al-brooks-course
51D - Losing Because of Mistakes
Raw transcript and slide notes for 51D - Losing Because of Mistakes.
Overview
- Slides: 17
- Transcript segments: 477
- 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: This is Al Brooks.
00:03 - 00:05
EN: Thank you for watching the Brooks Trading Course.
00:05 - 00:10
EN: This is the fourth of four videos on losing because of mistakes.
Slide 001
Time: 00:11
Bilingual Transcript
00:14 - 00:18
EN: A common problem with beginners i s they do not use the correct stop.
00:18 - 00:21
EN: They tend to use a stop that is too tight.
00:21 - 00:26
EN: Also, scaling in is a dangerous thing to do, especially as a beginner.
00:26 - 00:28
EN: It can lead to very big losses.
00:28 - 00:33
EN: Beginners, when they do scale in, they don’t realize how small they have to trade.
00:33 - 00:38
EN: Invariably they trade too large a position and they can’t handle the stress
00:38 - 00:42
EN: of the market going against them, and they end up exiting an otherwise good trade
00:42 - 00:46
EN: far too early with a loss instead of holding and making a profit.
Slide 002
Time: 00:48
Bilingual Transcript
00:53 - 00:57
EN: When you’re trading, the appropriate stop is usually pretty obvious.
00:57 - 01:01
EN: If you look at the chart and you know where the stop is but it’s too far away,
01:01 - 01:04
EN: either you have to trade very small or do not take the trade.
01:05 - 01:08
EN: It’s perfectly reasonable to not take trades.
01:09 - 01:12
EN: If for any reason you cannot take the trade – if the stop is too far,
01:12 - 01:15
EN: if emotionally you’re distracted – you simply don’t take the trade.
01:15 - 01:17
EN: There’ll be plenty other trades.
01:21 - 01:25
EN: If you are in position and you’re swing trading, you hold onto the position
01:25 - 01:27
EN: until there’s a clear opposite signal
01:27 - 01:30
EN: or some other strong reason to get out of the trade.
01:30 - 01:34
EN: You rely on your stop, and you can trail your stop when the market goes your way.
01:37 - 01:42
EN: It’s always good to take partial profits at support and resistance targets.
01:42 - 01:44
EN: Also, you should get out of the trade
01:44 - 01:47
EN: if there’s a reasonable signal in the opposite direction.
01:51 - 01:54
EN: For example, let’s say you sold anywhere in this box.
01:55 - 01:56
EN: The stop is obvious.
01:56 - 01:58
EN: It’s at the top of the bear swing.
01:58 - 02:02
EN: It doesn’t matter if you sold here or if you sold here; the stop is right there.
02:07 - 02:10
EN: Here we have a couple bear bars, good size bars –
02:10 - 02:12
EN: a breakout bar, follow-through bar.
02:12 - 02:15
EN: The market should not get above this high if it’s in a bear trend,
02:15 - 02:17
EN: and therefore it’s reasonable to tighten your stop here.
02:17 - 02:20
EN: This is still the major Lower High,
02:20 - 02:22
EN: but it is reasonable to tighten your stop here.
02:22 - 02:25
EN: If the market pulls back, goes above it,
02:25 - 02:27
EN: and you get stopped out, you can always sell again.
02:33 - 02:37
EN: At this point we have three legs down and therefore a Wedge,
02:37 - 02:39
EN: and we have a Micro Double Bottom.
02:39 - 02:41
EN: We went up on this bar and down on this bar.
02:41 - 02:43
EN: If we go above the high of this bar,
02:43 - 02:45
EN: then we have a Micro Double Bottom and a Wedge.
02:45 - 02:47
EN: The channel down is tight.
02:47 - 02:52
EN: The reversal is probably minor, which means either a Trading Range or a bear flag,
02:52 - 02:55
EN: but it’s okay to get out here, especially if you sold up here.
02:55 - 02:57
EN: You have a reasonable profit.
02:57 - 02:59
EN: You have a reasonable excuse to get out.
03:00 - 03:04
EN: You can also take partial profits and hold onto the remainder of your position.
Slide 003
Time: 03:08
Bilingual Transcript
03:14 - 03:17
EN: If you’re in a swing trade, you need a swing stop.
03:17 - 03:21
EN: If the trade looks bad, either get out or rely on your stop.
03:25 - 03:28
EN: Beginners are always afraid to take losses
03:28 - 03:33
EN: because they focus on losses and they’re worried about being a loser.
03:33 - 03:36
EN: All beginners are losers, and it hurts.
03:36 - 03:40
EN: Emotionally, it hurts to take losses, and therefore beginners hate taking losses
03:40 - 03:43
EN: and they often do not take losses when they should.
03:46 - 03:48
EN: Let’s say a beginner buys this reversal up,
03:48 - 03:51
EN: hoping that the leg up is strong enough to have a second leg up.
