This podcast is brought to you by the award-winning prop firm, Fidel cre,
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After years of using five minute charts,
I can see an incredible amount of things going on, on a five minute chart,
on a typical five minute chart, let's say for the Emen,
which is on the popular Stock index future contract,
that American Trade and Session opens six 30 California time,
one o'clock or one 15 California time.
So you've got 81 5 minute bars in the day. In a typical day,
I see on an average day,
I probably see 41 point scallops and 22 point scallops,
and I probably see 60 or 70 setups on a typical 81,
um, bar chart. I don't take all of them. On an average day, I might take 10,
20 or 30 trades, but I see an incredible number of setups.
Now I just sit down and I try to structure as many good trades as I can
a day on my 81 bars and on a good day, you know, I don't lose anything.
You know, I, I might win a hundred percent of, uh, the trades.
I know several traders,
probably many traders who win about 90% of the time as, uh, day traders.
And they win just about every day, if not every day.
I've never had a year in which I've won every day of the year. You know,
I always mess up some way, uh, at some point during the year. Uh,
my goal in life, I don't know if I'll live long enough to achieve that goal,
is to win every day of the.
Year. Episode 217, folks, we got Al Brooks back on the show after six years.
He was episode 40 of my 52 Traders podcast. And what I'm actually doing,
cuz this has been locked away, is I'm re-releasing this right now.
You're gonna hear that interview, please give me a bit of slack.
It was my 40th interview ever, so I'm probably not the best.
Hopefully I've improved over time. But yeah, that's coming up in a second.
And what we've done, and even better,
is we've got Al Brooks back in the house with a price chart in front of him for
about an hour,
and the guy just breaks down everything that is coming up on the channel in a
day. So please make sure you check that out after listening to this archived
interview that's being re-released. All right,
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Welcome Al, thanks for joining me here on the 52 Traders Podcast this week.
I appreciate having the opportunity to speak with your group.
Thank you very much.
Okay, Al, so I've mentioned some of your highlights already,
and I know that's only a small part of your story,
so can you tell the listeners a little bit more about you personally and what
first attracted you to trading?
Well,
I grew up poor and my mother wanted to have a doctor in the family,
so she picked me to be the doctor.
And all the time that I was at the University of Chicago,
becoming a doctor, becoming an eye surgeon,
I wondered if I should be downtown at the me or the Board of Trade Trading.
And I just didn't have the courage to make the switch. You know,
I knew staying as a physician was a sure way to make a lot of money,
and I had no idea whether or not I could make money as a trader on the floor
of, um, the futures or options pits. And, um,
so I stuck with, um,
being a surgeon and I worked extremely hard
to save up a lot of money. And in 1989, excuse me,
1988, I had a daughter,
and 15 months later I had identical twin daughters.
So I had three daughters under the age of 15 months,
and I thought, okay, I saved up a lot of money.
I'm gonna stay home and raise the girls. And while doing that,
I will also trade more.
I started trading in 87 the month before the crash.
And back then they did not have eis. They had full size contracts.
And the day of the crash, I had a big surgery schedule,
I had to be in the office, I forgot what time,
eight o'clock or eight 30 or something like that. And on the day of the crash,
I sorted shorted 13 [inaudible] contracts, excuse me,
13 s and p contracts, which today would be, um,
the equivalent of five times that. So we have 65 contracts or something,
and I had to close out before I went to work. You know, the,
the market started going,
it went up actually on the morning of the 1987 crash initially.
And I ended up closing out the position. I think I lost $5,000.
And then as I was driving into work on the radio,
I could hear, uh, the reports that the stock market's going down,
and nobody knows how far down it's going, but it's just going down. And, um,
the drop is far beyond what the computers are able to, uh, follow.
And at the end of the day, had I held onto my 13 s and p contracts,
I would've made $400,000 on the day. Unbelievable .
Yeah, which is crazy. And that day I decided that,
you know, there's pretty good upside to being a full-time trader. And well,
a couple years later, when my girls were born, I decided to go ahead, stay home,
sell my medical practice, stay home, and become a full-time trader, which I did.
And when you start out, everyone who starts out,
unless you're at Goldman Sachs or at some major bank and they put you in some
kind of training program, you have to kind of figure it out yourself.
And back then, in the eighties, the, the internet, well,
there was not much on the internet, but when you subscribe to magazines,
the ads were looked very attractive and appealing. You know, I want to help you,
uh, use my software, take my training course. And, you know, I took courses. I,
um, had tutors. I, um,
bought all kinds of software that was guaranteed to make me rich.
And every, you know, I spent a lot of money on all kinds of help.
And either the people were simply incompetent,
which most of them were, or they were, uh, dishonest. You know,
some, I know at least two or three of the software companies were ultimately,
uh, charged with fraud.
So there was no really good source of information back. I,
I learned in medical school that, you know,
the best way to learn something is to just study it, study it,
and study it from someone who's doing it really well.
And I assumed that all these books, I read everything, all these books,
all these articles, all these websites, you know,
all these people were there to help me.
And I was losing money and I kept losing money and I lost money for about 10
years. So I decided that, you know,
somebody making money doing this because I'm losing it.
Somebody's making my money. So, so there,
there is an ability to make money out there, uh, but I simply did not have it.
And using my doctor's approach to learning was,
was a failure. You know, trying to copy what other people are doing, you know,
reading, studying, uh, it's all garbage.
And ultimately I concluded that these people, some of them are,
are honest but don't know how to do it.
A lot of them are dishonest and they don't care that they don't know how to do
it. So I decided to strip away everything.
Back then there was a big push. I mean,
it was just assumed that if you're going to trade,
you have to use all kinds of indicators, you know, bands and oscillators and,
um, you know, G lines, gang lines are actually popular back then.
Nobody uses them anymore cuz you know, they're, they're fraud.
So I, my computer screens, I had multiple monitors, I had, um, you know,
all kinds of indicators, all of my screens. And, you know,
eventually I started to write my own indicators.
And I started to realize that indicators are just another variation of a
price chart. You know, you, you're, you're waiting different factors,
but anything that you see on an indicator, you can see on a price chart.
So I started to remove all of my indicators and I left myself with simply
a price chart. No, no average, no, no moving averages, no nothing on it.
I've tried every kind of timeframe, you know, tick charts, volume charts,
one minute chart, 60 minute charts, um, all kinds of other kinds,
all kinds of other charts over the years. And I like rhythm,
I like predictable rhythm and time charts give me that.
I know that the chart's gonna, the bar's gonna close in five seconds,
in 10 seconds, and one second. I like that.
Whereas you don't know that with volume charts or tick charts. Also,
the trend lines on time charts are extremely reliable.
A lot of computers use them. I mean, they clearly use them because they're very,
very reliable.
So I settled on using a time chart and I've tried using smaller timeframes,
like one minute charts and two minute charts. I was making two minute mistakes.
