FT71

Attitude, Psychology, ect...Overcoming.mp4 

• Attitude and Psychology is the most important obstacle to consistency.  No matter what you use to enter the market, this is your biggest obstacle
• You can't watch PNL when you trade.  You entered with a setup, you exit with a setup, PNL has nothing to do with trading
• Psychology - the daily trading coach (book
• Sports psychology books are more important than trading books
• Someone who is not consistent
• Looks for confirmation in lots of other random signals (MA, lots of other charts)
• Just looking for something that they want to see to confirm whether they are a winner or a loser psychology
• if you're risk averse  - they see things working against their trade
• if you're risk seeking - they see things that will get them into a trade
• Ideally you take every trade that has a positive expectancy, without hesitation or ignoring the information that makes the situation ideal.
• You only need a couple things to get into a trade, not too many things
• Most people have too much noise in their head because they haven't done their homework.
• Trading time is not homework time.
• Business plan
• what you're gonna trade
• when you're gonna trade
• how much time you will give yourself
• what are you costs - software, charting, commission structure
• how much time will you give yourself
• Journal
• Print out chart each day after close and write down where you are short and long and you can see your trades - you will see the pattern that you trade
• Your good and bad habits will become very obvious
• http://www.simplicitytradinghost.com/Webinars/2010-10-19-Journals/10-19-10%20Sample%20Trading%20Journal.pdf
• Statistics / Research
• All setups have their statistics in excel
• Don't use the same metrics to base a trade, ie: multiple price based indicators even if different time frames will give you the same answer
• Use volume
• Price
• Internals - tick, advance decline, breadth
• These are not calculated correctly by most exchanges
• # contracts
• 10k acct w/ 1% account equity stop has 390 consecutive losses for 75% loss
• recommends 1% to 2%

Volume Profile Mp4

• Principles of Auction Market Theory
• All markets operate as an auction regardless of the sophistication, technology, or product traded
• The purpose of the market is to create a price discovery process where the maximum number of buyer and sellers will agree on price
• Price is a common measurement of what the current value is for any given product. 
• The market will auction lower/higher to invite more buyers/sellers to step in and participate.  It auctions by advertising prices up or down which are expressed by bids / offers and trades
• Market seeks value by rotating higher or lower depending on how much supply or demand is available for a given product
• Never more buyers / sellers, just more aggressive ones
• Volume Profile
• HVN - high volume node - people agree on price
• When successful Price will act as support / resistance but rotate through this area
• LVN - low volume node - people disagree on price
• When successful Price should be quickly rejected with tails on the bar chart
• Profiles
• Balanced
• Compressed Profile, expect a move
• Long Liquidation
• Trend
• Short Covering
• The sharper the profile, the more imminent the move
• POC - point of control
• Most accepted price of the day
• Most volume price of the day
• Value area
• How to use
• How Far Back
• Big Picture overview - Uses Swing High to Swing Low over a 15min period
• Marks HVN and LVN and looks out how 
• After it moves down, he uses new Swing High to current
• Note all these major levels
• Usually uses the last 5 days for Daily VPOC
• Open gaps
• Open VPOCs
• Current Day Profile
• Usually only after IB does the current day's profile matter
• Then he's interested in how the VPOC is shifting up /  down
• Where we are in context of the IB
• Yesterday Profile in Context w/ composite is more important
• Look for confluence
• Context will give clues which way it will move
• Market moves from balance to unbalance to balance
• This is commonly seen as market moving from HVN to another HVN.
• Markets tend to test the LVN to see if they will move to the next HVN or fail back to the previous HVN
• HVN / LVN on dailiy charts that are close to each other are mostly noise
• Composite is more revelant
• 1st tests react the most normally
• Setups
• Close vs VPOC
• Open vs Range
• Open vs VPOC
• Open vs proximity to several previous days VPOC
• Opening Swing, first high and first low of the day
• Before rotations take place (can be very small rotations back)
• Might be more obvious on a 25tick chart
• Scaling in (very advanced) when market moving against him
• Scales out on every rotation
• Only takes a couple of ticks of heat
• Doesn't use tick charts, only uses DOM once he's identified areas to do business
• 
  