03:51 - 03:54
EN: So, he buys looking for possibly a swing up.
03:57 - 04:00
EN: If he takes the buy, his stop is down here.
04:00 - 04:04
EN: He has a Wedge Bottom, couple good bull bars.
04:04 - 04:06
EN: He might get a second leg up.
04:06 - 04:09
EN: Here he has a small Higher Low Major Trend Reversal,
04:09 - 04:11
EN: but at this point he does not know that.
04:11 - 04:15
EN: All he knows is Wedge Bottom, the market is starting to get flat,
04:15 - 04:19
EN: the trend is getting less steep, and he has a decent reversal up.
04:27 - 04:30
EN: If he buys here and then he sees this bear bar and another bear bar,
04:30 - 04:33
EN: a lot of times a beginner will get afraid because he’ll think,
04:33 - 04:38
EN: uh oh, maybe this is a bear flag and the market is simply going to continue down.
04:39 - 04:41
EN: Now let’s say he’s debating what to do in here
04:41 - 04:44
EN: and he’s not fast enough to put his stop below this low.
04:45 - 04:46
EN: Then what does he do?
04:46 - 04:48
EN: He has a swing stop down here.
04:48 - 04:50
EN: It’s reasonable to rely on it.
04:52 - 04:57
EN: This is a problem that a beginner often faces, and he looks for a compromise.
04:57 - 04:59
EN: He realizes that he could’ve gotten out early.
05:00 - 05:02
EN: He bought this close, a disappointment bar.
05:02 - 05:05
EN: He could’ve gotten out around breakeven here,
05:05 - 05:08
EN: and he chooses to take a chance that maybe it’ll go up.
05:08 - 05:10
EN: Instead, it starts to go down.
05:11 - 05:15
EN: He chooses not to use a tight stop because he does not want to take a loss.
05:16 - 05:19
EN: He’s thinking that, “Well, I don’t want to rely on the swing stop either
05:19 - 05:24
EN: because the loss will be too big” – even though when he put the trade on,
05:24 - 05:26
EN: he decided this was an acceptable size loss.
05:27 - 05:29
EN: Therefore, he’ll look for something in between.
05:30 - 05:31
EN: He did not take the early loss.
05:31 - 05:37
EN: He’s afraid to take the full loss, even though it’s still not too big of a loss,
05:37 - 05:40
EN: so he looks for some other place to put a stop in between.
05:40 - 05:42
EN: He says, “Well, this is a bull bar.
05:42 - 05:43
EN: It’s a breakout bar.
05:43 - 05:46
EN: Maybe I’ll put my stop below the low of this bar.”
05:52 - 05:53
EN: That’s a mistake.
05:53 - 05:55
EN: We’re in a Tight Bull Channel here.
05:55 - 05:58
EN: There’s no reason to get out below the low of this bar.
05:59 - 06:02
EN: Either you get out early or you rely on your stop.
06:02 - 06:05
EN: What happens is the beginner gets stopped out,
06:05 - 06:07
EN: he sees this big bear bar, and he panics.
06:08 - 06:10
EN: He’s happy to get out.
06:10 - 06:13
EN: He’s relieved to get out, and he’s unable to buy again above this bull bar.
06:13 - 06:17
EN: He misses the big trend that he was anticipating when he bought originally.
06:19 - 06:21
EN: This is what I call a skunk stop.
06:21 - 06:24
EN: It’s in between two reasonable stops.
06:29 - 06:31
EN: A skunk in the middle of the road is going to get killed,
06:32 - 06:36
EN: and if you start using skunk stops between two reasonable stops,
06:36 - 06:38
EN: your account is going to get killed.
Slide 004
Time: 06:40
Bilingual Transcript
06:47 - 06:52
EN: The minimum profit that you need to trade based upon the Trader’s Equation
06:52 - 06:54
EN: is at least two times your Actual Risk,
06:54 - 06:58
EN: and that has to be at least a minimum scalp size.
06:59 - 07:02
EN: Minimum is rarely ever the best thing to choose in life.
07:02 - 07:07
EN: Having a goal of making minimum wage is rarely ever a good choice,
07:07 - 07:12
EN: and going for minimum profits when trading is rarely ever a good choice.
07:16 - 07:21
EN: If a trader buys anywhere in this green box, he knows his stop goes here.
07:21 - 07:24
EN: If he gets stopped out and it reverses again, he can always buy again.
07:30 - 07:32
EN: Here we have 4 consecutive bull bars.
07:32 - 07:34
EN: We have a breakout bar, a bigger bull bar,
07:34 - 07:37
EN: and a follow-through bar, and we’re breaking above this Lower High.
07:39 - 07:42
EN: Reasonably strong breakout to a new high.
07:42 - 07:46
EN: It’s reasonable to trail your stop up from this low to below this low.
07:50 - 07:52
EN: Getting late in the session.