And then if you use higher timeframes, you know, 15 minute charts,
60 minute charts,
it doesn't really make sense to sit in front of the computer all day and do
that. I like sitting in front of the computer,
I like watching every tick during the day.
And ultimately I settled on a five minute chart.
And after years of using five minute charts,
I can see an incredible amount of things going on.
On a five minute chart. On a typical five minute chart, let's say for the ein,
which is the popular stock index future contract,
that American Trade and Session opens six 30 California time,
one o'clock or one 15 California time. So you got, um,
81 5 minute bars in the day. And a typical day,
looking at those 81, um, bars,
I see on an average day I probably see 41 point scallops
and 22 point scallops.
And I probably see 60 or 70 setups on a typical
81, um, bar chart. I don't take all of them.
On an average day, I might take 10, 20 or 30 trades,
but I see an incredible number of setups. So on 81 bars,
you know, I see at least one setup on every, um, one or two bars.
So I don't need indicators. And I also don't need a 15 minute chart.
I also don't need a globex chart. I also don't need, um,
charts of anything else because on that one chart I'm seeing 40 or 50
trades a day out of 81 bars. So I don't need anything else.
And that's what I do. I now,
I just sit down and I try to structure as many good trades as I
can a day on my 81 bars and on a good day,
um, you know, I don't lose anything, you know, I,
I might win a hundred percent of, uh, the trades. Um, now I,
I'm, there's, there's an organization called the nfa, natural fu,
national Futures Organization.
And so I have to be careful about what I say I personally do,
cuz I don't want to be audited by the nfa. Al you said x you know,
uh, we wanna look at all your trades for the past two years, you know,
give us records of all your trades. You know,
I'm 64 years old and I don't want to be audited by anybody,
so let me speak in generalities. I know several traders,
probably many traders who win about 90% of the time as,
uh, day traders. And they win, um, just about every day, if not every day.
Um, I don't, I I've never had a year in which I've won every day of the year.
You know, I always mess up some way, uh, at some point during the year. Um,
my goal in life, I don't know if I'll live long enough to achieve that goal,
is to win every day of the year. But, you know,
invariably there's some day which, um, has a couple fake out, moves early,
and I lose. And then, um, the day enters a very quiet training range.
Or I'll have a doctor's appointment and I'll have to run.
Something will happen. So at the end of the day, I've lost money,
but I never lose, um, much money.
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Some really, really good story there, Al. Um, have you got more, more to it?
Cuz I'm gonna ask you all some questions that dive a little deeper on some of
those things, um, throughout the show. Okay.
Go ahead. Why don't you ask me?
Okay, so, well, the first one I've got is you mentioned, uh, that glines, uh,
uh, you know, there's a fraud. What, what did you mean by that?
And where does that sort of come from?
Because that's the first time I've heard that.
Okay. I could, you know,
glines are dependent upon your bar compression,
how many bars you have on the chart, and there's so many variables that, um,
I I don't know of anyone who consistently makes money using G lines
and, you know, it's just a, for a form of trend line. There are,
there are other things out there that are pretty fraudulent.
A lot of fiocchi stuff is fraudulent. Uh, just the, the, the basis,
the logic behind Fiac is nonsense.
That there's this magic spiral of numbers that, um, you know,
the entire world operates on, and that's just total nonsense. Um,
I can tell you that a 50% retracement is extremely important.
A 50% extension, a hundred percent extension, those are extremely important.
Coincidentally, the FCI numbers,
but they're not important because the FCI numbers, you know,
I could talk for an hour about the mathematics of why, uh,
a 50% retracement is important or why, um, uh,
two-thirds or 75% retracement is important.
It has nothing to do with vichi, it has all to do with risk and reward,
uh, and probability. So, um, you know,
so there are all things,
a lot of things out there that look like they're the cause of something where,
where in fact they're just correlated. And, um, okay, you know,
fac numbers is, you know, if enough people trade facs, they would be important,
but I,
I really don't think enough people pay attention to 62% and 38%,
and then all the minor ones in between. You know,
most traders are just dealing with 50% or, or approximations.
You know, if you look at an ne in chart,
and let's say an average day has 10 points,
an average day now is more than 10 points, but an average day has 10 points and,
uh, four, four ticks per point.
So an average day has 40 ticks vertically from top to bottom.
And if you look at all the reversals during the day and you include,
uh, higher timeframe charts, and over the past several days,
there are probably 40 FCI levels during,
in the, in the course of a day.
So that means it's just about everything in the day is at a FCI price level.
And FCI traders don't worry about
things being precise. Let's say the market goes, you know,
four ticks beyond a 62% retracement, they'll say, oh,
well it hit a 62% retracement.
So if every FCI line has a band of four ticks above or below it,
you know, you're talking about every price on the chart as being a FCI level.
Um, you know, so to me it's, it's not helpful at all. The same with,
well, you know, I don't know, I I don't wanna talk too much about,
um, all of, um, all of the things out there that are fraudulent,
but, you know, for the most part, Nazis are fraudulent, G is fraudulent. Um,
most oscillators are, are fraudulent and, and useless.
So, you know, to me, I I'm mainly interested in is the market going up?
Is the market going down? How strongly is it going up?
How strongly is it going down?
I look at every bar in the chart and at every instant during the day,
I'm asking myself, are there more buyers? Are there more sellers?
When the bar closes, I ask myself, above the high of this bar,
are there more buyers or are there more sellers at the low of that bar?
What do I think is likely? Are there more buyers or are there more sellers?
And you know, if you think about it, if you, if you,
let's say the market's going sideways and then above the high of the bar,
you know, there are stock entry traders,
there'll be bulls buying one tick above the high of the bar,
and there'll be bears selling one tick below the, below the bar.
The flip side of that is limit order traders taking the other side of the trade.
So let's say we have a bar and we know, and let's say it's a,
looks like a buy signal. You know,
there are bulls buying one tick above the high, high of that bar.
Well guess what?
Half the time I'm selling with a limit order at the high of that bar,
taking the other side of the trade betting that there are more sellers than
buyers above that bar. And the same is true below the bar.
There are always gonna be traders saying, oh,
if it goes one tick below this bar, it's going down.
So there'll always be stop order traders selling one tick below the low of the
current bar. Well, half the time, approximately,
maybe more,
I'm placing a limit order to buy the low of the current bar betting that the
bear breakout will fail. You know, most breakouts fail,
most stop orders in general, um, it's,
it's the way traders should trade.
Most traders starting out should trade with stops.
But most of the bars on the chart, a stop order is a losing strategy, right?
Most of the bars on the chart are a fairly narrow range and buying
above, selling below a losing strategy.
And so for most of the bars on the chart, I am doing the opposite.
I'm looking to sell above bars. I'm looking to buy below bars.
If the market's in a trend, let's another the story, you know,
I am looking for stop entry trades as well as limit order trades.
If the market's in a trading range and it's reversing up from the bottom,
I will take a stop entry trade. But during most of the bars on the chart,
um,
a trader stands to make more money using entering with limit orders and using
wide stops, wide protective stops, and scaling in and trading small.
