al-brooks-course
52A - Losing When Good Trade Goes Bad
Raw transcript and slide notes for 52A - Losing When Good Trade Goes Bad.
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- Slides: 19
- Transcript segments: 409
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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 first of two videos on losing when a good trade goes bad.
Slide 001
Time: 00:12
Bilingual Transcript
00:14 - 00:16
EN: I want to begin by talking about some rules that traders
00:16 - 00:21
EN: can use to help avoid big losses, and I also want to make the obvious point
00:21 - 00:24
EN: that all trends eventually disappoint traders,
00:24 - 00:29
EN: and therefore you have to make decisions when you do see some disappointment.
Slide 002
Time: 00:30
Bilingual Transcript
00:38 - 00:42
EN: Every trader sometimes makes mistakes, and I talk about losses
00:42 - 00:46
EN: that are due to mistakes in the videos on losing because of mistakes.
00:52 - 00:55
EN: For example, let’s say a beginner saw this as a Double Top
00:55 - 00:58
EN: and he sold on a stop below this bar.
00:58 - 00:59
EN: He got filled right here.
00:59 - 01:03
EN: Despite 6 bull bars in the past 8 bars, he still took the short
01:03 - 01:07
EN: and the sell signal bar had a bull body closing above its midpoint.
01:07 - 01:10
EN: That is a mistake to take that short.
01:15 - 01:20
EN: Most losing trades, even for experts, are due to mistakes and not bad luck.
01:20 - 01:24
EN: Every trade has a probability that you’re going to win and a probability
01:24 - 01:27
EN: that you’re going to lose, and therefore even experienced traders
01:27 - 01:30
EN: are going to lose simply because of luck.
01:34 - 01:38
EN: A big difference between an expert and a beginner is that an expert tends
01:38 - 01:41
EN: to get out very quickly when he makes a mistake.
01:41 - 01:42
EN: He loses less.
01:42 - 01:45
EN: He’s not emotionally attached to a position.
01:45 - 01:49
EN: He doesn’t feel a need to prove that he’s right – for example,
01:49 - 01:53
EN: holding onto a bad trade, hoping that eventually he’ll be proven right.
01:53 - 01:55
EN: If he’s wrong, he gets out.
Slide 003
Time: 02:00
Bilingual Transcript
02:01 - 02:04
EN: I want to talk in this video about market risk
02:04 - 02:06
EN: and how to minimize it or how to avoid it.
02:07 - 02:09
EN: That’s risk beyond your personal control.
02:09 - 02:12
EN: Personal risk, that means you made mistakes.
02:13 - 02:15
EN: Market risk is things that you cannot control.
02:15 - 02:18
EN: The market is doing something that you thought was not likely.
02:25 - 02:29
EN: It’s fairly common that you’ll take a trade where the entry is good,
02:29 - 02:34
EN: the logic is good, but the market does not do what you think was most likely.
02:34 - 02:37
EN: That’s bad luck instead of a bad trade.
02:37 - 02:38
EN: It’s a good trade that went bad.
02:45 - 02:47
EN: For example, we have a Sell The Close market down here.
02:47 - 02:50
EN: Traders are selling closes, selling closes, selling closes.
02:51 - 02:54
EN: He knows that eventually one is going to be the final one
02:54 - 02:57
EN: and that the market will reverse and he’ll lose money.
02:57 - 03:01
EN: Nobody’s going to sell all these closes, but traders will sell at least one.
03:01 - 03:03
EN: Let’s say you sold this one,
03:03 - 03:06
EN: and then immediately you see a bull bar and then 3 other bull bars.
03:07 - 03:10
EN: At that point the trade is no longer a Sell The Close bear trend,
03:10 - 03:12
EN: and you have to change how you’re trading.
03:12 - 03:16
EN: One thing you might do is sell more higher and then try to get out breakeven
03:16 - 03:19
EN: on your first entry and then with a profit on your higher entry.
Slide 004
Time: 03:25
Bilingual Transcript
03:26 - 03:31
EN: You need some rules to prevent bad trades from becoming very big losses.