• Homework - FT71 approach
• 3 Hypothesis when the market closes
• 2 hypothesis when overnight finished the next morning
• Visualize what the market will look like to satisfy your hypothesis in each of your areas to do business (AOB)
• Homework after market closes
• Answers these questions
• What did it do
• What is trying to do
• How good of job
• =>What is most likely to happen
• Find your spots (levels), and wait and execute only at those points
• What is the flight plan(pilot example)?  
• Don't go into a plane w/o where you going.
• QuarterBack doesn't go out on the field and wonder if the play is going to work.  Already figures out the plays and just tries to executes perfectly
• Enter on setups
• Uses the following
• Overnight
• High, Low, Overnight VPOC
• RTH VP - 15min, 3min, 2500volume bar
• Swing High / Swing Low VP - Daily Bars
• Watches as market hits the levels and see how is reacts
• First LVN of the day is important for subsequent days
• Sees which hypothesis is being confirmed by the market
• Current VP is the most important
• Understanding what the market is trying to do
• Only very balanced profiles have Value areas
• Scalping
• Look for absorption by the trade you want to take when it hits a level
• Absorption
• Prices will not move past a certain point
• Bids / Offers hold when price moves to them, and when they are hit they refresh
• VPOC outside previous days value area or range, likely means there will be a pullback
• Sp500 tick
• +250 to -275 is 95% of the dataset
• Context
• What is your time frame? scalpers dont need to look at weekly
• What will affect your time frame? scalpers may 
• OTF - Opening Swing tells what the other time frame players are doing
• How far does it push before those orders are satisfied
• Significant break of IB hi / low and we're pushing one way by the OTF

• Psychology
• Your method is not how you make money, it is actually your psychology
• Make a plan and stick with it, most people don't ever get to profitability because they keep changing
• Trade Mechanically
• Stop once you hit your daily loss limit
• Every plan hits a losing streak
• Be confident and stick to what works for you, there is a lot of misinformation out there

DOM Reading

• Only interested in DOM at area you want to do business, otherwise it is just a casino blinking lights
• DOM only refines order entry, doesn't mean much in the bigger picture
• Useful for 40+ lot trades
• Only really interested in in the 3 inside levels
• If interested in getting short
• Watches that the offer stays firm
• Print on offer getting slower and smaller
• Poor prints on the retest
• Feel
• It's like hitting a baseball, its different every time but you get a feel of what to do
• Naked VPOC often tested
• VPOC = highest number of occurrences closest to the center of the range
• Value area is is defined by 70% around the VPOC.  This is the most common range.
• Choose greatest values closest to VPOC, keep including values until you get to the 70%
• Velocity, Size
• Bigger orders coming in w/ less frequency, and the size is getting smaller
• Fills 1 tick worse (at market), in front of bigger size or right setup
• Entries
• Does not work orders in books because you need to see at the time you enter what is going on
• In 2008 volatility was so great he 'learned' his lesson of levels holding
• Does not add to positions because he is not a trend trader
• Stops
• When he puts in stops he feels passive
• Stop is based on where you will be wrong
• Homework
• Only uses charts to find areas to do business, then he doesn't use price action or even look at charts during the day
• Only records the levels he wants to do business and wait for the market to get there

AMA

• P profiles that form where the HVN forms early in the day are unlikely to revisit it later in the day.  P that happens later in the day are more likely to move away from it by the end of the day
• 3 pieces of info you need to trade any product
• hours that volatility occurs
• range of that volatility (should be able to capture 50% of range)
• size of rotation during that volatility, targets or stops should be related to the rotation during this time
• CL respects weekly levels

What is Context?

• Context is looking at the bigger picture and relating it to what is happening now
• What is your timeframe?
• What will affect your timeframe?
• 
  
• 3 questions? 
• What has it done?
• What is it trying to do?
• How good of a job?
• =>what is it likely to do now?
• Volume profiles
• Composite is from last swing, just trying to pull in enough data to see the key areas above / below
• Micro-compsite, overlapping days  of balance to see a smaller picture
• daily profiles
• Look for confluence among these profiles
• Opening Swing - OS 
• where the first major buyers / sellers step in and what we should expect from the OTF
• IB- break shows that OTF is interested
• HVN are slow & mean price was accepted
• will probably be slow so not looking to get in on the first test
• LVN are fast and mean price was rejected
• looks to get in on first test, but could slip through
• Ex: We move from a VPOC to create an HVN above, if price moves away from HVN, if LVN fails, expect to move back to VPOC
• If we create a VPOC and then continue moving, in the same direction has a different interpretation then create a VPOC and move away
• Only do business in areas you've outlined
• he scales into trades if areas are close to each other
• learn where the areas are to do business, then use DOM to refine entry by 1 or 2 ticks.  this only matters when you're at > 50 lot