So, so, um, what you're talking about, I mean, that sounds a little bit like,
um, looking at order flow, but I'm guessing you don't look at order flow, or do.
You I do not. I have, um, a friend who, um, runs one of my websites,
the Brooks Trading course web website, um, who, um,
a year or two ago tried to sell me on depth of market trading and order
flows and all that. And, um,
I told him that I don't need to look at, uh, a depth of market,
uh, or order flows. I can see I, I know where the orders are, you know, uh,
he's telling me about iceberg orders. I don't,
I know where the iceberg berg orders.
Like I look at a chart and I know that at a certain, I know where the support,
I can see all kinds of, of support and resistance during the day.
And I know that there are huge orders at all of those prices. I know I,
I see them. I, I I, I don't need that stuff to I, if you can read a chart,
you know, you know all this stuff, you know, if you can read a chart,
you don't need indicators to tell that the chart's about to reverse or a trend
is about to resume. You can see on the chart, you know, what,
what traders are doing on the e mini, every tick is important. You know,
sometimes I hear somebody say, oh, it's just noise. That's total nonsense.
Anytime I hear a person says, oh, the market, that's just noise.
Anytime I hear that,
I think either the person is ignorant and they just haven't taken the time to
understand what the market is doing, or, um, they simply, they,
they're either lazy or ignorant. Everything matters. The compu,
like the emin right now,
probably 70% or more of the trades are conducted by computers,
and those computers are operating based upon logic,
algorithms and on ideas that have been tested.
And that's not noise. You know, that's, it's all logic. So, you know,
I think it's better to take, um, the other side of that argument and say, there,
there is no such thing as noise. Everything that happens happens for a reason.
These computers are not randomly spitting out trades.
Every one of those trades by every one of those computers,
by every one of those firms is being done for a logical reason.
So nothing, nothing is noise. Everything makes sense. And usually if you're,
if you study charts and you understand what every little bar is doing,
every little tick is doing every, uh,
every little piece of support and resistance is doing, um, you know,
you know where the orders are and it doesn't take long for you to see, you know,
what they're doing. Are the orders by orders? Are they sell orders? Um,
so no, I pay attention to order flow.
And, and so, so do you, um, are you,
would you say you're more of a discretionary trader,
or are you using me mechanical rules to pick your entries in, in exits?
I'm entirely discretionary, you know, but you know, I, I do things.
I have a bunch of, I, I've accumulated,
accumulated a lot of knowledge over the years. Also, back on the nineties,
I spent probably 10,000 hours computer testing just about every
idea I could think of. And I also designed a lot of automated strategies,
and I traded a lot of automated strategies,
and I decided that I'm just too controlling and too obsessive
to be an automated trader because every time I'd see a signal trigger,
I'd look at the chart and say, well, you know,
I understand that I tested it and it looks like it's profitable,
but there are things going on here that, um,
there are variables that are that, that are not,
that I did not consider in my system, and I really should consider them.
So I kept overriding all of my, uh, systems. A lot of what I do,
people can automate. And I know, you know, I've, I've been,
a lot of people have contacted me over the years asking me either to work with
them to help them automate or to tell me that they've automated different ideas
and they're doing really well with them.
We'll have to talk further because I,
I've run a course on teaching people how to automate their trading. So,
uh, we'll have to talk further on that. Um, right,
so let's move on with the show. So for those listening,
for the first time we're about to enter around,
I'd like to call the fundamentals.
And this is where I'll be asking Al to tell us stories that will help you
understand what makes him a successful TraderR. So, uh,
you've already given us some of these insights,
but I'm gonna ask you for a few more. So things like, um,
I suppose you've told us your trading style, um,
if you've got a particular strategy you use, which it sounds like you use many,
um, you've told us your timeframes, winning percentages, uh, instruments,
that's all been said, but what about things like, um, draw downs,
what to what's your typical sort of draw down and maybe your risk to reward
ratio?
Okay, let me on drawdowns. I, I don't get big drawdowns. Um,
you know, so I, you know, in general,
traders who have been doing this a long time, uh, they have many accounts.
They don't trade every account every day.
I have many accounts and I trade many accounts every day for different reasons.
And some of them are linked together. Um,
and there are other accounts I don't trade. And, you know,
in terms of actual dollars, you know, I'm never going to be risking, you know,
more than one or 2% of, um, my trading accounts, uh, on any one trade.
So, and I, you know, sometimes I'll get two, two losers in a row.
Rarely I'll get three losers in a row, but, uh, I'm never gonna be risking, uh,
all that much.
And, uh, and in terms of, um, risk to reward ratio,
I suppose it's quite high then, or.
Lemme just say something about that. I think that's important. And you know,
when I hear traders on television talk about risk reward,
it's really deceptive because there are actually three variables.
Risk and reward implies. There's math. You know,
how many dollars are you risking dollars? That's an amount. How many, how,
how many dollars are you trying to win? That's an amount, that's Matt. But,
you know, risk and reward is meaningless unless you also talk about probability,
right? Every trade, every trade that every trader takes,
they're taking either four risk, reward, or for probability.
Nobody can get both.
Nobody can get a great risk reward trade that has a high probability of success,
right?
There always has to be a reason for the somebody to take the other side of your
trade. So if your trade has a really high risk reward ratio, the other guy,
you have very little chance of winning. You have a very low probability,
the person taking the other side has a high probability of winning. Um,
in general, short of timeframe, traders scalpers, i,
I mostly scalp have a very high winning percentage,
but we end up taking lot of trades that have very bad risk reward.
So in other words, very little reward relative to the, to the risk.
But if you win a high enough percentage, you can offset the bad risk reward.
And traders who are looking for really high risk reward
trades, you know, really great reward, very little risk, you know,
they're gonna lose most of the time, right? So if, if you're risking,
let's say you buy, you buy something,
you buy Apple stock and you're gonna risk one penny, right?
You're not gonna lose very much, right? So your risk reward ratio is fantastic.
You're, you know, you're risking one penny and you're trying to make $10, right?
So a fantastic risk reward, uh, set up on that trade.
What's the probability of success? You know, like, yeah, very low.
One in a million. Yeah, right? On the other hand,
let's say you have a limit order to take profit on, on Apple, and, um,
and you've already made $7 on Apple,
and the market gets really close to your limit order,
and now your stop is maybe a dollar away, and, um,
and Apple is now one penny away from your profit target,
what are you gonna do? Okay, so at that instant,
your reward is one penny, right? There's only one penny left to your reward.
And at that instant, you're still risking $1, you stop as a dollar away.
Okay? So, um, you know, you're risking, you know, at that incident,
you're risking, um, a hundred pennies to make one penny.
So you have a horrible risk reward set up. Are you gonna exit at the market?
