframes.
25:02 - 25:04
EN: They look for a setup on one timeframe,
25:04 - 25:08
EN: and then an earlier entry on a smaller timeframe.
25:08 - 25:12
EN: While it sounds good – for example, trading on the 5-minute chart,
25:12 - 25:15
EN: looking for an earlier entry on the 1-minute chart
25:15 - 25:18
EN: - I think most traders who do that will rarely do it,
25:18 - 25:22
EN: and it rarely ever significantly improves their profitability.
25:22 - 25:28
EN: If a good bull scalper takes 10 or 15 trades a day, he might do that once a day,
25:28 - 25:31
EN: and the rest of the time he’ll simply rely on a 5-minute chart.
25:31 - 25:35
EN: He might dial down to a 2- or 3-minute chart occasionally,
25:35 - 25:38
EN: but he’s going to base most of his trades on the 5-minute chart.
25:43 - 25:44
EN: I’m Al Brooks.
25:44 - 25:46
EN: Thank you for watching the Brooks Trading Course.
25:46 - 25:50
EN: This is the second of five videos on scalping.