03:36 - 03:39
EN: When the market is swing trading, it’s fairly easy
03:39 - 03:41
EN: to make money trading in the direction of the trend.
03:41 - 03:43
EN: Market’s going up, you buy.
03:43 - 03:45
EN: Market’s going down, you sell.
03:50 - 03:54
EN: As long as it’s continuing to trend, it’s okay to hold onto your position
03:54 - 03:56
EN: or to enter at any time in the direction of the trend
03:56 - 03:59
EN: - buying here or selling here.
Slide 005
Time: 04:05
Bilingual Transcript
04:06 - 04:10
EN: If you’re long, there are three ways to protect yourself.
04:15 - 04:17
EN: First of all, you always need a protective stop.
04:17 - 04:20
EN: After every strong breakout to a new high,
04:20 - 04:23
EN: you can trail your stop to the most recent major Higher Low.
04:23 - 04:25
EN: Here, a breakout to a new high.
04:26 - 04:28
EN: You can trail your stop to below this low.
04:29 - 04:32
EN: If the stop is far away you have to reduce your position size,
04:32 - 04:36
EN: or if you’re entering at a time when the stop is going to be very far away,
04:36 - 04:37
EN: you simply have to trade small.
04:42 - 04:45
EN: Any time there’s a reasonable opposite signal
04:45 - 04:48
EN: - it does not have to be a perfect signal as long as it’s reasonable
04:48 - 04:51
EN: - it’s reasonable for you to get out of your trade.
04:57 - 04:59
EN: For example, we have a slight Higher High.
05:00 - 05:03
EN: We have a bull trend, Trading Range, and a Higher High.
05:03 - 05:07
EN: Therefore it’s a Higher High Major Trend Reversal and it’s a Wedge rally.
05:07 - 05:09
EN: We went up here, we went down.
05:09 - 05:10
EN: Up here and then down.
05:10 - 05:13
EN: Up here, and now we have a bear bar closing on its low.
05:14 - 05:17
EN: Reasonable to get out of longs if you’re still long at this point.
05:17 - 05:20
EN: You get out on a stop below the low of that bear bar.
05:21 - 05:23
EN: It’s a weak rally, it’s a Wedge rally,
05:23 - 05:25
EN: and it’s a potential Higher High Major Trend Reversal.
05:25 - 05:30
EN: You’ve got to be thinking that the market is no longer in a bull channel.
05:30 - 05:34
EN: It’s now either in a Trading Range or in a bear trend.
05:37 - 05:40
EN: In addition to exiting if there’s a reasonable opposite signal
05:40 - 05:45
EN: or if your stop is hit, you exit if there’s a strong opposite breakout.
05:50 - 05:53
EN: It can be a single big bear bar if you’re long,
05:53 - 05:57
EN: or it could be 3 or more bear bars with moderate size bodies,
05:57 - 06:00
EN: especially if they’re closing on or near their lows.
06:00 - 06:01
EN: Here we have 3 bear bars.
06:01 - 06:05
EN: This one became big, all 3 closing at or near their lows.
06:05 - 06:07
EN: Reasonable to get out at the market.
06:07 - 06:11
EN: As soon as you see that third close, you simply exit at the market.
06:11 - 06:12
EN: You sell out of your long.
06:12 - 06:16
EN: It doesn’t matter if you bought here or if you bought down here;
06:16 - 06:19
EN: you get out here if you did not already get out.
Slide 006
Time: 06:25
Bilingual Transcript
06:27 - 06:32
EN: Every channel eventually stops, and usually it becomes a Trading Range.
06:33 - 06:34
EN: We have a bull channel.
06:34 - 06:35
EN: It became a Trading Range.
06:35 - 06:37
EN: We have a bear channel, and we have a bull breakout,
06:38 - 06:41
EN: and it became a bull leg in a larger Trading Range.
06:47 - 06:52
EN: The single most important rule to protect yourself is having a stop in the market.
06:52 - 06:55
EN: Not a mental stop, not a stop in your head.
06:55 - 06:57
EN: If the stop is in the market, it’s a guarantee
06:57 - 07:01
EN: that you will lose no more than an acceptable loss.
