{"id":57617,"date":"2016-09-04T02:00:12","date_gmt":"2016-09-04T09:00:12","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=57617"},"modified":"2021-05-27T04:57:10","modified_gmt":"2021-05-27T11:57:10","slug":"trade-probabilities-book-recommendation","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/pt-br\/ask-al\/trade-probabilities-book-recommendation\/","title":{"rendered":"Ask Al: Book recommendation trade probabilities"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">Trade probabilities and management<br>BPA trading room Q&amp;A: July 17, 2015<\/h2>\n\n\n\n<p class=\"content-box-green\">Question: Which book do you recommend for learning to identity trade probabilities and trade management?<br><em>Audio duration: 7min 55sec<\/em><\/p>\n\n\n\n<figure class=\"wp-block-audio\"><audio controls src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/09\/Ask-Al-75-Book-Recommendations-Trade-Management-Probability.mp3\"><\/audio><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Book recommendations?<\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><a href=\"http:\/\/www.amazon.com\/gp\/product\/1118066510\/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=1118066510&amp;linkCode=as2&amp;tag=nmhk-btc-20&amp;linkId=IJCX63P3WD7XEDEY\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"160\" height=\"200\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2014\/05\/trading-price-action-trends-book-cover.png\" alt=\"trading-price-action-trends-book-cover\" class=\"wp-image-18790\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2014\/05\/trading-price-action-trends-book-cover.png 160w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2014\/05\/trading-price-action-trends-book-cover-16x20.png 16w\" sizes=\"auto, (max-width: 160px) 100vw, 160px\" \/><\/a><\/figure><\/div>\n\n\n\n<p>I don\u2019t read books; I write books.&nbsp; I know that sounds narcissistic and I probably am a narcissist, but I don\u2019t have an answer as far as books to recommend.&nbsp; I tried in my three books, the ones that I wrote a few years ago.&nbsp; I try to be comprehensive, discussing probabilities and trade management.&nbsp; Every day, I talk in the room.&nbsp; Traders ask me questions and I come up with better and better ways of wording things, ways of saying things that I hope are easier for people listening to me to understand.&nbsp; And every day, I get questions here and on the Brooks Trading Course website. And again that gives me a chance to think more about things in the course and in the books, and to try to come up with clear ways to say them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Trader\u2019s development<\/h3>\n\n\n\n<p>But anyway, back to your question, I really am not current on what other people are saying.&nbsp; My goal in everything that I do is to try to say things better than what anyone else is saying, and more clearly than whatever anyone else is saying, and I\u2019m trying to be comprehensive.<\/p>\n\n\n\n<p>I\u2019m pretty confident in my knowledge of the markets and I don\u2019t trust a lot of other people out there.&nbsp; 25 years ago, I paid for tutors; I went to seminars; I bought all kinds of books; I bought all kinds of software; and I concluded that, most of the people who are talking are frauds. What they say, if you think about it, it sounds good when you first hear it, and a lot of it is clich\u00e9, but it really does not make sense. And that\u2019s my concern about a lot of the people who write.&nbsp; I just don\u2019t trust them.&nbsp; I\u2019m being honest; I just don\u2019t trust them.&nbsp; You can read MBA-type books, grad school type books on management, but it won\u2019t be technical.&nbsp; Some of it might be technical, but most of it will be fundamental stuff.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Business schools not useful for traders<\/h3>\n\n\n\n<p>I have a daughter at <a href=\"http:\/\/www.hbs.edu\/mba\/\" target=\"_blank\" rel=\"noopener\">Harvard Business School<\/a>.&nbsp; I\u2019ve been to Harvard Business School with her.&nbsp; She invited me and I spent a day there, and I think most people who are day trading will not find anything useful at business school.&nbsp; I think it\u2019s not geared to that.&nbsp; It\u2019s geared toward institutional investing, portfolio fund management &#8212; it\u2019s not all fundamental &#8212; but it\u2019s mostly all fundamental.&nbsp; And then the math for portfolio management is, I think, very complicated, and I think the average trader &#8212; the average profitable, successful, consistently profitable trader does not use any of it in his trading.&nbsp; He simply tries to do what\u2019s right every day, and tries to look for ways to structure a trade.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Trade probability and management<\/h3>\n\n\n\n<p>At any given moment, you can buy or sell 90 percent of the time.