07:52 - 07:54
EN: We have a bear bar after a Buy Climax bar.
07:54 - 07:58
EN: Around a 50% pullback, three pushes up – one, two, three.
07:58 - 08:01
EN: Nested three pushes up – one, two, three.
08:01 - 08:04
EN: Reasonable to take profits here below that bear bar.
08:07 - 08:10
EN: Nested Wedge, and around a Measured Move target.
08:10 - 08:13
EN: We have a gap between this breakout point and this pullback,
08:13 - 08:15
EN: and the Measured Move projection is right there.
08:15 - 08:19
EN: Lots of good reasons to exit here at the end of the session.
Slide 005
Time: 08:23
Bilingual Transcript
08:26 - 08:30
EN: Let’s say you look at this selloff, 8 bear bars,
08:30 - 08:32
EN: and you think it’s a bad buy setup,
08:32 - 08:36
EN: so you sell at the high of this bar and you get filled right here.
08:41 - 08:45
EN: It doesn’t matter where you sold; your stop is above the top of the bear leg.
08:46 - 08:50
EN: If this stop is three times bigger than your usual stop,
08:50 - 08:53
EN: then you have to trade one-third your usual size.
08:53 - 08:56
EN: If you cannot do that, then don’t take the trade.
09:01 - 09:06
EN: If a beginner is afraid that his stop is too far and he’s worried about his loss,
09:06 - 09:09
EN: he’ll make bad decisions and he should not take the trade.
09:14 - 09:16
EN: For a trader to become consistently profitable,
09:16 - 09:19
EN: he has to consistently make good decisions.
Slide 006
Time: 09:25
Bilingual Transcript
09:28 - 09:31
EN: The beginner, if he took this short – which is a reasonable thing to do;
09:31 - 09:34
EN: we have a Give-up Bar, we have a follow-through bar,
09:34 - 09:36
EN: we could be getting a Spike and Channel down
09:37 - 09:39
EN: - he might be panicked by this bull bar
09:39 - 09:42
EN: and get out above its high instead of relying on his stop.
09:42 - 09:47
EN: However, after 8 bear bars, the first reversal up is probably minor
09:47 - 09:50
EN: and the best the bulls probably will get is the Trading Range,
09:50 - 09:53
EN: and the bears will probably still get at least a small second leg down.
09:54 - 09:57
EN: Now, why would the beginner get out above this bar?
09:57 - 09:59
EN: Because he lied to himself.
09:59 - 10:01
EN: He said he was going to rely on his stop,
10:01 - 10:04
EN: but he had no intention of relying on that stop.
10:04 - 10:06
EN: He was afraid of too big of a loss.
10:06 - 10:09
EN: He was never willing to risk that much money,
10:09 - 10:12
EN: and as soon as the market went against him, he got out.
10:13 - 10:16
EN: He sold hoping the market would go immediately his way.
10:16 - 10:19
EN: That was his plan, even though he told himself
10:19 - 10:22
EN: his plan was he was going to rely on his stop.
10:29 - 10:34
EN: Alternatively, if he held, he was so afraid of this bear bar.
10:34 - 10:37
EN: Now he’s thinking this might be a climactic end of the move.
10:37 - 10:40
EN: He’ll scalp out for a minimum scalp.
10:40 - 10:42
EN: Beginners do that all the time.
10:42 - 10:46
EN: They’re in a good swing trade and they’re so happy to have any profit
10:46 - 10:49
EN: because they’ve lost so many times in the past few days
10:49 - 10:51
EN: that they’ll grab a minimum scalp.
10:52 - 10:56
EN: Very often it’ll be a positive Trader’s Equation,
10:56 - 10:58
EN: so mathematically it’s an acceptable thing to do.
10:59 - 11:01
EN: However, it’s rarely a good thing to do
11:01 - 11:03
EN: because you’re going to make mistakes in life,
11:03 - 11:08
EN: and you need occasional swing trades to offset all of your little mistakes.
11:14 - 11:17
EN: If the beginner is really worried about losing too much money,
11:17 - 11:19
EN: he simply has to trade small.
11:19 - 11:21
EN: I talk about the “I don’t care” size.
11:21 - 11:25
EN: You trade so small that you really don’t care if your stop gets hit.
11:25 - 11:28
EN: That way there, you’ll focus on doing what is right.
Slide 007
Time: 11:30
Bilingual Transcript
11:36 - 11:42
EN: Traders need experience doing what is right and not simply focusing in on risk.
11:42 - 11:44
EN: The Trader’s Equation has three variables.
11:44 - 11:46
EN: Beginners always focus on risk.
11:46 - 11:50
EN: They ignore probability and they ignore reward.
11:50 - 11:55
EN: This trade is a good trade for a swing, and it has a potential for a big reward.
12:00 - 12:03
EN: If you trade small, you’re not going to get rich.