No, you're not. You're gonna hold. So at that instant, you know,
you believe your probability of success is really, really high,
because otherwise you're crazy. You know, you can't be,
you cannot be risking a dollar to make one penny unless
you're very, very confident of, uh, making a profit. But the,
the point that I'm making is every trade,
whenever I hear somebody talk about risk reward, I think that they're really,
uh, I don't, I don't, I wanna be polite.
I think they haven't thought enough about, uh, what they're doing.
You have to consider probability. And sometimes you'll hear that, you know,
I've watch options, action, and sometimes they'll talk about risk reward,
and then sometimes someone will actually say, oh, yeah,
but you're probably not gonna win.
What they're saying is they are f probability.
Usually when I hear people talk about risk reward,
they're implying that they're taking the trade because they think there's at
least a 50% chance of winning. They never say that,
but that's what they're implying. So whenever they're saying, oh, this,
this trade is a good risk reward tr set up. Well, I mean that,
just saying that by itself is nonsense. You have to talk about probability.
What they're implying is as a good risk reward set,
uh, ratio, and it has a pretty good chance of success. In other words,
the probability is 50%, you know, sometimes 40%, 50%,
60% on any trade, 90% of all, uh,
bars on the chart, on any chart you, you could buy or sell.
And you have between a 40 and 60% chance of success when
10% of the bars on the chart are in a strong breakout up or down.
And during those times, you know,
the probability is overwhelmingly one direction.
If you're in a very strong bull break out,
and it's very hard to make money selling. But all the other bars in the chart,
if it's a bull channel or a bear channel or a trading range,
you could buy or sell at any given incident and have no worse than a
40% chance of making money and no better than a 60% chance of making money.
Okay. That's nice way to look at it.
Yeah, I mean that's, that's the map. And if you think about it,
if you look at any bar on a five minute chart, you know, let's say an chart,
thousands of contracts are being traded.
So that means there are thousands of contracts being sold,
thousands of contracts being bought. And you know,
it's not like one side is smart and the other side is stupid.
Both sides believe they can make money. And that's what I'm saying, you know,
during 90% of the bars on the chart,
you can make money either buying or selling if you structure the trade
correctly,
if you use wide stops and scale in and use sensible wide stops and scale in.
And that's why there's so much buying between taking,
taking place on every bar and every chart because the computers are doing just
that. They're structuring the trades. Um, well, they,
the computers know they have between a 40 and 60% chance of winning and they
trade small enough so that they can use wide stops and scale in,
and that greatly increases their probability of, um, of being profitable.
It's at the price of risk using wide stops, right?
But if you structure your trades correctly during 90% of the bars on any
chart, you can make money either as a buyer or as a seller.
Okay, cool. Hey, um, just, I'm just gonna stop you for a second. Uh,
there's something going, something sort of your, your microphone. Um,
I wonder if there's a loose connection or something. Uh,
I keep getting like this buzzing and then like a beep and then, um,
just now it's just flipped back to having this background noise.
That's my air conditioner. Let me, lemme flip it off.
Ah, okay.
You're, you're in the middle of winter. I'm in the middle of summer.
. Yeah, I know.
Give a moment, lemme go. Turn it.
Off. You got an air conditioning on? I've got, I've got a heat pump on.
Okay. Just flip the square. It might take a minute. Okay.
To, and there's a, there's a, there's still something,
some sort of background noise cuz it disappeared. It, you started off fine,
then it went for the first bit.
You had this background noise and then all of a sudden it just stopped and then
it's just come back in the last one minute.
The air conditioner just came on a minute.
Ago. Oh, did it.
Before,
before we spoke I turned the air conditioner on to
make the house really,
really cold so that the air conditioner would probably not come on again while,
while I was speaking. Yeah.
.
You know, it's, I don't know, maybe 95 degrees out there.
So the air 95 degrees Fahrenheit, so while the air conditioner came on.
Okay. Well.
It, it should, I, I just flipped the switch and sometimes a minute to turn off,
but that is the background noise that's missing.
Oh, okay. That's alright. Hopefully, um, you don't start sweating too much.
. No . Um, okay, I'll, I'll move on with the next question.
So what does your, uh, typical trading day look like?
Well, I, I get up about five o'clock every morning and,
uh, sometimes I'll lift some weights. I have some weights in my, my office,
you know, for several days a week I lift weights. Um, uh,
and then in between sets of lifting weights,
I'm writing a blog and, um, I,
I write a blog from my websites about what I think the training day will be
like. You know, do, do I think today it'll be a training range date?
Do I think it will go up? Do I think we'll go down? Um, and, uh,
and then I'm looking at charts. So I'm drawing lines,
so I'm always drawing lines on charts. So I'm always looking for measured moves.
I'm looking for trend lines. I'm looking at, um, the five minute moving average,
the 60 minute moving average plotted on five minute chart,
and I'm looking at yesterday's high, other significant prior highs and lows.
And then I'm looking at, you know, yesterday, was it a trend day?
Was it a trading each day? If it was a trend day, was it climactic?
So I'm trying to get a sense of, you know, for example,
if yesterday was a very strong bull trend day,
I know that there's a 50% chance that there'll be followed through buying today
on the open, uh, for the first hour or two.
I also know that there's a 75% chance that the,
today we'll have at least two hours of sideways to down trading,
and it will start by the end of, uh, the first, by the end of the second hour.
And finally,
I know that there's only a 25% chance if yesterday was a very strong
bull trend day,
there's only a 25% chance that today is going to be a very strong bull trend
day. So I'm, I'm looking at yesterday, I'm looking at support and resistance,
and I'm, I'm, uh, making, uh, drawing lines on the chart,
just trying to get a sense of what the market is doing. When I was your age,
a lot of times I would, uh, start trading at five o'clock as soon as I get up.
And sometimes I would, uh, trade into the evening.
And there have been nights when I've traded all night long. Um,
back then I used to trade currencies instead of four x, now I trade four x.
But you know, now that I'm getting to be an old guy and, uh,
I don't need the money, um, I can, um,
I can be more selective and I have a, a more predictable, um,
workday.
Cool. Okay. And so in the beginning,
what do you think differentiated you from the average mum or dad trader out
there? So what traits did you have and what actions did you take?
Well, early on, you know, I applied my, you know,
medical school approach to learning and, you know, I just, you know,
read all that stuff and had all these tutors and went all,
took all these classes and everyone was pushing indicators.
And to me it, it was just hiding the underlying truth and the underlying truth,
this price, and I can see it on a chart. So for years,
I just assumed that I had to have all those indicators. And, you know,
10 years after 10 years of losing,
I got rid of all of them and I just started looking at the bars. And you know,
if you just print out a chart of any market, at the end of the day,
it's crazy to see, oh, it's going up here. If I make, if I bought,
I would make money. Oh look,
it's now going down and it's going down pretty strongly. If I sell here,
I'll make money. I don't need indicators, I don't need a course.
I don't need anybody, you know, a 10 year old kid can see that.