Mark Douglas Trading in the Zone

Ch. 1 - Mental Analysis

• The winners have attained a unique set of attitudes
• No longer susceptible to the common fears and trading errors that plague everyone else
• They stay disciplined, focused, and confident in spite of adverse conditions
• Best traders take risk, and accept and embrace that risk - there is a psychological gap between assuming your are a risk-taking trader and accepting that there is inherent risk in each trade
• The best traders can put on a trade without the slightest bit of hesitation and just as easily admit it is not working and get out of the trade without the slightest bit of emotional discomfort.
• If you are unable to trade without emotional discomfort, you have not learned to accept the risks inherent in trading.  You're trying to avoid something that is unavoidable 
• As traders you're confronted with being wrong and losing money constantly, and both rank very high on what people are afraid of
• Primary Trading fears that cause trading errors
• attitudes about being wrong, losing money, missing out, and leaving money on the table
• Fear causes us to mentally narrow our focus of attention to the object of our fear, this means thoughts about other possibilities, as well as info from the market, get blocked.  You will no longer think about all the rational things you've learned about the market until you are no longer afraid and the event is over.
• Logic Trap
• Because the market offers too many variables to consider you will never learn enough to fully anticipate every scenario.  There are no limits to the markets behavior because its participants can do anything at any moment to cause virtually anything to happen.
• If you are afraid of being wrong or losing money, you can never learn enough to compensate for these fears.  You therefore cannot be confident in the face of uncertainty
• Market Analysis
• When you operate from the assumption that more or better market analysis will create consistency, you will be driven to gather as many market variables as possible into your arsenal of trading tools.  However you will still be disappointed and betrayed by the markets because of something you did not see or give consideration to.  You will feel like you can't trust the markets, but the reality is you can't trust yourself
• Trading Easily
• As long as you are susceptible to rationalizing, justifying, hesitating, hoping, and jumping the gun, you will not trust yourself.  If you can't trust yourself to be objective and act in your best interest, it will be impossible to achieve consistent results.
• Until you acquire the mindset to stay confident in the face of constant uncertainty, trading will not be easy and simple.
• Your future self
• The future projection of the trader you want to be is something you will have to grow into.
• Many of the ideas will be in direct conflict with the beliefs you presently hold about the nature of trading.
• Your willingness to accept that other possibilities exist will make this process faster and more efficient

Ch. 2 - The Lure of Trading

• The underlying attraction of trading is the unlimited freedom of creative expression.  This is something that has been denied for most of us
• Emotional Pain is caused by an imbalance between your mental state and the exterior world
• When these are not balanced we experience it as dissatisfaction, anger, frustration
• As a child we are constantly denied creative expression
• Don't touch, ect...by the time we are adults we have heard several thousand denials, and thus have had several thousand denied impulses
• As a child, we reconcile these denied impulses by crying.  As an adult the denied impulses accumulate and manifest themselves in addictive / compulsive behavior habits
• ie: children who didn't feel they had enough attention, will have unresolved emotional energy that compels them to crave attention.  As adults the draw attention to themselves to satisfy the addiction
• These unreconciled denied impulses affect our ability to stay focused and disciplined while trading
• Safeguards - rules / boundaries while trading
• Trading is in constant motion with no beginning or end.  It is unlike any other activity because you are the only one who decides when it starts, how long it lasts, and when to end
• Regardless of what you have planned, psychological factors come into play.  if you become distracted, scared, or overconfident you will act in erratic and unintended ways
• Since there are no boundaries, we must act with some self control
• Problems
• Rules - Most people are resistant to rules in trading because it is a completely boundless environment 
• Responsibility - We want the freedom to make choices, but that doesn't mean we are willing to accept the responsibility of the outcome
• When we act on our own ideas, we put our creative ability on the line and get instant feedback on how well our ideas worked.  It's difficult to rationalize away any unsatisfactory results.  If we enter into unplanned, random trades, it's much easier to shift the responsibility by blaming other things
• Random rewards - monkeys will keep doing a task if the reward is given randomly, however if it is given on a consistent basis, and then it is stopped, they will stop as soon as the rewards are stopped.  
• Chemicals in our brain our released when we receive an unexpected, pleasant surprise.  If we trade randomly and get a good result, it will always be an unexpected, pleasant surprise
• External vs Internal Control
• One reason many professionals fail in the market is that they have the ability to control and manipulate their environment to fulfill their needs and desires.  As traders we have no ability to control the market externally