12:03 - 12:06
EN: However, you can practice doing the right thing,
12:06 - 12:09
EN: and once you get experience doing the right thing
12:09 - 12:13
EN: and you consistently do the right thing, then you can start trading bigger,
12:13 - 12:16
EN: and eventually you’ll have a decent shot at becoming rich.
12:23 - 12:28
EN: Also, you do not have to trade big volume to get rich or make a very good living.
12:28 - 12:32
EN: I’ve known traders over the years who trade relatively small position sizes,
12:32 - 12:35
EN: but they trade extremely well and they make a lot of money.
12:40 - 12:44
EN: I’ve heard from many traders over the years that they’re surprised
12:44 - 12:47
EN: by how much money they’re making simply by doing the right thing.
12:53 - 12:56
EN: Scaling in is for experienced traders.
Slide 008
Time: 12:55
Bilingual Transcript
12:56 - 12:59
EN: It’s very easy for beginners to lose far more
12:59 - 13:02
EN: than they ever imagined if they’re scaling in incorrectly.
Slide 009
Time: 13:03
Bilingual Transcript
13:11 - 13:15
EN: The purpose of scaling into a trade is to increase your probability.
13:16 - 13:21
EN: Whenever you improve your probability, you always weaken your risk/reward situation.
13:22 - 13:24
EN: Typically, you’re increasing your risk.
13:30 - 13:34
EN: One of the biggest mistakes that beginners make is they scale in
13:34 - 13:37
EN: without greatly reducing their position size.
13:38 - 13:41
EN: They end up losing far more than they ever dreamed possible,
13:41 - 13:44
EN: and part of that is because they never dreamed
13:44 - 13:47
EN: that the market would go against them and hit their stop.
13:51 - 13:56
EN: Only experienced traders should scale in because an experienced trader will know
13:56 - 14:00
EN: if his trade is still valid, and if he thinks it’s no longer valid,
14:00 - 14:01
EN: he’s not going to scale in.
14:01 - 14:03
EN: He’s just going to get out and take a loss.
14:03 - 14:08
EN: A beginner will not admit that his premise is no longer valid
14:08 - 14:12
EN: and he’ll keep scaling in, hoping that the market again goes his way,
14:12 - 14:14
EN: and he ends up taking frequent big losses.
14:23 - 14:27
EN: It’s a terrible combination to be scaling in and being hopeful.
14:27 - 14:29
EN: You need to be objective.
14:29 - 14:33
EN: One big loss can easily wipe out 10 or 20 good trades,
14:33 - 14:38
EN: and it will take 10 or 20 other good trades to make up for that one big loss.
14:41 - 14:46
EN: Everybody knows that you scale in to increase the probability of making money.
14:53 - 14:56
EN: However, beginners think that they can scale in.
14:57 - 15:00
EN: Invariably they have an unrealistic plan.
15:00 - 15:04
EN: They’re not willing to take the loss because the position size
15:04 - 15:07
EN: is going to be too big when they add to their position,
15:07 - 15:10
EN: and they start seeing how fast their losses are growing.
15:10 - 15:13
EN: Even if the trade is still valid, they’ll be shocked
15:13 - 15:17
EN: by how fast the losses are growing because their position size is too big.
Slide 010
Time: 15:20
Bilingual Transcript
15:24 - 15:28
EN: We have a bear trend, a bull breakout, a Higher Low Major Trend Reversal,
15:28 - 15:31
EN: and now we have 4 bull bars with increasing body sizes.
15:31 - 15:33
EN: The market’s accelerating up.
15:33 - 15:36
EN: Therefore, it probably will go higher.
15:37 - 15:41
EN: Bulls will buy, thinking that either the market goes up and they make a profit,
15:41 - 15:44
EN: or this is a bull leg in what will become a Trading Range
15:44 - 15:47
EN: and they can buy more lower, expecting it to come back up here,
15:47 - 15:50
EN: and then they can make a profit on their lower entry
15:50 - 15:52
EN: and get out breakeven on their first entry.
15:58 - 16:00
EN: Buy The Close bull trend.
16:00 - 16:02
EN: We have a 6 bar bull Micro Channel.
16:02 - 16:04
EN: No bear bars in 6 bars.
16:04 - 16:08
EN: Yes, we’re still below a prior high, so this might be a bull leg
16:08 - 16:10
EN: in a Trading Range, but it’s a reasonable buy.
16:11 - 16:13
EN: It’s a strong enough rally
16:13 - 16:16
EN: so that the odds are bulls will buy the firsts reversal down.
16:16 - 16:20
EN: However, remember, at this point you don’t know if this is the start
16:20 - 16:24
EN: of a bull trend or if it’s a test of the top of the Trading Range,
16:24 - 16:29
EN: and it could be followed by a deep pullback to below the bottom of this Buy Climax,
16:29 - 16:32
EN: the breakout, but above the bottom of the bull trend.