So that became the basis for my trading. You know,
just looking at what the bars are doing and try to get a sense of, you know,
will the market go up? Will it keep going up, will it go down? You know,
will it keep going down? And um, and if it's all sideways,
what's the best way to trade it in general? If it's sideways,
I'm looking to buy below prior lows, buy more lower and get out quickly,
scalp. If it's going sideways,
I look to sell above prior highs and sell more higher
and then, uh, scalp. So buy low, sell high, uh, scale in use,
wide stops and scalp.
Cool. Okay. That's good, good advice out there. Uh,
so if you're a retail trader working a day job,
what steps would you take to start earning an income as a trader?
People ask me that, um,
fairly regularly and everyone's aware that, you know, if your,
uh, work hours totally overlap the trading day, you cannot be a day trader.
But a lot of people, the market opens, especially if you work in the west coast,
the market opens early enough so that you can trade for an hour or two
before, before you have to go to work. And then alternatively,
you could trade, you know, if you have, uh, depending on where you are,
you know, the four x markets are active pretty much most of the time. Uh,
the longest dead zone in the four x market is right after the New York Stock
Exchange closes. And, uh, but then it picks up again, you know, uh,
in the middle of the night, middle of the night,
California time around midnight. So, um, you know, most traders,
most traders can find hours during the day when some market is
open,
open and they can find several hours during the day when some market is open.
So I would just try to find a block of time and start to trade
if most traders when they're starting out don't have a huge account. So,
you know, trading the e mini and trading some of the European markets,
some of the bond markets, they can't do it. But, and also stocks, you know,
a lot of,
there are minimum account sizes in the United States if you're gonna become a
day trader, if you're gonna be placing a lot of trades,
you have to meet certain account minimums. And then the alternative is, uh,
four X markets. And four x markets,
I think are a good starting place for a lot of traders because you can
have a small account and you can trade really, really small.
Yeah, and I think that's a, that's valid point. I mean, I did start off, uh,
with options and quickly moved into Fourex after realizing that, you know,
there was a lot of money, uh, that you had to put at risk, um,
initially just to, you know, take even a few trades.
And as soon as you start losing it,
the emotional thing was quite difficult for someone who's just starting out.
So ended up moving to Fourex where it, you, you can, you know,
essentially practice and until you do, um,
feel more confident and get control of those emotions. So, uh,
can you explain to the listeners your preferred trading strategy?
So the ins and outs of how it works and why you chose this type of strategy over
the others?
Well, I, you know, I, I'm always thinking of,
of the market in terms of the cycle,
that it's either in a trend or in a training range and trend,
it can be a very strong trend of breakout or it could be in a channel. And so,
you know, my favorite strategy is just to see what the market is doing.
Is it in a strong breakout? I love strong breakouts, right? Uh,
it's the highest probability time for trading, but like I said,
high probability means smaller reward and less risk.
By the time you've had a big breakout,
there's probably not much left to the move and you stop as far away.
And then when the market starts to enter a channel, I start to, uh,
do limit order trades, uh, against the channel. Once the channel, uh,
starts to become broad. So, um, you know,
I'm very happy trading in channels as well. And then in a trading range,
like I said, uh, I like trading ranges, you know, buy low, sell high scalp, uh,
I use wider stops I scale in. Um, so for me, it doesn't matter.
There's, the market can do one of three things. It can be in a breakout,
you know, no pullbacks. It can be in a channel, which is a trend with, uh,
a lot of pullbacks, or it can be in a trading range,
which is just the sideways channel. And I don't, I don't have a favorite,
you know, I, I I, I trade all of them and I'm very comfortable with all of them.
The key is recognizing, uh, which one is going on right now. And,
and a lot of times, uh, the market's in a transition, you can't tell. And, um,
anytime I'm confused,
that's my radar telling me the market's in a trading range,
even if it doesn't look like a trading range. If I'm confused,
it's in a trading range, and I'm looking to buy low buy more, lower,
I'm looking to sell high, sell more higher,
and I'm looking to get out with a quick profit. The one thing,
when I'm confused,
the one thing I'm confident of is that the market's not gonna go very far.
Right? And if the market's not gonna go very far,
I'm not gonna be swing trading. I'm, I'm going to be looking for, for scallops.
Cool. And, um,
so if you had to dive a little deeper thinking about a price chart,
what three things would you recommend a novice trader educate themselves on when
reading a chart?
Well, first thing, and first thing I would learn on the market cycle,
you know, learn to be able to distinguish a breakout from a, uh,
channel and from a, uh, trading range. And, um,
I would get some sense of strength.
So a lot of times the market will be in a channel, so,
and then it'll go back up. Let's talk about a bull.
So a lot of times it'll pull back and then it'll start going up again.
It'll pull back and it'll start to go up again. You know,
I would pay attention to, um,
how deep the pullbacks are. Are they only lasting one or two bars,
or are they lasting 10 or 20 bars? In other words, are the, are,
is the market making big swings? If the pullbacks are,
when traders start to see pullbacks, they're always trying to fade.
They're always looking, let's say a bull channel.
Once traders start to see pullbacks, they start imagining tops.
But if the pullbacks are only a bar or two or three, and they're not very deep,
you know, um, if you look at a higher timeframe chart, 15 minute chart,
60 minute chart,
that bull channel on the five minute chart is in fact a very strong breakout
on the 15 minute or 60 minute chart. So if the pullbacks are not deep,
if they're only lasting a bar or two or three,
and they're not falling down many points,
even though you're seeing pullbacks only trade in the direction of the trend,
I think that's a really common cause of losses.
People start seeing pullbacks,
so they start seeing reversals and they start taking opposite. Um, you know,
they start betting on, um, the opposite direction.
One of the natural things that a beginner is always going to focus on is risk,
right?
You work so hard to save some money so that you can start trading and the
money becomes really precious. And when they look at any trade,
all they think about is one variable risk. And I,
I said that there are three variables, you know, risk reward,
you always hear people talk about risk, reward, and then probability.
And I think probability is the most important of the three.
But when a trader starts out, they, uh, all they think about is risk.
I cannot lose this money. You know, it's like death, it's my death, you know,
I'll die as a trader if I blow this account. Uh, you know,
my trading career is over, my dream is dead,
and they focus a lot on risk. And,
and that's a mistake because when you focus on risk,
you're naturally gonna be looking for trays that have the smallest risk,
which usually means that the market's going up,
you're looking to sell because the stop is just above the high of this bar,
right? But you're ignoring probability. And, you know,
anytime you're taking a low risk trade, you're taking a low probability trade.
So I think one of the mistakes traders do is they tend to, um,
look for reversals when the trend is going on, and then another. So, uh,
so in other words, a trend when when it's channeling up,
it's gonna keep going up, 80% of reversals are going to fail,
and you're gonna lose money. So yes, your risk is small,
but if you're losing 80% of the time, you're going to lose money on the other.
Let me just flip it over and go to a trading range.
A trading range is filled with two legged moves, two legs up, two legs down,
and the second leg is usually extremely strong.
