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In the above chart, Al talks about how good traders leave the trade when premise changes.
But, Al also says that if you take a reasonable trade theirs a 90% chance that you could at least get out breakeven if we scale in and manage trade properly.
In this scenario, lets say that the market's making higher highs and higher lows and in a bull trend, the market pulls back and gives a stop order entry aka the 1st green box(assume its a bull signal bar).
Then market crashes even more and has a bear BO with follow-through(blue box), Al says that bulls should get out the trade with loss when this happens. But if their is a 90% chance that they can make money if they scale in,
QUESTION: where will they scale in(2X 1st trade) once bulls take the loss? assuming that the premise is still valid(meaning that the wide stop at major lower high's not been tested).
this is what I think:
In the picture after getting out with loss, I think that bulls should wait for a 2nd entry buy. But in this scenario, the bear trend BO 3 more times and then gave a proper 2nd entry buy for the bulls which went to the mid point of the first buy and the scale in buy i.e. getting out breakeven for the bulls.
The rule is 80% being able to get out BE and 60% chance of full original entry match. This rule derives from the understanding that - - - - the market doesn't create a strong trend in the opposite direction. In this case it does, which is why the recommendation to "take the loss".
Trying to fight this, you observe that the next real potential entry is quite some time indeed, and a lot of points. That is why, and the recognition of the development of a strong adverse trend should create a "switch breaker I'm out" so as not to hope things will turn, as sometimes they do not.
The 1st green box wouldn't really be a valid entry as it is too close to the top timewise and distancewise (scale in at last a scalp lower). However, there might be some BTC individuals on the last bull bar, though the upmove really wasn't that strong. They are caught and 20% of the time, do not recover. The last green box would be an appropriate entry and sometime one has to be able to wait some time for that entry, a MTR in this case, to occur. That is the importance of recognizing the breakout with follow through aspect.
Hopefully helpful and good trades to you!
