Webinar 21 Feb 2017 (futures.

io)

Losing When
Good Trade
Goes Bad
Al Brooks
How to Trade Forex Price Action – Part Video #54
Brooks Trading Course
BrooksTradingCourse.com BrooksPriceAction.com
Main Points
Slide
 Need rules to avoid big losses 2
 All trends eventually disappoint traders 12
 If premise changes, change trading style 20
 Trapped traders 30

BrooksTradingCourse.com BrooksPriceAction.com Slide 1

Lose: From Mistakes

An experienced trader sometimes makes mistakes

Losses due to mistakes (Personal Risk) are in the
video on “Losing Because of Mistakes”
Most losing trades, even for experts,
are due to mistakes, not bad luck
Experts lose less because they get out quickly and
are not emotionally attached
to an opinion

Beginner sells a DT Bear Flag,

despite 6 bull bars, and
bull sell signal bar

BrooksTradingCourse.com BrooksPriceAction.com Slide 2

Lose: From Bad Luck

An experienced trader sometimes makes mistakes This video is about Market Risk,
Losses due to mistakes (Personal Risk) are in the and how to avoid, or at least reduce, the loss
video on “Losing Because of Mistakes” Losing trades where the entry and logic are good,
Most losing trades, even for experts, but market does not do what the trader expected
are due to mistakes, not bad luck Bad luck instead of bad trade
Experts lose less because they get out quickly and
are not emotionally attached
to an opinion

Beginner sells a DT Bear Flag, Expert continues to sell closes

despite 6 bull bars, and in Sell The Close bear trend,
bull sell signal bar knowing that eventually one will fail

BrooksTradingCourse.com BrooksPriceAction.com Slide 3

Avoid Big Loss: Need Rules

Prevent losses from becoming too big

by always using rules that get you out early
When swing trading, easier to make money
only trading in the direction of the trend
As long as trending, ok to hold onto position,
or to enter in the direction of the trend at any time

BrooksTradingCourse.com BrooksPriceAction.com Slide 4

Rules: 3 Types of Protection for Every Trade

For every trade, use these 3 types of protection: Wedge HH MTR

1. Always have a reasonable protective stop Many bear bars
in the market, and trade small if it is far away Weak rally so probably bull leg in TR
2. Exit if reasonable opposite signal and therefore bear leg likely soon
(does not have to be perfect or strong) Good sell signal bar
3. Exit if there is a strong, opposite BO

Stop

Stop 3 consecutive bars closing on lows

3rd bar big
Reasonable context for reversal

BrooksTradingCourse.com BrooksPriceAction.com Slide 5

Most Important Rule: No Mental Stops

Need rules to minimize loss Most important rule is to always

once trend evolves into TR, have a stop order in the market
or reverses into opposite trend to guarantee no more than an acceptable loss

Trailing There are often 2 – 3 good choices for stop

Stop
Trail stop after each new strong BO to new extreme

BrooksTradingCourse.com BrooksPriceAction.com Slide 6

Appropriate Stop: If Wrong, Get out Early

Even a great scalper will lose 10% of time If clearly wrong, exit immediately before stop is hit,
Prevent losses from becoming too big like a reversal with consecutive strong bars
by always using rules that get you out early
Always have a stop order in the market
at an appropriate location
Stop above Measured Move up

Scalper sells at prior high

Scalper buys close

If profit order not filled,

exit on close of reversal bar,
Stop or below its low,
around breakeven

BrooksTradingCourse.com BrooksPriceAction.com Slide 7

Stopped Out: Re-enter If Trend Resumes

Exit if reasonable signal in opposite direction Buy above bull bar closing on high
If reversal fails, can always put position back on Wedge Bull Flag (High 3)
Exit below bear reversal bar HL, still Always In Long
2nd Leg Up after Failed Wedge Top

Swing trader buys close

1

Here, 2 good choices for stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 8

End of Session: Get out Faster

When near end of the session, get out faster Buy The Close bull trend in final hour
Reversal might not come back to your entry today, Exit below strong bear bar,
to let you avoid loss even though still Always In Long
Risk can happen fast at end of session