&nbsp; On a day like today until the final hour, you can buy or sell and scale in lower if you buy, scale in higher if you sell, and as long as you logically approach what you\u2019re doing, I think you can make money pretty much every day, right?&nbsp; And I do not think that you need much on probability or management beyond the stuff that I write about.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Market cycle &#8212; 60% and 40% probability trades<\/h3>\n\n\n\n<p>In terms of probability, I use the example of the market cycle all the time.&nbsp; I try to keep it simple:&nbsp; If the market is in a breakout phase, there\u2019s a 60 percent chance it will go to some kind of measured move based upon the breakout.&nbsp; And if it\u2019s not in a strong breakout, then in general, you can buy or sell.&nbsp; If it\u2019s a fairly tight channel &#8212; let\u2019s say a fairly tight channel up, the math is better just to take buys.&nbsp; If the channel is broad enough you can trade in both ways.&nbsp; And whenever you\u2019re in a channel or a trading range, if you\u2019re structuring your trades right and taking second entries, it\u2019s pretty easy to find setups where the probability is 60 percent. And if you\u2019re taking strong breakouts, the probability is 60 percent.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Initial and actual risk<\/h3>\n\n\n\n<p>If you\u2019re not clear and the market\u2019s in a channel or in a trading range, assume the probability is 40 percent and go for a reward of two times risk. Or you can increase your probability by using wider stops and scaling in.&nbsp; Beyond that, I think the average trader does not need to know anything.&nbsp; He just needs to know that, in general, if the probability is very high, he can go for a reward equal to his risk, actual or initial &#8212; actual is actually the minimum &#8212; and if the probability is unclear and if he feels nervous, he has to assume the probability is low.&nbsp; If he takes a trade, he needs to go for a reward at least twice his actual risk.&nbsp; That would be the minimum.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Probabilities are fleeting<\/h3>\n\n\n\n<p>And, I really think that\u2019s true.&nbsp; You don\u2019t need more than that in terms of probability.&nbsp; Everyone wants to be able to look at a chart and say, \u201cAh, that\u2019s a 90 percent certain trade.\u201d&nbsp; I see trades all day long and, I don\u2019t say it &#8212; I only say it to myself. But a lot of them I think are 80 or 90 percent certain.&nbsp; In my mind, I prefer to stick with certain 60 percent, uncertain 40 percent.&nbsp; You hear me talk all the time about 50\/50, but I just try to keep it simple.&nbsp; Is it a strong breakout? 60 percent certain.&nbsp; Is it all confused? 40 percent certain.<\/p>\n\n\n\n<p>Most of the time when it\u2019s 40 percent certain, I\u2019m willing to scale in and that gives me increased probability, but I pay for it with increased risk. Increased risk because my stop is further away, increased risk because my position is larger. But that is basically how I trade.&nbsp; I think most profitable traders have some variation of that and they don\u2019t spend a lot of time trying to perfect their ability to determine probabilities. Probabilities, they\u2019re so fleeting.&nbsp; For one instant the probability is very high, the next instant it\u2019s very low.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Many trades 90% certainty!<\/h3>\n\n\n\n<p>I give the example of all of us being 90 percent certain many times a day. Let\u2019s say you buy somewhere and you have a limit order two points above. At one point it hits your limit order and does not fill you. And at that instant you\u2019re trying to get a one-tick profit from the current price. And your stop might be seven or eight ticks away, and you continue to hold. So why are you holding trying to get one tick while risking eight ticks?&nbsp; Why don\u2019t you just simply exit at the market?&nbsp; And you can only continue to hold if you feel you\u2019re 90 percent certain that you are going to get that final one tick. Otherwise it\u2019s insanity to hold for a one-tick profit while risking eight ticks.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Manage your profits<\/h3>\n\n\n\n<p>So, all day long when you\u2019re taking trades, that you are 90 percent certain briefly many times a day.&nbsp; Many times a day you are 90 percent certain; you don\u2019t want to think about it because you don\u2019t want to be thinking, \u201cGosh, I\u2019m risking eight ticks to make one tick,\u201d and that\u2019s a fool\u2019s way to trade.&nbsp; But that is truth.&nbsp; All good traders who take profits with limit orders are in that situation pretty much in every trade.<\/p>\n\n\n\n<p>Every now and then, you\u2019ll get a trade that just flies through your limit order and you get filled.