07:04 - 07:07
EN: There are often several choices for a reasonable stop.
07:07 - 07:11
EN: For example, bulls who bought any time in here could have
07:11 - 07:15
EN: a stop below the bottom of this leg or below the bottom of the bull trend,
07:16 - 07:19
EN: and bears who sold any time in here, it’s reasonable
07:19 - 07:22
EN: to put their stop above the top of the bear reversal.
07:27 - 07:32
EN: After every strong breakout to a new high, it’s reasonable to trail your stop.
07:32 - 07:37
EN: If you bought anywhere in here and then the market breaks out here
07:37 - 07:40
EN: to a new high and you have several decent bull bars,
07:40 - 07:42
EN: it’s reasonable to put your stop below this low.
07:43 - 07:46
EN: For the bears, you have a strong bear breakout, stop up here,
07:46 - 07:50
EN: and then once it starts to break out again, you can trail your stop.
07:50 - 07:54
EN: Lower your stop down to the most recent major Lower High, which is right here.
07:54 - 07:56
EN: Put your stop just above.
Slide 007
Time: 08:00
Bilingual Transcript
08:02 - 08:05
EN: A great scalper can win 90% of the time.
08:05 - 08:08
EN: That means he’s losing 10% of the time.
08:12 - 08:16
EN: He needs rules to prevent his losses from getting very big.
08:20 - 08:25
EN: The first obvious one is always have an appropriate stop in the market.
08:27 - 08:30
EN: For example, let’s say you’re a scalper and you think
08:30 - 08:31
EN: - we have one push up, down.
08:31 - 08:32
EN: Up, down.
08:32 - 08:36
EN: Maybe the third push will be a Wedge and a reversal.
08:36 - 08:38
EN: Market’s transitioning to a Trading Range.
08:38 - 08:41
EN: He might sell with a limit order at this high,
08:41 - 08:46
EN: betting that the third leg up will fail and reverse down enough to make a scalp.
08:48 - 08:50
EN: Different ways to calculate where to put a stop,
08:50 - 08:53
EN: but one might be just beyond a Measured Move up
08:53 - 08:55
EN: based upon the height of this small Tight Trading Range.
08:59 - 09:01
EN: Let’s say a trader bought this close,
09:01 - 09:03
EN: thinking that it’s a strong enough pair of bars
09:03 - 09:07
EN: so that the market’ll probably have at least one more leg up.
09:08 - 09:12
EN: Reasonable stop below the 2 bar breakout or below the bottom of the leg.
09:13 - 09:16
EN: Some scalpers would even put a stop down here or here,
09:16 - 09:20
EN: thinking that maybe the market will have a deep pullback into a Trading Range.
09:20 - 09:22
EN: They can buy more lower,
09:22 - 09:26
EN: confident that we’ll come back here after 2 pretty good bull bars.
09:31 - 09:35
EN: If you’re clearly wrong, it’s usually better just to exit immediately
09:35 - 09:37
EN: and don’t wait for your stop to be hit.
09:42 - 09:46
EN: For example, if a bull bought this close and the next bar looked like that,
09:46 - 09:50
EN: a reversal bar closing near its low – it’s a doji bar, but it’s also a Wedge
09:50 - 09:53
EN: - one, two, three – if the trader is now concerned
09:53 - 09:57
EN: that we may get a couple legs sideways to down and he’s a scalper,
09:57 - 09:59
EN: he’s going for a small profit.
09:59 - 10:01
EN: He does not want to have a big risk.
10:01 - 10:04
EN: Therefore, it’s reasonable for him to get out just below the low of this bar
10:04 - 10:06
EN: and not wait for his stop to get hit.
Slide 008
Time: 10:10
Bilingual Transcript
10:14 - 10:19
EN: Any time there’s a reasonable opposite signal, it’s reasonable to get out.
10:19 - 10:23
EN: If the opposite signal does not lead to a reversal
10:23 - 10:27
EN: and it simply becomes a flag and the trend resumes, you can always get back in.