PB in Buy The Close bull trend

Probable TR within 3 bars
Be ready to exit
Stop
Small DB and big DB

BrooksTradingCourse.com BrooksPriceAction.com Slide 9

If No Reversal Signal: Exit If Strong opposite Momentum

One big trend bar 2 – 3 medium size trend bars, 3 – 5 small trend bars
If using wide stop, especially if close on high, Exit long on close of
do not wait for it to be hit and no overlap 3rd or 4th small bear bar
closing below midpoint
Exit short
on close of big bull bar,
or as bar is forming
Stop
choices
Stop
choices
Stop

Exit short
on close
Bulls giving up
of 3rd bull bar
(Give-up bars)
Strong bull bar
Big bear BO

BrooksTradingCourse.com BrooksPriceAction.com Slide 10

Main Points
Slide
 Need rules to avoid big losses 2
 All trends eventually disappoint traders 12
 If premise changes, change trading style 20
 Trapped traders 30

BrooksTradingCourse.com BrooksPriceAction.com Slide 11

Strong Trends: Eventual Disappointment

Buy The Close bull trends and Most traders can avoid a loss
Sell The Close bear trends are common if they manage their trades well
Each eventually has a disappointing bar or two I discuss management in the videos on
that can lead to at least a minor reversal, “Entering Late in Trends” and
and a possible TR or major reversal will briefly discuss it again here

BrooksTradingCourse.com BrooksPriceAction.com Slide 12

Buy The Close: Always Has Final Trend Bar

Once bull believe it is a Buy The Close bull trend,

he buys one or more closes
If the bar following his buy is a strong bear bar,
he suspects that he just bought the
final bull trend bar

BrooksTradingCourse.com BrooksPriceAction.com Slide 13

Easiest Acceptable Management: Just Rely on Stop

Easiest approach is to rely on stop If disappointed by the strength of the selloff,

As long as premise is still valid and stop not hit, just get out breakeven on a test of the entry price
trader holds onto his position (the highest close)
For example, bull buys the close, Common cause of DT (or DB)
but the next bar is bear bar and the next 2 – 3 bars
did not allow him to get out breakeven

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 14

Scale In: Increments Based on Size of Smallest Scalp

Some bulls will scale in 1 – 3 times,

with each one based on size of the smallest scalp
Some scale in below low of prior bar,
as long as each entry is at least the
size of a scalp below the last buy
Trade small enough so that if stop is hit,
loss is no more than with any other trade

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 15

Disappointment: Exit to Avoid Loss, Not to Make Profit

If disappointed by the strength of the selloff,

just get out breakeven on 1st buy and
with a profit on the lower buys

Stop

Scale in to increase probability of profit,

or chance of avoiding loss
Only for experts because have to manage well
One mistake can quickly undo 10 good trades

BrooksTradingCourse.com BrooksPriceAction.com Slide 16

Disappointed, but No PB: Get out Breakeven

Some bulls will buy one time If the PB does not go deep enough,
They wait for a PB that is at least 2 – 3 times they will just hold their original position
bigger than a minimum scalp If disappointed by the selling,
They then buy above the high of a bull reversal bar they will exit breakeven
They only buy if the distance from the 1st entry
is at least 2 – 3 times the size of a minimum scalp
(not here)

Stop

BrooksTradingCourse.com BrooksPriceAction.com
Possible Bad Trade, but Premise Still Valid: Rely on Stop

When trader believes bear BO is strong

enough so that PB will be sold,
he sells the close of the BO bar or
the follow-through bar
Stop

As long as no clear reason to exit,

waits for PB that allows him to sell more
on reversal below bear reversal bar
Reversal up did not give clear reason to exit
Ok to rely on stop,
even though rallied above entry price

BrooksTradingCourse.com BrooksPriceAction.com Slide 18

Main Points
Slide
 Need rules to avoid big losses 2
 All trends eventually disappoint traders 12
 If premise changes, change trading style 20
 Trapped traders 30