16:38 - 16:42
EN: A lot of the bears see the 6 bars up and the 4 good bull bars
16:42 - 16:47
EN: and look at that and see a lot of momentum, and they wait for a second entry short.
16:47 - 16:49
EN: In other words, they’ll wait for a Micro Double Top
16:49 - 16:51
EN: or a Wedge Top before looking to sell.
16:56 - 16:58
EN: When you look at this, where should you put your stop?
16:58 - 17:03
EN: You see two obvious choices: the bottom of the breakout down here,
17:03 - 17:05
EN: or the bottom of the bull trend down here.
17:05 - 17:07
EN: Both are reasonable.
17:07 - 17:09
EN: If you use the tighter stop,
17:09 - 17:11
EN: you’re going to get stopped out more often but lose less.
17:12 - 17:15
EN: If you use the wider stop, you’ll get stopped out less often,
17:15 - 17:17
EN: but when you lose, you’ll lose more.
17:17 - 17:20
EN: If you take the tight stop in 10 trades like this
17:21 - 17:23
EN: and somebody else takes the wide stop,
17:23 - 17:27
EN: after 10 trades you’ll have about the same amount of money.
17:27 - 17:30
EN: Both are reasonable, and therefore you can use either one.
17:31 - 17:35
EN: If it goes down below this low and reverses up, you can always get stopped out
17:35 - 17:37
EN: and buy on the reversal up.
Slide 011
Time: 17:43
Bilingual Transcript
17:48 - 17:50
EN: Let’s say a trader is willing to scale in
17:50 - 17:52
EN: two more times for a total of three entries.
17:53 - 17:57
EN: Therefore, you have to make each entry about one-third
17:57 - 18:01
EN: of your normal position size if you’re using this stop or this stop.
18:01 - 18:05
EN: Whatever your position size is for either of these stops,
18:05 - 18:09
EN: if you’re thinking that you might scale in if this sells off
18:09 - 18:13
EN: and becomes a Trading Range, you have to true extremely small.
18:13 - 18:14
EN: Beginners can’t do that.
18:15 - 18:19
EN: Either their account size is small and their position size is small already
18:19 - 18:22
EN: and they cannot reduce their position to one-third size,
18:23 - 18:26
EN: or they simply think the position size then would be
18:26 - 18:28
EN: so tiny that it’s not worth taking the trade.
18:29 - 18:32
EN: The result is the beginner ends up taking too big of a trade,
18:32 - 18:36
EN: and he doesn’t realize how bad he’ll feel emotionally
18:36 - 18:39
EN: if it’s starting to go against him and he adds onto his position,
18:39 - 18:43
EN: and the rate of his losses accelerates.
18:48 - 18:52
EN: If your stop is twice your normal stop and you’re thinking
18:52 - 18:56
EN: of entering two more times – in other words, tripling the size of your position
18:56 - 19:02
EN: - then you have to trade one-sixth of your normal size, and if you cannot do that,
19:02 - 19:04
EN: you don’t take the trade – or you use a different plan.
19:05 - 19:07
EN: For example, don’t scale in.
19:15 - 19:19
EN: What you could do is you could buy here, wait for a pullback,
19:19 - 19:21
EN: and then buy more above a reversal bar.
19:21 - 19:23
EN: That’s a common approach.
Slide 012
Time: 19:25
Bilingual Transcript
19:34 - 19:36
EN: One concern that you have to have
19:36 - 19:40
EN: when you’re in a possible Trading Range is a 2nd Leg Trap.
19:40 - 19:44
EN: Sometimes you’ll get a weak first leg and then a very strong second leg,
19:44 - 19:48
EN: but it’s not breaking far above all the bars to the left.
19:48 - 19:50
EN: Therefore, it could be a bull leg in a Trading Range
19:50 - 19:53
EN: instead of a Measuring Gap leading to a new bull trend.
19:54 - 19:56
EN: Beginners only see the 6 bars up,
19:56 - 19:59
EN: and they think that it’s going to be a successful breakout.
19:59 - 20:02
EN: The bull bodies are good, but they’re not particularly big
20:02 - 20:05
EN: and they have tails on top, so this is not all that strong,
20:05 - 20:07
EN: and look at all of these bars.
20:07 - 20:08
EN: Every bar has tails.
20:08 - 20:12
EN: That means this might be part of a Trading Range.
20:12 - 20:16
EN: If you have a lot of bars with tails, that is Trading Range price action,
20:16 - 20:19
EN: and a rally like this could be simply a bull leg in a Trading Range.
20:27 - 20:30
EN: Beginners only see this, big bull bars,
20:30 - 20:33
EN: and they think bull trend, and they don’t see this.
20:33 - 20:35
EN: We’re not above the top of the bars to the left,
20:35 - 20:39
EN: and this could simply be a buy vacuum test of the top of a Trading Range.