10:30 - 10:32
EN: For example, let’s say you bought this close,
10:32 - 10:34
EN: hoping that the bull trend will continue,
10:38 - 10:41
EN: and then on the next bar you see that reversal
10:41 - 10:45
EN: - yet you want to hold and use a reasonable stop, here or here.
10:50 - 10:53
EN: If you did get out, you could always buy again above a bull bar,
10:54 - 10:57
EN: especially a second entry buy above a bull bar closing on its high.
10:58 - 11:05
EN: Reasonable to get out here, a large High 2 rally – one, pullback, two – nested.
11:05 - 11:07
EN: There’s a smaller one – one, pullback, two.
11:07 - 11:08
EN: Consecutive tops.
11:08 - 11:12
EN: We have a Wedge Top here, maybe a Wedge Top here.
11:12 - 11:15
EN: One or one and then two, pause, and three.
11:15 - 11:17
EN: Good bear bar.
11:24 - 11:28
EN: If you get out, again, if the market’s still Always In Long – and it is
11:28 - 11:31
EN: - you can look to buy again after two or three legs sideways to down
11:31 - 11:35
EN: - one, pullback, two, pullback, three.
11:35 - 11:37
EN: A bull bar.
11:37 - 11:40
EN: Reasonable to buy above this bull bar and put your trade back on.
11:40 - 11:43
EN: If you get out below here, you buy again above here.
11:43 - 11:48
EN: If you get out below here, you can buy again above that bull bar.
Slide 009
Time: 11:50
Bilingual Transcript
11:56 - 11:58
EN: When the market’s near the end of the session,
11:58 - 12:00
EN: you have to be prepared to get out faster,
12:00 - 12:03
EN: because sometimes a reversal may not come back
12:03 - 12:05
EN: to your entry to let you avoid a loss.
12:09 - 12:12
EN: We have a bear swing, but a slightly Higher Low,
12:12 - 12:14
EN: and then we have a small Double Bottom.
12:14 - 12:18
EN: Bull bar here, a better bull bar here, and this Double Bottom
12:18 - 12:21
EN: is forming a Double Bottom with this Double Bottom,
12:21 - 12:24
EN: so it’s a big Double Bottom with this low and this pair of lows,
12:24 - 12:27
EN: and it subdivided into a smaller Double Bottom.
12:31 - 12:33
EN: Reasonable to be buying above this bar
12:33 - 12:37
EN: or buying closes once it becomes a Buy The Close bull trend.
12:37 - 12:41
EN: But it’s a Buy The Close bull trend late in the session or late in the day.
12:42 - 12:46
EN: Whenever that’s the case, it’s usually good to get out below any bear bar
12:46 - 12:51
EN: that closes near its low or 3 or 4 ticks or 3 or 4 pips below any bar,
12:51 - 12:53
EN: bull bar or bear bar.
12:56 - 13:00
EN: When you’re buying these closes, your stop is here below the low,
13:04 - 13:08
EN: and you have to get out, I think, below a bear bar closing near its low.
13:08 - 13:09
EN: So you can get out here.
13:10 - 13:14
EN: A lot of bulls will not get out below this bear doji
13:14 - 13:16
EN: because it has only a small bear body.
13:16 - 13:19
EN: The odds are it’s going to go up a little bit higher.
13:20 - 13:23
EN: However, once you’ve had 3 or 4 bars
13:23 - 13:27
EN: in a Buy The Close trend at the end of a session or the end of the day,
13:27 - 13:31
EN: you have to be prepared to get out because usually a Buy The Close rally
13:31 - 13:35
EN: at the end of a session will only last 4, 5, or 6 bars.
13:35 - 13:38
EN: So once you’ve had five or six closes in your direction,
13:38 - 13:42
EN: you have to be prepared for a reversal, and therefore be ready to get out.
Slide 010
Time: 13:45
Bilingual Transcript
13:47 - 13:50
EN: Sometimes there’s no good opposite signal to get you out,
13:50 - 13:53
EN: but you still need some method to get out.
13:55 - 13:58
EN: For example, one big trend bar is enough to make bears
13:58 - 14:00
EN: get out before their stop gets hit.
