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Strategies: "Always In", "2:4", and "H/L2 reversals @ 1x risk"
Hello fellow traders,
I've identified three strategies in the video course that Dr. Brooks has seemed to suggest so far. I'm currently in the 40s videos. If you are interested in checking this out and have any suggestions or feed back, I would be glad to see it posted here!
The strategies are first, "Always In" from the videos in section 13; second, "2:4 on a good setup" from video 30A; and finally, a "Reversal H/L 2 at 1x risk" from video 30C.
Dr. Brooks talks about the "Always In" strategy in the videos in Chapter 13 of the video course. The strategy calls for entering the market after seeing price action form one extra large bar, two large bars in sequence, or three to five smaller trend bars form in a context that suggests a strong break out. And, if three or more strong trend bars form with one or two dojis in between them, the pattern might qualify as an "Always In" signal that took place over more time: it might be a break out on a higher time frame chart.
After prices establish an "Always In" direction, traders might add to their positions at increments of a scalp size or after additional trend bars. Traders might then exit their position after prices seem to have reached a support or resistance level, or after prices have formed an opposite "Always In" direction. And, traders could apply this way of adding to positions and taking profits to the "2:4" and "H/L 2 Reversal" strategies if those trading them want to hold on for a swing.
Dr. Brooks talked about the "2:4" strategy in video 30A. With this strategy, traders look for a favorable entry. Then, they place a stop order to enter with a protective stop two points beyond that entry and a limit order to take profits at four points at the other extreme of the entry level.
As a caveat, I'm calling it a "2:4" because traders might use two or four points or other amounts, as long as they hold that same ratio. For example, traders might see a range in the price action where 4:8 or 5:10 would work better.
Finally, Dr. Brooks talks about a hypothetical "Reversal H/L 2 at 1 times risk" strategy in video 30C. This strategy allows traders to enter a Major Trend Reversal (MTR) early, based on an MTR pattern and a High or Low 2 break out bar.
Today, (Sunday 10/22) I printed out three 5 minute charts from Friday and applied the strategies to them. As a learning exercise, I wanted to compare them. I applied the strategies in light of some chart patterns I identified, mainly Measured Moves, Wedges, and Double Bottoms and Tops. These formations influenced whether I would take a trade and in what direction. And, I obviously had the advantage of hind-sight. I wasn't able to upload pictures of the charts here.
Doing this exercise made me realize how profitable the strategies are.
Both the "H/L 2" and "Always In" strategies require traders to wait a lot longer for their profits, relying on their chart analysis and stops to keep them in the trade. I might almost want to take these trades, set my limit order target and stop order protective stop, then take a break while the price action plays out.
The "2:4" strategy gives the trader a lot more trades to take and a lot more opportunities to see the profits or losses accumulate. For that reason, this might be a better strategy for someone close to blowing their margin account.
My goal at this point is to implement these strategies separately. Then, when I have gained more trading skill, use them together to make more money.
I recently saw an educational video about a learning technique called "interleaving" by Benjamin Keep, PhD, JD, on YouTube. That technique would be the next step from what I am doing by learning the trading strategies separately.
By the way, Benjamin Keep has several videos about learning. One of them was particularly helpful for learning from the Brooks Price Action video course. It is about learning from a lecture and not taking notes, but just listening to the lecture and then writing down what you remember after in a cluster format or as written sentences.
But in my chart comparison, I noticed that the "H/L 2 reversal at 1x risk" technique would get me into a trade sooner than the "Always In" technique. The H/L 2 technique also does some things that are different than "Always In" trading.
If I am understanding this correctly, to trade an "H/L 2 reversal" entry, traders would be entering against the "Always In" direction. The H/L 2 technique does this because it accounts for an MTR pattern. Interestingly, the H/L 2 at 1x risk guides traders to exit at 1x their risk. That would allow them to exit with a profit if the MTR goes into a Trading Range, rather than a new trend in the opposite direction.
Or, traders using the "Aways In" technique could use the H/L 2 reversal technique to take profits on their trade and "stand aside" until prices continue in the "Always In" direction.
Finally, the H/L 2 technique guides entries, only. After such an entry, if the new trend's price bars are strong, traders might add to positions at scalped-sized spaces and/or after strong trend bars form, or any of the other entries that Dr. Brooks suggests throughout his video course.
After today, I think that the "H/L 2 reversal @ 1x risk" strategy will be the most effective.
Unfortunately, today, Monday, Oct. 23, I got trapped in the opening bear bars. However, I was glad to be able to hold most of the day and then add a short position after the first peak after the the HOD exhaustion climax, at about 10:55 on the five minute chart. Finally, I was able to breakeven with a minuscule profit.
The "H/L 2 reversal @ 1x risk" strategy allows me to enter possible trends early, exit before the pullback into trading ranges, or re-enter if the trend breaks out. Other entries are important to enter with as well, like the big bull BO bar #4 today.
Now, when I take notes as I go through the video courses, I think about how the new concepts will relate to this strategy.
So you only trade H2/L2 and exit at 1x ?