20:41 - 20:43
EN: Then you get this.
20:43 - 20:46
EN: Let’s say you buy that close and you see this bear bar.
Slide 013
Time: 20:45
Bilingual Transcript
20:46 - 20:47
EN: It’s two legs up.
20:47 - 20:51
EN: We’re still below the bars to the left, the top of the bars to the left.
20:51 - 20:54
EN: This could be a 2nd Leg Trap in a Trading Range.
20:54 - 20:57
EN: Most traders, if they have a strong breakout like this
20:57 - 21:02
EN: and a possible Trading Range and they see a bear bar closing on its low like that,
21:02 - 21:04
EN: it’s better just to get out below the low of that bar,
21:04 - 21:08
EN: because if this is a 2nd Leg Trap, we could sell off very deeply
21:08 - 21:11
EN: in the Trading Range before we get a leg back up.
21:12 - 21:15
EN: If you do hold long and plan to scale in,
21:15 - 21:19
EN: you either rely on your stop here or on your stop here.
21:19 - 21:23
EN: If you get that bear bar and then it trades below that bar,
21:23 - 21:27
EN: I would not be scaling in at a fixed number of points or pips below.
21:27 - 21:31
EN: I would wait until we get a reversal up and then buy more above the bull bar,
21:31 - 21:34
EN: assuming I did not get out below that bear bar.
21:34 - 21:36
EN: I typically get out below that bear bar.
21:36 - 21:41
EN: A failed breakout, two legs up, still below the top of the bars to the left,
21:41 - 21:45
EN: still in a Trading Range or possibly even a Broad Bear Channel.
21:45 - 21:46
EN: We have a Lower High.
21:53 - 21:55
EN: When you look at this you say, well, it’s got to go up.
21:55 - 21:57
EN: No, it doesn’t.
21:57 - 22:00
EN: There’s always a reason to take the opposite side of the trade.
22:00 - 22:03
EN: The bears think this is just two legs up in a Broad Bear Channel
22:03 - 22:06
EN: and that we’ll get a Lower High and then a new low.
22:06 - 22:10
EN: It’s reasonable to think that, and then after this bear bar closes on its low,
22:10 - 22:12
EN: it’s reasonable to sell below this bar,
22:12 - 22:17
EN: betting on two legs up in either a Trading Range or a Broad Bear Channel.
22:17 - 22:18
EN: It’s a reasonable short.
22:23 - 22:28
EN: Strong enough rally so that the first leg down probably will be bought,
22:28 - 22:32
EN: but if this whole thing is a leg in a Trading Range,
22:32 - 22:34
EN: that first leg down could be very deep,
22:34 - 22:36
EN: and it could even fall below the bottom of this breakout.
22:37 - 22:40
EN: This is a reasonable Buy The Close bar.
22:40 - 22:44
EN: That means that we should get back here within the next 10, 20, maybe
22:44 - 22:46
EN: even 30 bars, but we should get back here.
22:46 - 22:48
EN: This is a disappointment bar.
22:48 - 22:50
EN: This is a disappointment as well.
22:51 - 22:53
EN: A lot of the bulls who bought here are hoping
22:53 - 22:56
EN: it comes back to this close so they can get out breakeven.
22:56 - 22:59
EN: Otherwise, if it keeps going down, they’re trapped.
22:59 - 23:03
EN: Experienced bulls will get out below that bear bar or on the second
23:03 - 23:07
EN: or third consecutive bear close if there are three bear closes,
23:07 - 23:12
EN: or they’ll rely on their stop here or here and look to buy more lower.
23:19 - 23:21
EN: This is a breakout above this high,
23:21 - 23:24
EN: but it’s not a breakout above the top of the Trading Range.
23:30 - 23:34
EN: 2nd Leg Traps trap traders into buying high, trap traders
23:34 - 23:37
EN: into thinking that this is the start of a trend.
23:37 - 23:38
EN: That’s the whole idea of it.
23:38 - 23:42
EN: But unless the breakout is far above all the bars to the left,
23:42 - 23:45
EN: you have to be thinking that it could be a 2nd Leg Trap,
23:45 - 23:48
EN: trapping beginners into buying momentum
23:48 - 23:52
EN: that has not yet broken above all the bars to the left.
23:52 - 23:55
EN: It could simply be a test of the top of the Trading Range.
24:00 - 24:03
EN: Bull breakout above this high, but terrible follow-through,
Slide 014
Time: 24:00
Bilingual Transcript
24:04 - 24:07
EN: and therefore traders should conclude it’s still in a Trading Range.
24:08 - 24:11
EN: For the moment, although this could be the start of a bull trend,
24:11 - 24:15
EN: it’s also a bull leg in a Trading Range or a bull leg in a Broad Bear Channel.
24:15 - 24:17
EN: It’s still below this high.