14:04 - 14:08
EN: Let’s say you’re using a wide stop up here at the top of this Tight Bear Channel
14:09 - 14:12
EN: and you’re short for any reason, and then you see a big bull bar like this.
14:12 - 14:14
EN: This is a surprise bar.
14:15 - 14:21
EN: A surprise bar has at least a 60% or 70% chance of at least one more leg up
14:21 - 14:23
EN: and probably some kind of a Measured Move up.
14:24 - 14:26
EN: Therefore, once you see this bar, get out at the market.
14:26 - 14:28
EN: Don’t wait for your stop to get hit.
14:29 - 14:32
EN: If the market is reversing up strongly even here,
14:32 - 14:36
EN: you’re going to get out at the market before a tight stop here is hit.
14:37 - 14:40
EN: Once you believe your premise is wrong, get out of your position.
14:40 - 14:42
EN: Don’t rely on your stop.
14:46 - 14:49
EN: If you’re short, get out as the big bar is forming
14:49 - 14:51
EN: or certainly on the close of the big bar.
14:51 - 14:54
EN: Whenever you have an exceptional bar like that,
14:54 - 14:57
EN: there’s going to be follow-through, so don’t rely on your stop.
15:03 - 15:05
EN: Instead of 1 big bull bar,
15:05 - 15:08
EN: if you’re short sometimes you’ll see 2 medium size bull bars.
15:09 - 15:12
EN: In that case usually it’s good to get out on the close of the second bar,
15:12 - 15:14
EN: which would be right here.
15:14 - 15:18
EN: This is also 4 bull bars, but 2 of them have pretty good bodies
15:18 - 15:19
EN: and they’re closing on their highs.
15:19 - 15:23
EN: So, reasonable to get out there and don’t rely on a stop to be hit.
15:26 - 15:30
EN: If you had your stop up here, you’re not at the stop,
15:30 - 15:33
EN: but this is strong enough up we’re probably going higher,
15:33 - 15:36
EN: and therefore your stop is probably going to get hit.
15:36 - 15:38
EN: If you’re short, it’s better just to get out.
15:38 - 15:41
EN: Buy at the market as soon as this bar closes.
15:46 - 15:50
EN: A lot of traders will simply exit if there are 3 consecutive bull bars
15:50 - 15:55
EN: and 1 or more of them has a good size body closing on or near its high.
15:55 - 15:59
EN: If a trader is short, this is a reasonable place to get out as well.
16:03 - 16:07
EN: If you’re long and you see 3, 4, or 5 small bars,
16:07 - 16:10
EN: you’ll get out on the close of one of the bars,
16:10 - 16:12
EN: especially if 2 or 3 of them are closing near the low.
16:13 - 16:17
EN: Bulls who are long here get out on the third or fourth or fifth close,
16:17 - 16:20
EN: just sell out of their longs at the market.
16:20 - 16:23
EN: One big bar against you is a good reason to get out,
16:23 - 16:28
EN: 2 medium size bars against you are reasonable reason to get out,
16:28 - 16:34
EN: and 3, 4, or 5 small bars against you are reasonable reason to exit.
16:36 - 16:37
EN: Don’t wait for your stop to be hit.
16:38 - 16:42
EN: Once you’ve seen 3, 4, or 5 bars against you if you’re long,
16:42 - 16:46
EN: your stop is going to get hit, so just get out before your stop is hit.
16:51 - 16:55
EN: Exit on the third or fourth close, especially the fourth close here, a bigger bar.
16:55 - 16:57
EN: We’re starting to accelerate down,
17:02 - 17:04
EN: and now we’re getting a series of bigger bars.
17:04 - 17:06
EN: This is the bulls giving up.
17:06 - 17:10
EN: The market’s now reversing this rally, so big up, big down,
17:10 - 17:13
EN: and the bars are getting good bodies.
17:13 - 17:14
EN: The bulls are giving up.
17:14 - 17:15
EN: The bears are taking control.
17:15 - 17:18
EN: The market is probably going to go lower.
17:18 - 17:19
EN: It’s Always In Short.
17:24 - 17:27
EN: Every trend eventually ends,
Slide 011
Time: 17:25
Bilingual Transcript
17:27 - 17:31
EN: and every trend eventually disappoints traders hoping that the trend will continue.