People are naturally hopeful. Everyone's hopeful. I mean,
it's a survival skill. And I think it, um, I think it was bred into us,
you know, if, um, you know,
if you're a caveman and you didn't find any food today,
and you just give up hunting, you're gonna die. But if you keep,
if you persistently keep looking for food,
eventually you'll find food and you'll survive. And the, the, the,
the people who are hopeful get selected out and their genes become, um,
a very big part of our, our population, I think people are naturally hopeful.
And because of that, you know, when the markets in a sh trading range,
I think traders always hopeful that, oh, look how fast it's going up.
It's gonna be a breakout and we're soon gonna get a trend.
So they buy a very strong bull bar at the top betting on that.
The trend is going that it's the start of a trend.
They sell a very strong bear bar at the bottom thinking that, wow,
this time for sure we're going to break out and this is gonna be a big trend.
But if you're buying at the top, you're stop as far away, risk is big.
If you're selling at the bottom, you stop as way at the top of the range,
your risk is big and your probability is low, right?
So here you have a trade with big risk and low probability.
Um,
so do I want to sell that strong bear bar at the bottom or buy that strong bbar
at the top? No, I'm doing the opposite.
If I see a trading range and I see a strong bull bar at the top, I'm selling,
you know, if it has a, if it closes on it's high, I'm selling, right?
Because, you know, the guy who's buying has a big risk and low probability.
So if I'm doing the opposite, I have much less risk and a high probability.
So I think that is another problem that traders face. You know, um, I I,
I have what I call the 80% rule on my inertia rule
that 80% of the time the market's gonna continue to do what it's been doing.
If it's trending, 80% of reversal attempts are going to fail.
So you should not be looking for reversals. And if it's in a trading range,
the market has inertia, it's going to continue in the range.
80% of breakout attempts up or down will fail.
So instead of betting that a breakout will finally succeed,
no matter how strong it looks,
you have a better chance of making money if you start looking for trades in the
opposite direction.
Cool. And then just on there, so, um, so you talk about probability a lot,
and to be fair, it's the first time that anyone's actually mentioned, well,
actually maybe it's the second time anyone's mentioned on the show, um,
the significance of probability. And so, so when you were automating your, uh,
strategies back in the day,
was that something you would calculate on a regular basis within each strategy?
Oh, you know, it,
as soon as you do an automated trade and you get a result,
you print out the result, you're gonna see percent win percent loss. So,
you know, you quickly, um, see probability,
but I still think traders don't really pay much attention to it. I think,
I think when you're, when you're doing those, uh, automations,
you tend to focus on risk and reward. You know, how much should I,
how much should I win, how much do I lose? But, um,
every trade has three variables, not two, not risk reward.
It's risk reward and probability.
And I think understanding probability is crucial to being a trader. Like I said,
during 90% of the bars in the chart, you can make money buying or selling,
and the probability of making money, if I buy it any instant, right?
I have and pick, let's say I pick a reward equal to my risk.
So let's say I'm buying Apple and I'm risking $1 to make $1 to make
$1 at any bar on the chart, you know,
for 90% of the bars I have, uh,
between no worse than a 40% chance of making a dollar before losing a dollar,
and no better than a 60% chance of making a dollar before losing a dollar.
And as a trader, you're trying to, uh,
structure a trade to make the probability better or make the reward a little bit
better. And, you know, that's, that's the art of trading. You know,
you're always, you're trying to,
you're trying to work with the three variables to structure a trade that gives
you the best, uh, trader's equation. You know, I,
I talk about the trader's equation all the time,
and it incorporates the three variables, you know, is, um,
you know, is the probability of winning, um, time. Well, I don't,
I don't know, it'd be complicated to say,
but basically you wanna make sure that you know,
your risk and reward and probability makes sense. You know,
your probability of winning times your risk has to be, uh,
significantly greater than your probability of losing times to your, uh,
how much you're risking on the trade. So, okay. If that makes sense.
Yeah.
Cool. Alright, so we're gonna move on and to the next part of the show.
So this is a part I'd like to call the technicals,
and I'm gonna run through 12 quickfire questions to help you,
the listeners out there understand what it takes to become a successful TraderR.
So are you ready, Al?
Yes, I am.
Okay. So how long did it take you to go from trading newbie to consistently
profitable?
It took me 10 years.
What's your mental approach to trading and what special techniques do you use to
keep those emotions in check?
Well, I think to be a successful trader, you know, I, I talk about the,
I don't care position size.
I think the single best thing that a trader can do is get to the point where
they truly don't care and let, so if you're paper trading, you don't care,
but you lie to yourself all the time.
I used to lie to myself all the time and I paper trade, you know, and I'd say,
oh, I, I really,
really wouldn't have taken that trade so I'm gonna cross that one out. Or I,
I should have,
I really would've taken this trade and it shouldn't need to be a good winner.
I put that in. Um, so it's really easy to lie when you're paper trading,
but I think it's better to trade real money, for example,
Forex is a good way to do it because, um,
you cannot lose a lot of money if you trade small, right? Um,
so the best thing to do is get to a position size where you truly do not
care.
Get down to the I do not care size so that you can remain objective and
do everything that you're supposed to do and just practice doing the right
thing. Most traders quickly can figure out what they have to do. I gotta buy,
I gotta sell, I gotta get out, you know, I gotta get in.
And it just takes a lot of time practicing doing what you should be doing
and, you know,
I would do it with real money so that there is a little bit of pain if you lose
and there's a little bit of happiness if you win. So, um, I would,
I would, I would trade the I don't care size, whatever size that is. Um,
I would trade it.
And turning off your, um, turning off your, uh,
trade screen is sometimes helpful and there was some advice that was left by
another, um, interviewee, uh, on the show.
So keeping that away from your view so you can't actually see it.
And so you dunno how much you've got at risk and if you're all you know,
is if you're up or down. Um, I tried that the other day and it seemed to work.
May interrupt for a moment. Another thing I sometimes all traders should do.
A lot of traders exit too early.
I tell 'em if they structure a pretty good trade, and they have it on,
let's say, on the five minute chart. You know, place a bracket, order in there,
place the logical stop place, the logical profit target,
maybe two times greater than the risk, and, uh,
go for a walk and come back in an hour. And, uh, you know,
if he structures your trade correctly,
I think you'll be surprised to find out that over time, you know,
if you do it 10 times, you're gonna, you, you're going to make money.
So that's basically the equivalent thing of your saying what you're saying.
Yeah. You know, don't look at it.
Yeah. Walk away. And, uh,
I had another guy on the show that literally trades in the morning, that's it.
And he walks away. Well, he doesn't, he turns off everything,
doesn't have anything on his phone that he can check.
It literally sort of excludes himself from his computer screen so he doesn't
know until the next day. And so whatever happens, happens. Um, right.
So what's your favorite entry setup?
