My reply was not intended to your precise situation. Even though you are considering yourself as a noob, I am not considering you as such.
The first chart I posted wasn't to show off a trade but to illustrate an objectively observable example of the most basic set up taught in Brooks's course. The knee jerk reaction here at ET, where "elite" traders gather, is to say anything possible to move the focus from trading to their favorite topic which is, apparently, losing. The second trade, the long on Friday morning, it the same set up, an H2 bull flag long. The standard Brooks entry was posted prior to the buy stop triggering. I entered early, but even my entry was available during the first 30 to 45 minutes of the New York Stock Exchange open. As far as long wicks go, that seems to be a problem for you and some others here. But for a price action trader, it is just information about the market. Also, if one were trading a five minute chart, the four hours during which that "long wick" formed should have offered both a very rewarding short intraday swing as well as a similarly rewarding long intraday swing. During that tail, there was some temporarily strong and possibly surprising selling. However, buyers stepped in and took that pullback as an opportunity to buy at a discount. There were probably also a number of shorts who thought for sure the market was breaking and were then squeezed. While you and other elite traders on this forum would not have "tolerated" that wick, I'd bet there are many multiples more of far less elite traders such as I who didn't even notice it as something about which to be concerned. The failed third push failure above the previous week's high was far more concerning and a reason to exit longs than was the intraday fluctuation, even though the intraday fluctuation had a larger move than the candle that failed the third breakout attempt.
It's of vital practical importance. You simply must determine where your stop has to be to take the trade, as that is the amount you must be willing to lose if you're wrong and the trade reverses. I routinely have 20 point stops and I accept them as the necessary risk to get into a position at what should be the most favorable and opportune time to profit from a swing of 40 points or more, upwards of several hundred points. However, once price moves in your favor, if it does move in your favor, it becomes clear that that initial necessary amount may never have been at risk, so you adjust you stop to the actual risk point. But the initial stop is the correct initial stop. Any tighter and you will be stopped out of otherwise highly profitable trades with an unnecessary loss. How does that not make sense? Initial risk is the stop based on market information at time of entry, and actual risk is only revealed through subsequent market action. First, I wouldn't be two hours late. The market is offering over 100 points per contract per swing lately. You're going to be two hours late for that sort of opportunity? But if late and I were to miss, there is always another entry. Market is in breakout mode, so as Brooks says, "buy for any reason." The first limit buy would be the high of the breakout candle that defined the actual standard H2 Brooks entry on that particular swing. Then there would have been the H1 above with a trader's choice of two different buy stop levels, followed by yet another H2 bull flag entry. If you were to know Brooks's method, these questions you have would go away, because you would have a methodology that would enable you always to know whether there is a defined risk entry or not. And a reminder to those who would stand and point and yell "Hindsight!" These are four hour candles. Each one takes four hours of data to start and complete. It really isn't difficult to look at a four hour candle and see these set ups. This is not fast market trading. It is a very relaxed approach, as a matter of fact. 20 points on the ES is the same as a 2 point stop if you were trading SPY shares instead. One ES equals 500 shares of SPY. If you want to trade this way and 20 points risk on the ES is too much, trade some amount of SPY shares, or trade the micro contracts. One MES is equal to 50 shares of SPY. Trade the size that allows you tolerate the initial risk and the intraday wicks.
I could also ride through that candle if i was working on a longer time frame. If i worked a longer time frame, that would have reduced the number of transactions to one. I would have exited on the same bar as Brooks, but i would also have initiated the trade earlier, with a defined risk entry of 1.50%: I only have one kind of signal for both entry and exit. I trail stop, but each trail stop is also a turn around reversal. I don't know what a Brooks H2 is.
It makes total sense, but I just don't know why the differentiation. All you're really saying is that once the trade is working, you can move your stop up. So the initial risk never hit, and when price puts in a higher low, you can move your stop up to this new higher low, which you now call your actual risk. I just figured that you would use this new "actual risk" figure in some meaningful way, like calculation a new target or something. Its like when traders calculate MAE and MFE. If they notice in their trades that their Max Adverse Excursion is always high, they perhaps start looking for a better way to enter. So I figured that you would use "actual risk" in some way. But since actual risk will never be know, and you always have to assume initial risk, I just don't understand what you do with the "actual risk" information since it was always the initial risk that was in play. I guess I was just curious about what you would do to buy on Monday if you missed that first entry. The 4hr chart is a straight up rally, and for that chart, there are hardly any pullbacks. But the 5 minute chart on Friday shows a deep pullback, and if you got it late, a long entry might be tough to hold, especially in the afternoon when price almost double topped at 4248 at roughly 2:30 on Nov 1 like in the chart I posted. At any rate, thanks for all the write-up and if you can, please update us on any trades next week.
4413 is first breakout point in line to get tested. 4391.75 would be next in line. An H2 after a pullback to that 4391.75 would set up a place to add to the long position for me. I'd not expect nor demand exactness. The pullback can exceed or fall short of the level. Just thinking ahead.
Big picture has ES at what might be what Brooks calls a double top bear flag in his course. Unlike Brooks's video posted to this thread where contrary to Brooks himself, it was NOT reasonable to short, this here is a reasonable short at 4418.25 or lower. Considering a switch to short here myself.
Techinally Ture but the Book "The Snowball -- Warren Buffett and the Business of Life" by Alice Schroeder was written with full access to Buffett. Published 2008