Slide 012
Time: 17:32
Bilingual Transcript
17:38 - 17:40
EN: Sell The Close bear trend.
17:40 - 17:42
EN: You get a bull bar closing near its high.
17:42 - 17:44
EN: You’ve got to get out just above the high of the bull bar.
17:45 - 17:46
EN: A Buy The Close bull trend.
17:46 - 17:48
EN: Disappointed bulls.
17:48 - 17:49
EN: Reasonable to get out here.
17:49 - 17:51
EN: Sell The Close bear trend.
17:51 - 17:54
EN: Well, not really, but if you’re a bear, you’re certainly disappointed
17:54 - 17:58
EN: that the breakout is not bigger, the reversal down is not bigger,
17:58 - 18:00
EN: and the follow-through is not bigger.
18:00 - 18:01
EN: Buy The Close bull trend.
18:02 - 18:03
EN: It’s disappointing all the way up.
18:03 - 18:06
EN: We have bars with big tails, small bodies.
18:06 - 18:08
EN: Probably not going to last all that much longer,
18:08 - 18:12
EN: and then you’re certainly going to be disappointed by that big bear bar.
18:18 - 18:20
EN: Sell The Close bear trend.
18:20 - 18:21
EN: Disappointment bars.
18:21 - 18:22
EN: Bull bars.
18:22 - 18:24
EN: Buy The Close bull trend.
18:24 - 18:25
EN: Disappointment.
18:25 - 18:28
EN: Bear bars, especially bear bars closing on or near their lows.
18:29 - 18:31
EN: An attempt at a bear reversal.
18:31 - 18:33
EN: Not convincing, but in any case,
18:33 - 18:36
EN: if you’re a bear you’re disappointed by bull bars.
18:37 - 18:38
EN: Bull trend.
18:38 - 18:42
EN: Even though it’s about 8 bull bars, it’s not very strong,
18:42 - 18:44
EN: and you’re certainly going to be concerned
18:44 - 18:46
EN: by a big bear bar closing near its low.
18:46 - 18:50
EN: It’s disappointing, and it makes you think that the bull trend is ending
18:50 - 18:52
EN: and the market might be entering a Trading Range.
18:56 - 19:01
EN: Usually a good trader can avoid his loss if he manages his trade well.
19:05 - 19:09
EN: I talk about this in the videos on entering late in trends,
19:09 - 19:11
EN: and I’m going to talk a little bit more about it right here.
Slide 013
Time: 19:15
Bilingual Transcript
19:17 - 19:20
EN: For example, let’s say you were treating this like a Buy The Close bull trend,
19:20 - 19:22
EN: and you bought one or more of these closes,
19:22 - 19:25
EN: either for a scalp or a swing, and then you see this bear bar.
19:26 - 19:27
EN: We’re in a bull channel.
19:27 - 19:30
EN: You look to the left, bears who sold this high made money.
19:31 - 19:34
EN: Bears who sold this high maybe made a little bit of money.
19:34 - 19:37
EN: Bears were selling above highs all the way up, not making much,
19:37 - 19:39
EN: but a pretty good pullback here.
19:39 - 19:42
EN: If we go to a new high, maybe we’ll get another pullback.
19:42 - 19:45
EN: Bears who sold this high made money.
19:45 - 19:46
EN: They sell that high, they sell more higher,
19:47 - 19:49
EN: and they get out breakeven at their first entry
19:49 - 19:50
EN: and with a profit on their second.
19:51 - 19:53
EN: Very Tight Bull Channel.
19:53 - 19:57
EN: Probably a minor reversal, meaning either a bull flag or a Trading Range.
19:57 - 20:01
EN: However, if you happened to buy that close,
20:01 - 20:04
EN: you knew that we’ve pulled back every time we’ve broken out to a new high.
20:04 - 20:06
EN: We’re in a channel.
20:06 - 20:07
EN: We’re going to pull back soon.
20:07 - 20:11
EN: If you see this bear bar, you have to be disappointed.
20:18 - 20:21
EN: You may have bought the high close of the bull trend.