&nbsp; Most of the time, it goes up a tick, down a tick, up a tick, down a tick. So it hits your limit order, doesn\u2019t fill you, hits your limit order again, doesn\u2019t fill you.&nbsp; So most of the time, that\u2019s what\u2019s happening.&nbsp; It\u2019s hitting your limit order several times before it fills you, and that means you\u2019re trying to get a one-tick profit. Maybe there\u2019s a two-tick pullback, maybe trying to get two-ticks profit, but you\u2019re risking to your stop, which could be eight, ten ticks away.<\/p>\n\n\n\n<p>But for the most part, I think about probabilities in terms of 60 percent or 40 percent. Are we in a strong breakout, or are we not in a strong breakout?&nbsp; And sometimes if we\u2019re not in a strong breakout &#8212; let\u2019s say we\u2019re in a broad channel or a trading range &#8212; a second entry buy at the bottom, a second entry sell at the top, that can also be 60 percent.<\/p>\n\n\n\n<p><em>Al Brooks<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Postscript [BTC Admin]<\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><a href=\"https:\/\/www.amazon.com\/Reminiscences-Stock-Operator-Commentary-Livermore\/dp\/0470481595\/\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"258\" height=\"324\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/09\/book-reminiscences-of-a-stock-operator.jpg\" alt=\"Reminiscences of a Stock Operator\" class=\"wp-image-57627\" title=\"\" srcset=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/09\/book-reminiscences-of-a-stock-operator.jpg 258w, https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/09\/book-reminiscences-of-a-stock-operator-239x300.jpg 239w\" sizes=\"auto, (max-width: 258px) 100vw, 258px\" \/><\/a><\/figure><\/div>\n\n\n\n<p>In his recent <a href=\"https:\/\/www.brookstradingcourse.com\/ask-al\/52-traders-al-brooks-podcast\/\" target=\"_blank\" rel=\"noopener\">52 Traders podcast<\/a> Al did suggest an excellent general trading book which is highly recommended: <em>Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore<\/em> by Edwin Lefevre and Jon Markman. This book is certainly one of the few &#8216;must read&#8217; trading books out there.<\/p>\n\n\n\n<div class=\"clear\">&nbsp;<\/div>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><a href=\"https:\/\/www.amazon.com\/Trading-Exchanges-Market-Microstructure-Practitioners\/dp\/B003ZSHIPE\/\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"160\" height=\"221\" src=\"https:\/\/www.brookstradingcourse.com\/wp-content\/uploads\/2016\/09\/book-trading-and-exchanges.jpg\" alt=\"Book Trading and Exchanges - Larry Harris\" class=\"wp-image-57635\" title=\"\"><\/a><\/figure><\/div>\n\n\n\n<p>I would add <em>Trading &amp; Exchanges: Market Microstructure for Practitioners<\/em> by Larry Harris. This book gives you valuable facts on how the market works &#8211; most of which is unknown to many traders. And copious details on the different kinds of traders present in the market, and how they actually trade.<\/p>\n\n\n\n<p>So just 5 books recommended in my humble opinion: Al&#8217;s Price Action Trilogy (Trinity?), and these two books. Feel free to comment below on others.<\/p>\n\n\n\n<div class=\"clear\">&nbsp;<\/div>\n\n\n\n<p><a title=\"Al Brooks&#039; trading room\" href=\"https:\/\/www.brookstradingcourse.com\/online-day-trading-room\/\">Information on Al&#8217;s Online day trading room<\/a><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n","protected":false},"excerpt":{"rendered":"<p>Trade probabilities and managementBPA trading room Q&amp;A: July 17, 2015 Question: Which book do you recommend for learning to identity trade probabilities and trade management?Audio duration: 7min 55sec Book recommendations? I don\u2019t read books; I write books.&nbsp; I know that sounds narcissistic and I probably am a narcissist, but I don\u2019t have an answer as [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"shadow","_genesis_layout":"","footnotes":""},"categories":[159],"tags":[],"class_list":{"0":"post-57617","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-ask-al","7":"entry","8":"has-post-thumbnail","9":"override","10":"shadow"},"featured_image_src":null,"author_info":{"display_name":"BTC Admin","author_link":"https:\/\/www.brookstradingcourse.com\/pt-br\/author\/richardhk\/"},"_links":{"self":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts\/57617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/comments?post=57617"}],"version-history":[{"count":0,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/posts\/57617\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/media?parent=57617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/categories?post=57617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.brookstradingcourse.com\/pt-br\/wp-json\/wp\/v2\/tags?post=57617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}