Well, as I said, you know, I like,
I think of the market in terms of the market cycle, uh,
breakout channels and trading ranges. And I don't,
I don't care which part of the cycle it's in, you know, you know, I, I'm,
I'm happy and I enjoy trading all of them. You know, on a given day,
the breakout may be so exceptional that I'm really excited and happy about it.
Other days,
the trading ranges might be so predictable that I can make it an incredible
amount of money by just buying below prior lows, selling about prior highs.
And then other times the channels are really broad. Uh,
let's say it's a bull channel.
I can sell every new high scale in higher and do really well,
or buy 50% pullbacks of, uh, of the prior leg and do really well.
So for me, I don't have a favorite, you know, I'm just, you know, I just,
I trade whatever's in front of me and I never, um,
I never worry about what is not in front of me, and I'm,
I'm comfortable trading whatever the market is doing.
What strategies do you use to exit of manage active trades?
I usually enter, I usually, um, limit orders.
And based on the trader's equation,
I know what the minimum reward I have to make on a given trade
to take the risk that, that I'm taking, you know, going to a trade, I know what,
what my risk is.
The first thing I think about on any trade is where do I have to put my stop?
Right? And a lot of beginners put stops that are way too close.
Right. And, you know, that's a, that's a, a really costing mistake.
You know, I try to be objective.
I look at the chart and I know where my stop has to be.
And once I know where my stop has to be, that's my initial risk.
I know where my initial profit target has to be,
given that my probability of making money is between 40 and 60%.
In general, I want my reward to be at least two times my, um,
initial risk. Once the trade starts going my way,
I ignore initial risk and I look at my actual risk.
How many ticks did I actually have to risk to, uh,
stay in the trade at this point? And then I try to, uh,
take a reward equal to two times that, uh, actual risk.
If the probability of making profit is really, really high,
if I'm trading during a strong breakout, I'm not gonna get, uh, two times,
uh, a reward equal to two times risk.
Usually if I have a high probability trade, I have to take a lower risk reward,
which means I usually have to exit with, um, a reward equal,
equal to risk instead of two times risk. Remember,
if you're taking a high probability trade, you have to give something up.
And that's something is always risk reward.
So if you have a very high probability trade, you have to, uh,
go for a relatively smaller reward relative to your risk.
Cool. And what's your recommended must-read trading book?
Well, I've written many, I've written many. I've written four books. Uh,
that three volume set that I, uh, wrote several years ago, um, has a,
it's a pretty good summary of how I view the market. And then beyond that,
um, in terms of, um, a fun book, you know, that, um,
that that fictional book about, um, Dan,
what's it called on the Jesse Livermore book?
Ah, yeah. Um, the, ah,
as been mentioned on the show before many times, um,
of a stock market.
Remini remini.
Reminisce.
Yeah. Stock, stock, you know, stock trade or something like that. Yeah. That,
that was a fun book. And then beyond that, you know, every book has something.
And, uh, I, I don't,
I don't think there's anyone book that's so much better than all the others.
Okay.
If there's one thing you would recommend any retail trader to spend the next
month mastering, what would it be? Why and how could they go about mastering it?
Um, I would, uh, first thing I would say is decide,
figuring out where stops have to be. You know,
look at any chart and if I buy here or if I sell right here,
where do I have to put my stop? And once you know where your stop is,
then you know what your position size has to be,
because you never wanna risk more on,
on a trade than you typically are comfortable risking.
So the first thing I would just look at any chart, okay, I'm buying here. Wow,
that stop has to be far away if I buy here. Well, that's, that's,
that's the stop you have to use and you have to trade small enough so that
you're risking no more than you do on any other trade. But that,
that would be the first thing I would do, is, you know,
trying to get some sense of where I have to put my stop, where,
where's the sensible stop.
I really like that. That's a really good bit of advice. Um,
what trading related internet resource, like b bloomberg.com, do you always use.
Zero? Nothing, because, yeah, I, um, in terms of fundamentals,
there was a show on in the United States, um, I forgot what it was called,
money in motion or something a few years ago about, uh,
for trading. And, you know, the guy or the gal would say,
I'm gonna buy the dollar yen, or, um, because, um,
you know,
Japan is doing such and such and the United States is doing such and such and,
and also, or, or it's at a 50% retracement. And I say, wait a minute,
you're not buying because of that stupid thing you just said about fundamentals.
You're buying because it's at a 50% retracement.
Every piece of fundamental information is already baked into price.
Every institution knows the fundamentals far better than I can any, ever know,
any fundamental. So, you know, someone say, I'm gonna sell Brexit because, um,
you know, uh, I'm gonna sell the British Pound because of Brexit, um,
because of Brexit. You know, that's nonsense. I'm not gonna do that. Um,
I'm gonna look to sell pullbacks maybe,
but I'm not simply just gonna sell because of Brexit. Right.
I don't care about fundamentals. I, I don't care at all.
They're totally baked into the market.
All the institutions know them much better than I could ever know them.
I don't care. But the, on the other hand,
the institutions cannot hide their information.
If the institutions as a group think that the market is going down,
that the market's gonna go down and I'm gonna look to sell.
If more dollars think that the market's gonna go up, uh,
the market's gonna go up and I'll see that, and I'm gonna buy.
So I don't care what the fundamentals are, you know, all the time, you know,
you'll see stocks with bad earnings reports and they go up,
or stocks with good earnings reports when they go down,
or some fundamental thing that looks terrible. Japan's economy might be bad,
but the end starts going up. So I don't care what the fundamentals are.
All I, I'm in this to make money, alright,
I'm in this to make money and you know, I, and you know, I, if the market,
if if the chart in front of me, if the price is going up, I wanna buy,
if the chart in front of me is going down, I'm gonna, I'm gonna sell.
I don't care why I don't,
I don't care if it's due to some kid in Brazil eating an ice cream cone.
I don't care. You know, I just care about, you know, can I make money?
And knowing the fundamentals has nothing to do with me making money.
What's the biggest mistake most retail traders make?
I think the biggest one is, uh, focusing on risk. All I think about it is,
oh, I work so hard to get this money. If I lose this account,
my wife will kill me, or my husband will kill me. And, uh,
they'll never be allowed to trade again. And so, uh, they focus on risk.
I think that's the single biggest mistake.
They end up using stops that are too tight.
They end up taking trades that have really low probability.
What's your preferred broker and trading platform?
Yeah, I, um, yeah, I can tell you that I use, uh,
interactive Brokers a lot. I use Trade Station a lot, but I'm really not, uh,
up to date. Uh, I'm not qualified to, uh, you know,
ex to say what, what is the best program out there? Um, I think both of them,
trade Station in in particular has a lot of legacy issues. Uh,
they have very old software that they keep trying to fix,
and instead they should just throw out the entire thing and, um, you know,
rewrite it for Windows 10.
But I understand the economic reasons why they do not, you know,
it's good enough, you know, but there are,
I'm sure there are a lot of others that are, are, that are equally good.
And if you could leave our listeners with one piece of advice, what would it be?