BrooksTradingCourse.com BrooksPriceAction.com Slide 19

If Premise Changes: Ok to Exit

Ok to exit once TTR

Here, might get out with small loss
Is this a good trade that went bad?
Not yet, so do not have to take loss
Stop Even though 2nd sell signal,
was not at least 2 – 3x size of scalp above,
context was good for 2nd Leg Down

Exit at end of session

above bull bar
with Micro DB
BrooksTradingCourse.com BrooksPriceAction.com Slide 20
Strong BO: 1st PB Will Be Bought

When trader believes bull BO is strong

enough so that PB will be bought,
he buys the close of the BO bar or
the follow-through bar

DB after DT
2 big bull bars closing on highs
BO bar closed above high
Stop Follow-through bar did not have bear body
BrooksTradingCourse.com BrooksPriceAction.com Slide 21
Deep PB: TR Likely So Exit near Top

Deep PB so TR more likely than bull trend

Selloff was strong enough so that
trader believes no longer good bull trend trade
Now, TR more likely
Switches strategy and looks for small profit

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 22

Deep PB: Ok to Exit Breakeven

Waits for PB and buy more on reversal above If very disappointed enough to think rally
bull reversal bar, will not reach 1st entry, exit breakeven on
as long as 2nd entry is entire trade at midpoint of two entries
at least 2 – 3x size of scalp below
Gets out at 1st entry at top of TR
Breakeven on 1st
Profit on 2nd

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 23

Buy above Bull Bar: Since Scale In Bulls Will Buy There

If strong enough selloff, there is Can always buy again if reverses back up
possible trend reversal, so ok to exit
Exit long on close of consecutive
big bear bars closing on low
5 bars without bull body

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 24

Disappointing Follow-Through: Watch next 2 – 3 Bars

3 consecutive strong bear bars

New low
Possible early Sell The Close bear trend
Bear sells close
Next bar reversed up,
but closed in its lower half,
near sell entry price (doji)

Stop

BrooksTradingCourse.com BrooksPriceAction.com Slide 25

Disappointing Follow-Through: Scale In to Exit without Loss

Quick thinking bears scaled in higher

at the size of a scalp above
Believed bear BO was strong enough
so that 1st reversal up would fail

Stop

Bought back both at original entry price

Breakeven on 1st sell and
scalper's profit on 2nd

BrooksTradingCourse.com BrooksPriceAction.com Slide 26

Disappointing Follow-Through: Bears Try to Exit Breakeven

4 consecutive strong bear bars Bears place limit order to buy at the low close
New low Now want to get out breakeven on 1st entry
Sell The Close bear trend and with scalp profit on 2nd entry
Bear sells closes
Bears scale in, at least the size of a scalp higher
Disappointed that scale in bar Stop
closed on its high,
creating a big bull bar

BrooksTradingCourse.com BrooksPriceAction.com Slide 27

Bears Cannot Get out Breakeven: Will Buy Higher

Fell to limit order, but not below

Most bears unable to buy back shorts
Getting worried about possible loss
Raised limit order slightly, even though will
then have only small net profit
Hit new limit order,
Stop
but again not filled
Bears are trapped
Bears start buying back at market
and above 2 bull buy signal bars

BrooksTradingCourse.com BrooksPriceAction.com Slide 28

Do Not Let Losses Grow: Can Always Buy Again Later

If bought the high close and reverses down strongly, When bulls are trapped and give up,
you missed a topping pattern and a sell signal odds favor at swing down and probably
Even if you still do not see it, Ten Bars, Two Legs (TBTL)
get out because the market is telling you Can always buy again if
that you are wrong and are trapped immediately reverses back up
Do not get paralyzed by a need to see Stop
what you missed
Just exit with a loss before it grows big

BrooksTradingCourse.com BrooksPriceAction.com Slide 29

Review
Slide
 Need rules to avoid big losses 2
 All trends eventually disappoint traders 12
 If premise changes, change trading style 20
 Trapped traders 30

BrooksTradingCourse.com BrooksPriceAction.com Slide 30

 Webinar 21 Feb 2017 (futures.io)

Losing When
Good Trade
Goes Bad
Al Brooks
How to Trade Forex Price Action – Part Video #54
Brooks Trading Course
BrooksTradingCourse.com BrooksPriceAction.com 31