24:28 - 24:30
EN: I think it’s reasonable to get out below that bear bar.
24:30 - 24:32
EN: You do not want to see a breakout
24:32 - 24:35
EN: and then have the follow-through bar be a bear bar closing on its low.
24:35 - 24:38
EN: It’s usually better just to get out below that low.
24:38 - 24:42
EN: If we go sideways here, you can always buy on a reversal back up.
24:42 - 24:45
EN: But too much risk that this is a bull leg in a Trading Range
24:45 - 24:48
EN: and that we might test all the way down to the bottom of the range.
24:52 - 24:55
EN: Some traders exit below the first bear bar.
24:55 - 24:56
EN: Others exit below the second.
24:56 - 25:00
EN: Others exit if we get three consecutive bear closes.
25:05 - 25:07
EN: Beginners, all they see is momentum up.
Slide 015
Time: 25:05
Bilingual Transcript
25:07 - 25:09
EN: All they see is a bull argument.
25:09 - 25:13
EN: They’re not thinking about the possibility that this is a bull trap.
25:18 - 25:21
EN: A lot of beginners will think, “Okay, I’ll buy.
25:21 - 25:23
EN: I want to increase my chances of winning.
25:23 - 25:25
EN: I know the size of minimum scalp.
25:25 - 25:28
EN: I’ll add on the size of a minimum scalp here
25:28 - 25:31
EN: and then two times the size of a minimum scalp here.
25:31 - 25:35
EN: I’ll get out breakeven if it gets back to my original entry price.”
25:43 - 25:45
EN: The beginner does not see the opposite argument.
25:45 - 25:50
EN: He only sees the momentum, but momentum alone is not enough reason to buy.
25:50 - 25:54
EN: Has the breakout broken above all the bars to the left,
25:54 - 25:56
EN: in which case maybe it is a bull trend?
25:57 - 26:00
EN: Or is this possibly a bull leg in a Trading Range?
26:00 - 26:02
EN: Momentum up is good.
26:02 - 26:05
EN: At the close of this bar, there’s a 60% chance we’re going higher.
26:06 - 26:10
EN: At the close of this bar, there’s a 50% chance we’re going higher,
26:10 - 26:12
EN: and 50% chance 2nd Leg Trap.
26:13 - 26:15
EN: As you start to get more and more bear bars,
26:15 - 26:18
EN: the probability is we’re going to get lower.
26:18 - 26:23
EN: The bears who take this sell have maybe a 40% chance of a swing down,
26:24 - 26:28
EN: but their risk is small and the reward is at least twice as big as their risk,
26:28 - 26:30
EN: so it’s reasonable for them to take that short.
26:33 - 26:35
EN: And this is what we got.
26:35 - 26:38
EN: A huge stop run below the Higher Low,
26:39 - 26:41
EN: yet look at the follow-through after this big bear bar.
26:41 - 26:46
EN: It’s breaking below an important low, but look at the follow-through.
26:46 - 26:48
EN: It’s the opposite of this.
26:48 - 26:51
EN: Strong rally, bear bar, strong selloff, bull bar.
26:51 - 26:54
EN: Terrible follow-through, terrible follow-through.
26:54 - 26:55
EN: We got a reversal.
26:55 - 27:00
EN: An experienced trader who took this buy would not buy more
27:00 - 27:02
EN: below that bear bar or below this bear bar.
27:02 - 27:06
EN: He would wait until there’s a bull bar and then buy more here,
27:06 - 27:09
EN: knowing that Buy The Close bulls were reasonable to buy this close,
27:09 - 27:14
EN: and if you do something reasonable and trade appropriately, scale in appropriately,
27:14 - 27:18
EN: 90% of the time you can either avoid a loss or make a profit.
27:18 - 27:22
EN: Experienced traders, if they bought this close and did not exit here,
27:22 - 27:27
EN: would buy more above a good bull bar here and then wait for the market
27:27 - 27:29
EN: to get back to their original close, get out breakeven
27:29 - 27:32
EN: at that close and then with a profit here.
27:32 - 27:34
EN: You can see the selling that took place here.
27:34 - 27:39
EN: A lot of that selling is from bulls getting out of their original position,
27:39 - 27:42
EN: and the smart ones bought more here,
27:42 - 27:44
EN: and they ended up getting a profit on their second entry.
27:47 - 27:50
EN: If you get stopped out – let’s say you use the tighter stop
27:50 - 27:53
EN: and you get stopped out – you simply buy again above this bull bar.
27:53 - 27:54
EN: It’s hard to do.
27:54 - 27:57
EN: It’s hard to get stopped out with a big loss and then go right back in
27:57 - 28:02
EN: and buy, but if you were thinking about scaling in when you put on that trade,
28:02 - 28:05
EN: if you get stopped out you buy a double position here,
28:05 - 28:10
EN: which is what you would’ve had if you bought here, relied on this stop,
28:10 - 28:12
EN: and then bought more above this bull bar.