20:21 - 20:24
EN: More likely you bought the high close of the current leg in the bull trend.
20:25 - 20:27
EN: We have 8 consecutive bull bars.
20:27 - 20:31
EN: First reversal probably minor, but you have to make decisions on what to do.
Slide 014
Time: 20:35
Bilingual Transcript
20:40 - 20:42
EN: The easiest approach is to just rely on your stop,
20:42 - 20:47
EN: and as long as your stop has not been hit and your premise is still good,
20:47 - 20:48
EN: you can hold onto your position.
20:48 - 20:50
EN: Strong breakout, new high.
20:51 - 20:52
EN: This is a major Lower High.
20:52 - 20:55
EN: Reasonable to keep your stop right here.
21:02 - 21:06
EN: If you bought this close after you saw the disappointment bar,
21:06 - 21:08
EN: you might’ve placed an order to get out breakeven,
21:08 - 21:11
EN: and you were unable, unable, unable.
21:11 - 21:13
EN: Several bars unable to get out breakeven.
21:13 - 21:17
EN: Buying this close was a reasonable thing to do.
21:17 - 21:20
EN: Usually if you do something reasonable and you rely on your stop
21:20 - 21:25
EN: and scale in lower, you can avoid a loss and possibly make a profit.
21:32 - 21:37
EN: One thing to do is rely on your stop, place a limit order to get out breakeven.
21:37 - 21:40
EN: Another thing is to buy more the size of a scalp
21:40 - 21:43
EN: or two to three times the size of a scalp below your first entry,
21:43 - 21:47
EN: rely on your stop, and then get out breakeven on your first trade
21:47 - 21:49
EN: with a profit on your lower trade.
21:51 - 21:52
EN: We’re getting late in the day.
21:52 - 21:56
EN: A lot of the bulls who did buy here and sat through this are concerned
21:56 - 21:58
EN: that we might not go much higher.
21:58 - 22:01
EN: They simply sell out of their longs at their original entry price.
22:02 - 22:03
EN: Reasonable.
Slide 015
Time: 22:05
Bilingual Transcript
22:10 - 22:15
EN: Some bulls, as I said, will scale in one times or two times or three times
22:15 - 22:18
EN: the size of a minimum scalp, rely on their stop,
22:18 - 22:21
EN: and then look to get out with a profit on their lower entries
22:21 - 22:24
EN: and get out breakeven at their first entry.
22:24 - 22:26
EN: You can only do this if you’re trading small enough
22:26 - 22:29
EN: so that your entire position does not expose you
22:29 - 22:33
EN: to any more risk using the stop than any other trade.
22:33 - 22:36
EN: If your position is too big to allow you to scale in
22:36 - 22:38
EN: and use that stop, don’t scale in.
Slide 016
Time: 22:45
Bilingual Transcript
22:50 - 22:51
EN: Disappointment.
22:51 - 22:55
EN: You get out breakeven on your first entry, and if you added on,
22:55 - 22:57
EN: you get out with a small profit on your lower entry.
23:05 - 23:10
EN: Traders scale in for one reason: to increase the probability of a profit
23:10 - 23:14
EN: or to increase the chance of avoiding a loss.
23:14 - 23:16
EN: It’s a thing that experts do.
23:16 - 23:20
EN: Beginners should never do it because invariably
23:20 - 23:23
EN: their position will be too big for the stop that they need.
23:23 - 23:26
EN: They buy here thinking that they’re going to scale in.
23:26 - 23:29
EN: They scale in thinking that they can hold and rely on the stop,
23:29 - 23:31
EN: and then they do the math and decide that,
23:31 - 23:34
EN: “Wow, I didn’t think I was going to be risking that much money,”
23:35 - 23:37
EN: and they end up selling with a loss
23:37 - 23:40
EN: rather than managing the trade as they originally planned.
23:41 - 23:44
EN: They had an unreasonable plan given their skill level,
23:44 - 23:47
EN: their ability to tolerate the market going against them,
23:47 - 23:50
EN: and their position size was way too big.