Ch 3 - 

• Taking Responsibility - sounds simple but is not easy to grasp or put in practice.  You must understand the ways in which you are and are not responsible for your success as a trader.
• Complete responsibility - All of your results are self generated, based on your interpretations of market information, the decisions you make and the actions you take
• Without complete responsibility you 
• establish an adversarial relationship with the market that takes you out of the constant flow of opportunity.  
• mislead yourself into believing that your trading problems can be rectified through market analysis
• Shaping Your Mental Environment - your ultimate goal is consistency.  
• Your goal has to to learn to think like a consistently successful trader.  They have eliminated the effects of fear and recklessness from their trading
• Fear based errors come from rationalizing, subconsciously distorting info, hesitating, jumping the gun, or hoping.  Once the fear is gone, there won't be a reason to make these errors and they will disappear from your trading
• Euphoria from a string of winners is also as dangerous as fear
• The Zone
• It is a carefree state of mind where there is absolutely no fear and you react instinctively.  You don't weigh alternatives or consider consequences or 2nd guess.  
• You cannot force yourself into the zone, but you can develop a positive winning attitude
• Positive winning attitude is expecting a positive result from your efforts, with the acceptance that whatever results you get are a perfect reflection of your level of development and what you need to learn to do better
• Others get bogged down in negative self-criticism, regret, and self-pity
• Expectations are our mental representations of how some future moment in the environment is going to look, sound, feel, smell or taste.  Depending on how much energy is behind the expectation, it can hurt a lot when it isn't fulfilled.
• Blaming the market
• As children most of the time we were forced out of a state of joy or happiness by someone with more power or authority.  We had no choice (or believed to have no choice) or responsibility for what put us into emotional pain.  Thus the outside force was to blame.
• We feel betrayed because these situations were unexpected or unanticipated and we were unprepared for how some people in our lives had the potential to behave.
• If we haven't accepted and prepared for the inherent risks of trading and don't know how to guard against these natural connections between our past and present, we will end up blaming the market for our results instead of taking responsibility for them.
• The market
• The purpose of the market is to facilitate people taking money from each other.  It is trying to separate you from your money just as much as the opposite.
• If you blame / feel betrayed by the market you are expecting the collective actions of everyone participating in the market to make the market act in a way that gives you what you want.
• Consequences of avoiding pain
• Conscious level - We shield painful information by rationalizing, justifying, or making a case for staying in a losing trade.  Some typical ways we do this are to call our trading buddies, talk to our brokers, look at indicators we never use, all for the purpose of gathering unpainful information in order to deny the validity of painful information
• Subconscious - will automatically distort, alter, specifically exclude information from our conscious awareness
• Euphoria
• if losses are the result of euphoria, it doesn't matter form the streak takes, it can be any number of wins in a row.  But the overconfidence means you cannot perceive any risk because it makes you believe that nothing can go wrong.  If nothing can go wrong, there are no need for boundaries or rules to govern your behavior
• Winning Attitude
• Is leaving money on table more painful than taking a loss?  When we lose there are a number of ways to shift the blame and not accept responsibility, but we are completely responsible for leaving money on the table.
• The most efficient path to discovering what you need to be successful is a winning attitude.  It produces the kind of mindset that is most conducive to discovering something no one else has experienced
• Many traders think they have a winning attitude, when they don't or expect the market to develop the attitude for them by giving them winning trades.  No amount of market analysis will give you a winning attitude
• Stop expecting the market to give you anything or do anything for you.  If you stop fighting the market, and yourself, the market will not be your opponent.  You will quickly recognize exactly what you need to learn, and how quickly you will learn it

Ch 4 - Consistency - a state of mind

• What separates traders is not what they and when they do it, it is how they think about what they do and how they're thinking when they do it
• People who are truly happy don't need to do anything in order to be happy.  Traders who are consistent don't have to try to be consistent, they are consistent.  There is no struggle, they see exactly what they need to see and act on it in the moment.  
• Nothing is being blocked from your awareness, so it is effortless
• Having to try indicates that there is some degree of struggle or resistance.  The best traders don't try to get anything from the market, they take advantage of whatever the market is offering.
• Understanding Risk
• accepting the risk means accepting the consequences of your trades without emotional discomfort or fear
• possibility of being wrong, losing, missing out, leaving money doesn't cause defense mechanisms to kick in and take you out of the opportunity flow
• you make yourself available to take advantage of an opportunity, you don't impose any limitations or expectations on the market's behavior, and you are satisfied to let the market do whatever it is going to do
• Pros don't not perceive anything that the market does as threatening because of the way they view risk

Ch 5. 

