Hi everyone, I am currently in the process of applying what I have learned (and am still learning) from Al Brooks' price action books/videos. I created a journal at brookspriceaction.com originally last week, but I think it'll be well worth it to continue here instead of there, since the community is larger. I originally started with $400 and am trading micro lots (usually a 2000 position size so I can scale out while taking profits). After about 5 days of trading, I am down to $388.22. I will be bringing that journal over here, but first... I'd like to say some things about my first few days trading the EURUSD on the 5 minute chart, and get some input on my observations. I have sim traded ES, CL, and stocks. I have looked at many 5 min charts for these instruments, and studied the way price action behaves with these instruments. I may not be a professional trader, but to me, the EURUSD doesn't behave in the same way at lower timeframes - while futures and stocks behave as one would often expect (such as during pullbacks to the EMA(20), breakouts, etc.), I don't find this to be the case with the EURUSD. I trade the early hours of the New York session (between 8 AM and around 11 AM), and find that the prices are erratic, with many fake outs and very difficult to predict behavior. A bar might shoot up 20 pips and close at its high, but will often sharply reverse back down when you enter expecting that this is a breakout into a new trend. High 2 or Low 2 (people familiar with Al Brooks will know what I am talking about) entries during the pullbacks to the EMA(20) during trends are simply unreliable, whereas if you look at a 5 min chart of SPY or ES, you will see a higher probability of success using these types of signals for your entry. Due to this, I am seriously thinking about just accumulating more capital over the next few months until I can put some money in to trade the SPY (small trade sizes, like 200 shares) until I feel ready to trade the ES. The eventually goal is for me to tackle the ES - I thought trading micro lots with the EURUSD would give me tons of practice and experience with minimal risk capital, but I am not feeling so good about the practice opportunities for setups Anyone else have similar feelings, or does anyone feel the contrary? I'm most interested in responses from people who are successful on the 5 min EURUSD chart while trading setups Al Brooks discusses in his books, or any price action setups in general. Thanks for the help.
I've been around long enough to know, you won't be hearing from anyone that isn't lying. FX, 5min charts.... You keep that up you'll lose all your money every time. Can't see how ES would be any different. Do you follow markets or just watch 5min PA all day?
Great that there is a completely new thread on Al Brooks method. Out of curiosity : how long have you been trading beforehand ? How long have you been trading with Al Brooks method? Did you do any SIM trading ? if yes, how many months for consistent profitability? and how many months of SIM profitability before trading with real money (no matter the size of the account)?
I have no doubt that there are people that make a ton of money trading with price action principles on the 5 minute chart with forex and futures and stocks. I'm not really concerned with the question "can money be made?" I'll find that out for myself in the long run, but for now I have a great deal of faith in price action principles. Bob Volman and Al Brooks and some others discuss pretty much the same principles, and very similar setups. And I myself have successfully sim traded a couple of the easier setups for a short period (though I'm not very good). I'm sure with the proper money management techniques and taking setups that are worthwhile for a probability standpoint, money can be made. In my opinion, how much or how little (or if any at all) depends on how well you can execute the trades over the long run. My question is mainly addressing the applicability of Al Brooks' price action setups and principles on the EURUSD, compared to the ES or high volume stocks/ETFs. I've sim traded stocks for a little while (a few months on and off, mainly just "watching" and doing backtesting). I did make money sim trading, and though it wasn't a huge percentage, I did learn from what I was doing. Mainly, I was trading breakouts and trying to catch a move on those. For stocks, it worked well. I also sim traded the ES and CL, but not for more than a week, so I'm not sure if this would really say anything. Soon afterward, I got Brooks' price action material and began going through it. I found that I could use some of the easier-to-understand setups, and if I was able to read the context of the market correctly and see those setups forming, I was able to have a good probability of success. However, I found that sim trading stocks and futures was breaking my focus, so I decided to try this out with a small amount of real capital so that I would learn better. I chose the EURUSD, and opened an account with Oanda so that I can trade micro lots and not have too much capital at risk. Since I don't have the $20K that I would LIKE to have if I was learning on futures or stocks, I thought I would do myself a favor by trading the EURUSD for the time being. Problem is, the setups are NOTHING like the setups on the ES or SPY, and it's really just choppy most of the time, with many false breakouts and tons of stop-loss triggering reversals on your with-trend trades. It doesn't seem like an ideal price action trading instrument to me, but I'm basing this only on my comparison of 1) the EURUSD 5 minute chart setups and 2) the same setups on the ES and SPY 5 minute charts. The ES and SPY have a higher probability of follow through with these price action setups, and far more setups in general.
mangolassi, I think starting off with micro lots at oanda is a good choice to learn PA. I know you are pretty damn sold on the BS, but there is no one making money (long term) with a 5min trend method in FX. How are you able to read the context of the market on 5min chart, that's insane. Maybe you can get lucky for a couple days tops in a smooth trend but what's going to happen when you have a situation like now, when the market is awaiting something, rangebound. After that maybe some vol and direction. Even with that going on, there is the second component, USD in the EUR/USD pair. I know it's not what you want to hear, but forget about brooks and 5 minute charts in FX realm, or any realm for that matter. Go to at least dailies and 240min/60min for trades. It's a different market. FX is highly leveraged. Watch PA for awhile, trade small until you get it. It will take time if ever. Should be watching all major markets, not just EUR/USD or just FX.
These aren't only with-trend setups - understanding price action can allow one to see setups in various market conditions. Also, you don't have to just look at the 5 minute chart - other higher time frame charts can be used to get an overall picture of the market condition, if necessary. But I think it is completely valid to use the 5 minute chart. The reason I say this is because I've done the backtesting for some simple strategies on various instruments' 5 minute charts, and the probability works out quite well as long as you were able to read the context and the setup properly. (As a side note, I honestly think the difficult part is not so much the setups and trading what you see, but rather the management of the trades that you take.) I can agree with one point you have made - and that's about the difficulty in trading with the 5 minute chart in forex. However, the setups that I see fail in backtesting and sim trading with the EURUSD 5 minute chart are the same setups that do seem to work with futures and stocks.
I have taken your advice, and have stopped trading forex with intraday charts. The lack of predictability is highly apparent on the forex charts compared to, for example, the E-mini SP500 or high volume ETFs like SPY. I am studying the daily charts, and have made an excel spreadsheet for all of my notes, with a separate sheet for each pair that I am watching. Is it necessary to use smaller time frames to enter/exit trades when you are using the daily charts for price action analysis? I understand that the entry/exit prices may be more ideal, but it seems like a lot of extra effort for a potential gain of only a small amount of pips (compared to the overall gain that you would expect from daily chart swing trading).
Doesn't OANDA also offer you proxies to the NASDAQ 100, S&P 500 and a few others though? I know they do here in Canada. If they do for you too, you might even do something like chart the actual indices elsewhere like eSignal (to see the real price action and volume) and execute in your OANDA account, provided your trades are long enough (i.e. not just a few minutes where the discrepancies between OANDA and the market might be too significant). It'd just be a matter of translating price levels (something Forex vs currency futures people are familiar with). Just a thought.
I'm not sure I understand what you mean. Can you elaborate? What do you mean by proxies to the SP500? Thanks.
At least in Canada, in the instruments available in my OANDA account there's the usuals like EUR/USD for example, but there's also "US SPX 500" which is OANDA's CFD for the S&P 500 index. HOWEVER, I see that there seems to be huge restrictions if you're in the USA. Compare http://fxtrade.oanda.ca/markets and http://fxtrade.oanda.com/markets for example. I'm guessing you're in the USA. Bummer.