Slide 017
Time: 23:55
Bilingual Transcript
23:57 - 24:01
EN: A lot of bulls who are looking to scale in will only scale in once.
24:02 - 24:06
EN: They like to wait for a pullback that is at least two to three times
24:06 - 24:08
EN: bigger than the minimum scalp size,
24:16 - 24:19
EN: and a lot of them prefer to buy above a decent bull bar.
24:19 - 24:24
EN: So for example, a bull might buy here and hope that once it starts to sell off,
24:24 - 24:29
EN: he gets to buy more 2 to 3 points or 10 or 20 pips,
24:29 - 24:33
EN: 30 pips below this first entry, but above a bull bar.
24:33 - 24:35
EN: For example, this is a good-looking bull bar,
24:35 - 24:40
EN: but it’s probably not two to three times the size of a minimum scalp.
24:46 - 24:49
EN: If a trader bought here thinking that he’s disappointed,
24:49 - 24:53
EN: he wants to buy more lower, and it does not go low enough,
24:53 - 24:57
EN: he simply holds onto his position in case it goes lower and then adds on.
24:58 - 25:01
EN: If instead it does not go low enough to scale in,
25:01 - 25:05
EN: he simply gets out breakeven at his original entry.
Slide 018
Time: 25:10
Bilingual Transcript
25:17 - 25:22
EN: We have a bear breakout, a pullback, and then a strong bear breakout,
25:23 - 25:25
EN: a pair of bear bars closing below the low,
25:25 - 25:28
EN: and a follow-through bear bar – a doji, not all that good.
25:28 - 25:31
EN: But good enough breakout, good enough follow-through,
25:31 - 25:35
EN: probably at least a little bit more down, and maybe a lot more down.
25:37 - 25:39
EN: If the bear sells at this close,
25:39 - 25:43
EN: his stop is above the top of the most recent major Lower High.
25:43 - 25:45
EN: A major Lower High.
25:45 - 25:48
EN: We broke to a new low and there’s a reasonably strong breakout,
25:48 - 25:49
EN: 4 consecutive bear bars.
25:49 - 25:51
EN: A good location for the stop.
25:57 - 26:01
EN: Then he sees this: a Micro Double Bottom, a bull bar, and it’s starting to go up.
26:01 - 26:04
EN: Here we have 5 bars up without a pullback.
26:04 - 26:06
EN: But is his premise wrong?
26:06 - 26:10
EN: Is this now Always In Long, or is it still Always In Short?
26:10 - 26:13
EN: This is not enough to make it Always In Long.
26:13 - 26:15
EN: This is not enough to make it Always In Long,
26:15 - 26:19
EN: and therefore it’s Always In Short still and has not hit his stop,
26:19 - 26:22
EN: so it’s reasonable to stay short.
26:22 - 26:26
EN: You sell here and you sit through this because there’s no clear,
26:26 - 26:29
EN: obvious buy setup – this is not a convincing obvious buy setup
26:30 - 26:33
EN: - and the reversal never had 3 or 4 strong bull bars.
26:33 - 26:36
EN: You have 3 bull bars here, not particularly big.
26:36 - 26:39
EN: If you want you could get out on the close of this bar,
26:39 - 26:41
EN: but if you do, the premise is still valid.
26:41 - 26:45
EN: You look for a bear bar and you get short again below that low.
26:52 - 26:55
EN: Even though the reversal up lasted about a dozen bars,
26:56 - 26:59
EN: the market never clearly became Always In Long,
26:59 - 27:02
EN: and therefore it’s reasonable to rely on your stop
27:02 - 27:05
EN: even though the market is now above your entry price.
Slide 019
Time: 27:10
Bilingual Transcript
27:10 - 27:14
EN: All traders need rules to avoid big losses,
27:14 - 27:17
EN: and the single most important rule is to rely
27:17 - 27:19
EN: on a protective stop that’s in the market.
27:20 - 27:22
EN: Every trend eventually ends,
27:22 - 27:25
EN: and that means how you’re trading has to change as well.
27:30 - 27:31
EN: This is Al Brooks.
27:31 - 27:35
EN: This is the first of two videos on losing when a good trade goes bad.