Uh, trust yourself. You know, learn to, uh, to ignore everybody,
all the experts on television and just trust yourself. You know,
develop the ability, uh,
to get confident about what you're reading on the chart and also realize that
no matter how confident you are, 40% of the time, you're gonna be wrong.
So be always entirely open to the exact opposite of whatever,
whatever you believe. And do not be surprised when it happens,
because it's gonna happen at least 40% of the time.
Okay. We'd like you. So this is the last question.
We'd like you to give us the bones of a full trading strategy.
So the entry set up, stop loss, take profit targets, market timeframe.
Some of our listeners can try it at home. What have you got for us there, Al?
Okay, I'm gonna give you one, uh,
which is probably the easiest to visualize as I'm speaking.
So let's say the Forex market,
the Euro versus the dollar is totally flat,
and then it breaks out and rallies, uh,
a hundred pips over the course of the next 30 minutes, right? What,
what do I think is gonna follow?
Do I think it's gonna reverse or do I think it's gonna go up probably at least a
60% chance that it's gonna go up for a hundred pips at some point later in the
day? So I'm gonna buy for any reason, I'll buy at the market, right?
I'll buy below the low of the prior bar.
I'll buy above the high of the prior bar. I'm gonna buy for some reason,
but my stop is gonna be a hundred pips away. It's gonna be below the,
below that bar,
and I'm only gonna buy that a hundred pip breakout if it's well above the highs
of, uh, the past day or two or three.
I wanna make sure that it's truly broken out of everything.
So we have a hundred pip breakout. I buy, my stop is a hundred pips away,
and, um, it's a high probability trade.
So I need to get a reward equal to at least one time my risk.
So I'm going to initially plan to take profit of a hundred pips.
Let's say we have a 20 pip pullback,
and then the market starts to go up strongly again. Well, at that point,
my actual risk turned out to be only 20 pips.
So mathematically I could exit with a, uh, 20 pip profit.
However, because of the size of the breakout,
I'm pretty confident that I have a,
a reasonable chance at making a hundred pips mathematically. I can get out,
I can get out at a hundred pips if my, excuse me, at 20 pips,
if my actual risk turned out to be only 20 pips. It's a high probability trade.
So exiting with a reward equal to risk makes sense. But, um,
I'm gonna get a hundred pips. I'll try to sit patiently and get a hundred pips.
I'm just say one thing about that. I had a friend years ago,
I used to trade with him online for several years, maybe 50 years ago.
And he would take a trade like that and he would place his stock in a hundred
pips below, he'd place his limit order in a hundred pips above,
and then he'd go take his mother out to the doctor's office for a couple hours,
two or three hours, or he'd go out on the lake in,
in canoe for a couple of hours, and then he'd come back.
And part of it was he had things to do,
and part of it was he wanted to make sure that he didn't interfere with what
he knew was a logical thing to do when he put the train on.
Cool. And, um, just on that, so, so the, so the 20,
so say it retrace 20 perps, is that you'd say you'd enter there or even,
and then you'd, you'd sort of enter at the, at the end of the retracement,
or you're saying you'd enter at the a hundred pipp mark regardless?
Well, let's say the market is racing up. Usually I'm buying at the market,
right?
But let's say just turn on the screen or having to look at the chart and it's up
a hundred pips and I decide to buy right there,
and the instant I buy it starts to sell off and 15, 20, 30 minutes
later it's down 20 pips, right? Yeah. Um, and I've already bought,
so right now I have an open loss of 20 pips.
My stop is still down there at a hundred pips. However,
if the market starts to go up and it goes above my entry and it goes up 20 pips
more, right? Mathematically at that moment I can exit.
And if I take that trade a hundred times and manage it that way,
I will make money because I have a reward equal to my risk and my
probability is 60% or higher. Mathematically, that is a sound way to trade.
So you can,
you can exit with a reward equal to your risk as long as the probability is
60% or higher. And if you're buying, uh,
the market during a very strong breakout,
the probability is 60% or more that you'll,
if you go for any risk and, and, uh, any reward,
and the risk is equal to the, to the, um,
if the risk and reward are equal, you'll make money.
So it doesn't matter if you're going for a 10 pip profit u risking
10 pips, it doesn't matter if you're going for a 50 pip profit risking 50 pips,
you still have a 60% chance of, um, making, um,
uh,
making your profit target before your stop is hit so mathematically,
if you, if you take, if you manage it that way every time,
go for a reward equal to your actual risk, uh, it's a profitable strategy.
Makes perfect sense. Thanks Al. Um, right before we wrap up,
what's the best way for traders to get hold of you.
Through one of my websites like brooks trading course.com or
brooks price action.com? Usually I get so many emails now that, you know,
I have, uh, people handle most of the, um,
emails. But you know, if you're, if you're signed up for one or the other site,
you know, you're able to post questions.
And I try to answer the questions online because a lot of times people ask a
question,
I what was happening with the emails is someone would ask a question two days
later,
someone would ask the same question two days later someone would ask the same
question and you know,
it made more sense just to have people post the questions on the website and
then I answer the question on the website so that everyone can see it.
Cool. Oh, a big thank you to, to al for sharing with us today.
Everything we've discussed here, along with all the links,
are gonna be on the show notes to find them.
Simply search for al in the search box on 52 traders.com. Until next time,
I wish all my listeners a trading happiness and success,
tired of missing trades or spending hours at the charts.
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Get the free training and download a free robot. Alright folks,
there you have an interview done and dusted from 2016 off all things.
Now we've got a much more recent,
like literally two or three weeks ago I recorded a charting session with Al
and this is gonna blow your mind. Trust me, it is gonna blow your mind.
It is absolutely awesome. He reads literally every single candle.
So everything you've heard here in the interview we talk about,
we break it down and even more, we go onto so, and there's so much more stuff.
It is well worth going and checking that out. Now,
there's a link below the video here if you are on the, uh,
YouTube channel or if you're listening in the podcast, go and check it out.
Link into the description and that video will be on that page.
Other things to remind you of are the new things happening in the robot
section@tradingnet.com. Go and check that out.
Three new things up there at the moment. I know you're gonna love them.
I'm not gonna tell you much more about them.
Just go and check them out after this. And the other two things are, yeah,
trading View Pro, pro, go and check out Black Bull Markets.
They have a special offer.
There's a link under the video to that as well as for Del Crest.
If you want to take part in that 50 K challenge. If you think you can do it,
you get a chance to win a thousand bucks. If you pass both stages,
cost you nothing, uh, you get to come on Trading Nuts,
livestream channel and do your thing. Show people what you can do.
So if you're looking to grow a YouTube channel or something like that,
it could be perfect for you. Alright folks,
thank you for listening and watching and we'll see you in this our Brooks video,
which is, I've gotta tell you, it is awesome, awesome, awesome.
You've gotta go and check it out. So we'll see you there. Otherwise,
we'll see you in some other video here on Trading Up.