one thing i have learnt the hard way. the market does not forgive mistakes and does not celebrate wins. because a trader is supposed to win -that is his job. if he loses it is ok, if he did not make a mistake. if he did, make a mistake, then he deserves to be, and will be punished, to the full extent of market law. this is not the free world. this is the market: the fair and just world. Long live the market.
and if the market is a ranging environment, then smart and strong traders will fade the trend, with a wide stop, scale in and with nerves of steel, honed with experience, bet just that: that new trend, can and will, reverse. strong and smart: that is not me; but it may be @volpri
the market, as Brooks says and as others say, all in different ways, moves in 3s, one move, and then another 2 moves. if the 3 move is weak then that is the wedge. if instead, the 3 move is strong then, traders will fade the wedge reversal and expect another two legs/moves. If the second leg is strong, then traders will look for two more legs/moves. this is how trends happen. bar by bar. of course, in real time, this may, and does take, a more complex form, especially, if there is a big trading range type of corrective move. so while, markets are not predictable, in advance, they can be read, in hindsight. Novice traders make the mistake of predicting/expecting market to do something which, in their mind, they have decided, the market should do. And then wondering WTF is wrong with the market, when their account blows, into their perplexed faces. What they should be wondering is, WTF is wrong, with themselves. this is how the market moves and i have described it in 6 lines-not 3 books-and without a single USD. the prince is now the King. long live the king
my biggest problem - and i suspect every trader's problem- is to know, define and recognize a normal market, which can be traded. and if such a market cannot be recognized, then how can anyone a recognize an abnormal untradeable market? so that an attempt is not made to trade such a market.
Brooks observation of gaps is a brilliant one. it shows when the market is changing from a trending market to a ranging market. this transition if not noticed -and most traders have hell with this transition- is the reason for most of the bad trades traders make. this simple observation in hindsight can warn you that the trend is weakening and perhaps a correction / reversal is coming. i never paid much attention to this and thought -like most trader think-that it was the ramblings of a deranged mind. there is a thin line between a deranged mind and the mind of a genius
one of the major characteristics of a trending market is the failure of wedges. one of the best ways to enter a trend is to assume that any wedge will fail or that any reversal pattern will turn into a correction when the reversal pattern fails.
the simple answer is that there are no simple answers and since traders want simple answers, they abhor the truth and so abhor Brooks. or, to put in other words, traders all want easy money, without working for either skill attainment or trade mastery or market understanding. do you want to be master or just make money? i have always wanted to be a master and have been willing to work for this goal. genius is 99% perspiration and 1% inspiration. Traders move markets in short term and the only one who accepts this is Brooks and the only one who tells you how to manage this is Brooks.
I just want the money, and have found that my brain was always looking for a challenging puzzle, a sporting conquest rather than a bountiful harvest. My brain has a mind of its own! There really is easy money out there. Finding it and ignoring everything else is the only way I've ever come out ahead for very long. I hope you are able to master the Brooks brain teaser, because the rest of us have tapped out long ago!