28:18 - 28:23
EN: Bulls betting that this is not a Higher Low Major Trend Reversal anymore,
28:23 - 28:26
EN: but maybe this is a Higher Low Major Trend Reversal.
28:27 - 28:30
EN: It sounds easy, but difficult to do,
28:30 - 28:32
EN: and therefore beginners should not be doing this.
28:32 - 28:37
EN: Experienced traders can sit calmly and do the right thing, but beginners will not.
28:37 - 28:39
EN: They’ll panic and take losses all day long.
Slide 016
Time: 28:41
Bilingual Transcript
28:43 - 28:48
EN: This blue box, 5-minute chart, is the same as this blue box, 1-minute chart.
28:49 - 28:54
EN: Another mistake that beginners make is they’ll put a trade on using one timeframe,
28:54 - 28:56
EN: and then because they’re afraid of a loss,
28:56 - 29:00
EN: they’ll exit using a stop based upon a smaller timeframe.
29:02 - 29:04
EN: Sell The Close bear trend.
29:04 - 29:08
EN: Therefore, traders are selling any of these closes.
29:08 - 29:09
EN: Nobody’s going to sell all of them,
29:09 - 29:13
EN: but a good trader’s going to try to sell at least one or two of them.
29:16 - 29:19
EN: On the 1-minute chart it’s a very Tight Bear Channel.
29:23 - 29:26
EN: These are the entries from the 5-minute chart.
29:26 - 29:29
EN: That’s this entry, and then this is the next one.
29:29 - 29:34
EN: These are where you’d be getting in if you were selling closes on the 5-minute chart.
29:41 - 29:47
EN: If you’re taking a trade on the 5-minute chart, don’t exit on the 1-minute chart.
29:47 - 29:50
EN: The profits on the 1-minute chart will be too small to offset the losses.
29:54 - 29:57
EN: This is where you’d exit on the 5-minute chart.
29:57 - 30:01
EN: It’s a Sell The Close bear trend, so you’re looking to exit above a bull bar,
30:01 - 30:05
EN: or 4 or 5 ticks or 4 or 5 pips above any bar.
30:05 - 30:06
EN: This is a bull bar.
30:06 - 30:08
EN: Reasonable to get out above that high.
30:09 - 30:12
EN: If you took any of these sells, this is where you’d get out.
30:12 - 30:13
EN: You’d end up with a good profit.
30:19 - 30:22
EN: Beginners who took any of these sells are probably scared
30:22 - 30:25
EN: that it’s falling quickly and may reverse up quickly,
30:25 - 30:27
EN: and they’ll be happy to have any profit.
30:32 - 30:36
EN: The beginner who took this sell on the 5-minute chart, which is right here
30:36 - 30:39
EN: - if he looks at the 1-minute chart and he sees this bull bar,
30:39 - 30:42
EN: he’ll very often panic, thinking it’s a reversal,
30:42 - 30:46
EN: ignoring 7 or 8 or 9 consecutive bear bars, and he’ll get out there.
30:46 - 30:48
EN: If he sold here, he gets out with a loss.
30:48 - 30:51
EN: If he sold here, he gets out with very little profit
30:51 - 30:53
EN: and he misses the huge profit.
30:54 - 30:57
EN: If he took this trade on the 5-minute chart,
30:57 - 31:00
EN: he needs to manage it on the 5-minute chart.
31:00 - 31:02
EN: He cannot switch to the 1-minute chart
31:02 - 31:06
EN: and get out on a 1-minute reversal, which is a common occurrence.
31:06 - 31:08
EN: If you’re in a good trend on the 5-minute chart,
31:08 - 31:11
EN: a 1-minute chart is always going to be reversing.
Slide 017
Time: 31:15
Bilingual Transcript
31:16 - 31:18
EN: It’s really important to use the correct stop,
31:18 - 31:20
EN: and the correct stop is usually obvious.
31:20 - 31:23
EN: If the correct stop is far, you have to trade small.
31:24 - 31:27
EN: If the stop is so far that your risk is bigger than on other trades,
31:27 - 31:29
EN: simply do not take the trade.
31:30 - 31:32
EN: Scaling in, only for experts.
31:32 - 31:35
EN: Beginners scale in to increase probability,
31:35 - 31:38
EN: but they don’t realize how greatly it increases their risk
31:38 - 31:41
EN: until they’re in the trade and it starts to go against them
31:41 - 31:44
EN: and they add on to a losing trade.
31:44 - 31:46
EN: Beginners should never scale in.
31:50 - 31:51
EN: I’m Al Brooks.
31:51 - 31:53
EN: Thank you for watching the Brooks Trading Course.
31:53 - 31:57
EN: This is the fourth of four videos on losing because of mistakes.