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Dear group,
I am developing systems based on the BTC. I do understand that Al has great skil in understanding PA but i find the stop loss location quite missing in terms of RR and seeing trading as a distribution of returns and losses, but on each and every trade you must be sure that your return is always a multiple of your risk. For the way Dr Brooks speaks, i mean the RR on trades always looks < 1.
How are professional BTC traders that are consistently profitable and in production phase solved that? To my experience trading is very systematic process where a setup is a condition where if taken ever and ever again the RR is > at least 2 (i target 5 a at the expense of win rate).
Thank you
Al talks a LOT across the books and video course about swing trading, namely entering with stop order, stop beyond signal bar (or sometimes the beginning of spike or at swing point), and going for 2R (Risk:Reward 1:2). I'm not sure where you are getting the idea that Al's teachings are focused on trades with Risk:Reward > 1.
P.S. you got your RR numbers backwards, you are writing Reward:Risk instead of Risk:Reward
I am not talking Swing trading but day trading as i want to learn that too and having a system that aims on average on RR Return-Risk > 4.5 in a systematic fashion.
PS Whenever i mention RR of course i mean Return to Risk, aiming to get 1 unit of Risk in exchange of 1 unit * X times units of return i.e. Return/Risk >1, specifically in my case Return/Risk > 4.5 on average, systematically
My suggestion is to take the course / make it through the course. You seem to miss some basic concepts from the BPA course, such as what Al defines swing trading as, which is simply holding for a few legs, it does not mean hold for days. And Al always refer to it as Risk:Reward which is why I commented about that. The course and books will give you some good information to help you in your quest.
I think it's all based on the expectation that for most of your trades, you will exit on a premise change before your stop gets hit. I say most because every once in a while, you will "take one take one in the chin." And if I do rely completely on my stop, it's only with a partial position where I'm hoping to scale in or if I've gained a profit and I'm now trailing my stop (even then, probably gonna bail early). IMO, anyone who relies on their stop with a full position is a glutton for punishment.
I’m still new to this (about halfway through the course) and currently paper trading to practice. In the beginning, I was confused too. I often took trades with a 1:1 risk-reward ratio—or even worse—just because I felt the need to win. Eventually, I started thinking more critically about that approach.
As I progressed through the course, I noticed helpful tips like “trade small enough” or “don’t care about size", or "depending on the size of your account". So now, I approach those open setups with that mindset. I also watched the free trading rooms on the first of the month and saw that risk-reward is a top priority for the instructors.
After practicing and reviewing charts, I realized that the areas Dr. Brooks highlights—especially early in the day—are where your stop-loss is least likely to get hit when you enter a "high probability trade".
Each trader has different views and personalitiesl. For me, as of now, if I ever trade the open I wait for a second entry set up for a swing where R:R is at least 1:2. In my personal experience, I prefer to wait after the first hour of trading. By then, you have an idea of what pattern the market is doing and trade it accordingly (paper trading, no boosting here)
It is a belief of mine that i genuinely cannot find intelligent ever putting myself in a position where my average win is statistically significantly less then my average loss. This is not edge to me, but the problem is that Al Brooks seems to be living off trades that have this type or Risk Return profile.
I mean I wish i am wrong so i am looking for professional Price action traders that use BTC methods and have developed way to structure trades with RR greater than 2.5/3 and manage to get trades daily
What Al has laid out is correct however there is a much deeper discussion which must be bridged - the acquisition of skill in determining probability. This variable is not on the chart. However, there are many elements which help to define this variable.
Probability directly relates to situational context. Money/risk management is how probability is intertwined with appropriate position sizing to allow for the average win > average loss. However, there are a variety of ways probability can be used. If 40% probability (MTR) 2:1 is needed to compensate. Because the MTR and risk profile allows for the balance, "being right" and having to prove oneself (higher probability necessities), doesn't become a weighted factor. . . 40% - well you know you don't have to be right - in fact you are saying you aren't event as good as a coin flip.
Higher probability though, and its identification, puts additional strain on "being correct". The situations are faster, requires quicker evaluation, timing, and analysis. Much higher pressure.
While there isn't a right or wrong probability, based on human nature, higher or lower probability may be a stronger initial fit. Higher probability is more difficult though, and has more prerequisites. Overall, one wants to work towards being able to trade from a peaceful state and be happy. This relates to how people can work with stress.
Probability is the unspoken variable.
That is why you can be a super price reader but in then trading is execution and "planning for failure" and that implies having a RR enough to compensate for execution mistakes, slippage, and so on. So reading PA well is only IMO less than 20% of a successful assassin-trader. That is why i am asking for help from people that have made that jump. Everything else is just "playing: of being a trader and being the owner of a trading business that actually exists
While a system is perhaps only 15% of what is required for success, BPA actually is the encyclopedia of how prices move. It is an encapsulation of a great variety of potentials. Some of them will suit you more than others. So, R:R is reflective of both experience and risk management.
You may be able to swing or scalp, and that is based on your personality. Swing trading is easier on the ego. If you are going to scalp, a base recommendation is 1:1. Because scalping is higher probability, if you are even slightly better than 50% probability, then you are profitable (with good position sizing).
As written before, probability and risk management are inversely related (the higher the probability, the greater the risk where the stoploss goes). There isn't a free lunch in any of this, and therefore studying is necessary - both content and understanding yourself.
I remember back over a decade ago reading reviews of whether "it was the real stuff", and discussions of fraud, etc. It took quite some time for me, much like Al. It is correct. The easiest way to digest is to find someone competent and learn from them as unconscious incompetence, especially with regards to trading, is a significant issue. Individuals do not know what they need to know, and so studying becomes drawn out. The BTC is very well structured and laid out. How To Trade works through the variety of situations in applying the theory to a great variety of situations. Working through the course several times will allow for common themes to make more of an impression. Begin with stop orders and see how well you match against the free published solutions the next day. That will train your eye, as well as provide feedback on where gaps are. Al also has on YouTube a video on how to approach marking up the chart each day. It is pure "gold". Most don't do it. . .
Good trades to you!
Thanks for the contributions but i have to disagree:
I swing trade for a living and i am doing it for years. My system is mathematically based from the entry to stop loss size, everything is designed so that i just cannot lose no matter what. I do not have to feel good to trade, i do not have to interpret the market is a certain way different from yesterday, everything is such that the operational risk is just not there. That is what a system is: a way that allows you to participate in some structural market dynamic in a way that you have RR naturally (not artificially, because remember you do not generate alpha , as in markets alpha is generated by the decision "where you have to be and when you have o be there" otherwise if you think you can generate alpha you will scale in lower until death) skewed on your side.
You have to understand what are you taking advantage of, what are you looking to exploit that is going to happen and generate a move completely independently from you entering any order, and you have to make your participation easier as possible, with the lowest execution risk possible, and in a way that it allows for many failure points against you. That is trading and not gambling.
Well the course does not have that , at least for the way i see and i am confident that any trader that lives off this has all these pieces in their system in such a way that "no matter what happens" he will make money consistently and no operational risk. I would like to speak to someone who could help me with this because i am struggling a lot in generating a method that can be called system.
