discretionary traders have P&L statements too. btw I may have been unclear whatt I meant with high-probability set-ups. First and foremost a trading author should define what a high-probability set-up is. High winning percentage? High profit per trade? Without hard definitions like this, a book about discretionary trading can be easily discretionary read, leading to financial ruin. Is it really high probability setup? Ort am I just rehasing TA from the interwebs and putting it together in a book? Doesn't matter, people don't care about the editing or lack of P/L statements or lack of backtesting anyway! People don't care whether the set-ups really work or not! P.S. What is a high probability set-up? A set-up that is not a low probability set-up? Who would trade a low probability set-up? Then why call set-up high probability setups? Maybe because high probability set-up sounds fancy? Instead of plain set-up? As if people need reminded look this is high probability, so it works!
I haven't read the book and I'm not sure if you have. Yet, if you have not read the book, you should find out if it's the book author or just NoDoji using that "high probability" phrase. Also, it's "very common" to learn a discretionary trade method and then apply it differently in comparison to the book author because the user makes changes to so that he/she can apply the method in a way that suits his/her own personal trading style. Simply, it's very common to see two traders applying differently the exact same discretionary trade method. Thus, if you're looking for verification about the merits of a discretionary method...any of the following should do. * You should learn/apply the method yourself. * Verification (proof) from more than one user while knowing that profitable trading has many variables and a trade method is just one variable of someone's trading plan. That alone is why one trader may find the book useful and another trader will not find the book useful...they have different trading styles, different needs and expectations. Just the same, it explains why one trader can be profitable while another trader will not be profitable with using the exact same discretionary trade method due to how those variables in their trading plan are working together...the profitable trader most likely has a better trading plan while the losing trader has an inadequate trading plan. For example, one of the variables is discipline. The profitable trader has good discipline in applying the method while the losing trader has poor discipline in applying the method. There's other critical variables of a trading plan (market experience, money management, proper capitalization, proper trading environment, stress management and others. My point, it's more efficient to learn how someone has embedded the discretionary method into their trading plan if that person states they're profitably using the method. Thus, you should spend time trying to learn about the "trading plan" of the user and most likely you'll determine it's the USER that's profitably using a method instead of the method that's making the user profitable. Yet, it does get confusing for newbies or inexperience traders when they hear a user continuing saying "it's the method" when in reality it's the user's application of the method involving the user's trading plan. Mark
Perhaps we can agree that relatively systematic trading is principally about technique, whereas discretionary trading is a combination of both art and technique. And while I would love to be able to rely on inspiration with predictable regularity in the markets, alas, it is not in the cards for me. Taking an art class presupposes a certain amount of innate talent. If I were to take your friend's art class, I'm quite confident that I still coudn't paint a clown portrait without the numbers. Perhaps we are getting into esoterica. The point in my earlier post is that I think too large a "tool box" containing too many "tools," some of which potentially contradict one another, can be distracting. It can also be used by an author to justify or dismiss just about any setup after the fact. And I reiterate that I am not accusing Brooks of having done that. Rather, I am uncomfortable with such approaches, which is why I returned the book after having read only a few chapters. But if you have benefited tangibly from his book, then nothing I say can or should dissuade you. And then, of course, there is the added benefit of honing your cryptologic capabilities as you read through his book...
Most of the ideas are easily adaptable to larger time frames, and he uses examples from larger time frames in his book. I have over 100 spreadsheets over a 10-month time period that defined and refined high probability setups and trade management methods for the instrument I trade, derived from daily manual bar-by-bar analysis. Head and shoulders is not one of them. What I looked for in high probability setups were setups that resulted in a move to a minimum profit target at least 70% of the time. When I combine this positive expectancy with a positive reward:risk ratio, the net result is fantastic. The environment surrounding a setup is as important as the price bar or multi-bar pattern itself. For example, many traders notice a price bar that closes as a hammer or shooting star at the end of an extreme trending move is a reversal signal far more often than not. But such a price bar is often a trap when it occurs in the middle of a trending move or in a range/channel. Inexperienced traders will take a counter-trend trade following the close of such a bar and end up selling near a low tick or buying near a high tick. They'll then conclude that "TA is worthless, because more than half the time these setups fail. The market is random. You may as well flip a coin." Al Brooks describes this and many other price action concepts in his book. Take what you like and adapt it to your trading style; discard what you find useless. Do your own research/testing, develop a trading plan, and follow it.
Your position is clear. You think discretionary traders "rely on inspiration" and, to me, that translates into that you think it is without merit. I do not think we can agree.
I increased my top line by 300% and my bottom line by over 500% in four months. Should I give the money back since his crystal ball was defective? How can someone who can read and write possibly think that results are less important than predictions? Get a grip!
Then that is your own translation. I never suggested discretionary trading is without merit. I would love to trade on a purely discretionary basis. However, I have come to realize that I do not have the innate talent required to do so. Therefore, I rely on a relatively pedestrian and largely systematic approach which allows only a limited amount of discretion. It is a realization and acknowledgment of my own limitations. I wonder how many people who read Brooks's book have innate trading talent, as compared to the number who are only journeymen such as myself.
OK ... so it is talent not inspiration. Fair enough. Discretionary is not an easy route to go and I think all discretionary traders struggle in the early years. But I suspect that all roads are ultimately difficult and reward very few.
and as al mentions all the time, most h&s fail and is actually a continuation pattern more often than not. exactly, everything has to be taken in context which is what makes these setups so hard to back test and is mainly where the "discretion" in discretionary trading comes in imo.