• Dynamics of Perception - market doesn't generate happy or painful information, just simply information.
• When you first looked at a chart, the information was undifferentiated and although all the information about opportunities was there, they were invisible to you.  Most of us have no concept to which we are continually surrounded by invisible opportunities inherent in the information around us
• Unless you're in a completely new or unique situation, operating out of genuine openness, we won't perceive something that we haven't learned yet
• People learn to see what they want to see, until they learn to counteract the energy that blocks their awareness of whatever is unlearned and waiting to be discovered
• Perception and risk
• Boy is curious and bitten by a dog, when he sees a new dog he is afraid.  To other observers, the new dog is friendly and the boy's fear is irrational.  There is still more to be learned about dogs, but the boy is now afraid to experience it
• A top trader would say the now moment has nothing to do with your last trade.  Each on is independent, so if you feel fear it is unfounded.
• Our minds are built to associate similar things and project our feelings towards that dog onto the dog so you perceive the information the dog shows as threatening even tho the information generated by the dog is not threatening.
• The market generates information from a neutral perspective.  It provides the observer with an unending stream of opportunities to do something on your own behalf.  If what you perceive causes you to feel fear, ask yourself: Is the information inherently threatening, or are you simply experiencing the effect of you own state of min reflected back to you?
• When you hesitate on a good signal, instead of perceiving the signal from an objective, positive perspective, you experienced it from a negative one

Ch 6.

• Most traders experience the market through their last couple trades.  Pro's are not negatively / positively impacted by their last few trades
• Secret of the Nature of trading - at the core of one's ability
• trade w/o fear or overconfidence
• perceive what the market is offering from its perspective
• stay completely focused on the ' now moment opportunity flow'
• spontaneously enter the'zone' - a strong belief in an uncertain outcome with an edge in your favor.  You believe without a doubt that anything can happen regardless of what has just happened.
• The fear of being/admitting wrong causes us to place an inordinate amount of significance on the info that tells us we're right
• Not pre-defining your risk, not cutting your losses, or not systematically taking profits are the 3 most common trading errors you can make
• The reason typical traders do this is because they believe it is not necessary.  It is only not necessary if he believes that he knows what is going to happen next, based on what he perceives is happening in any given moment now
• Believing, assuming, or thinking he knows will be the cause of virtually every trading error.

Ch 7

• Thinking in probabilities
• Like a casino, you only needs odds in your favor and a large sample size.  At the micro level you don't know which hands you will win or lose (based on variables like how the individual players act, ect), only that over time you will take in the rake (game has an expected outcome)
• Trading is the same, you may have the same model that has an edge, but you don't know at the micro level how the other traders will act.
• So you must act on every edge because you will never know which edge will lead to a positive or negative outcome
• Most traders crave certainty that analysis appears to give them.  Every trader wants to be right on every single trade.   You can only be certain that certainty does not exist.
• If each moment in the market is unique, anything is possible, then any expectation that does not reflect these boundary-less characteristics is unrealistic
• Managing expectations
• protecting ourselves from mental pain is the same way we protect ourselves from physical pain.  We try to avoid physical pain by moving away or deflecting it.  We avoid mental pain by ignoring, rationalizing, justifying, excusing, getting angry, or gathering information that will neutralize the conflicting information.
• if we have an expectation, we expect it to be right.  If it comes an unfulfilled expectation we become unhappy.  If something causes us to be unhappy we use our pain avoidance mechanisms to exclude, distort, diminish our awareness to protect us
• To avoid pain, we narrow or focus and concentrate on information that keeps us out of pain, regardless of how insignificant or minute
• If we are trading counter trend, we ignore any trend continuation signals until the pressure of losing too much money becomes unbearable
• Goal is to be rigid in your rules, and flexible in your expectations
• Rules are there for self trust and protect us in an environment with few boundaries
• Flexible in expectations so you can perceive, with clarity and objectivity, what the market is communication from its perspective
• Eliminating emotional risk
• Thinking in a probabilistic environment
• Anything Can happen
• You dont need to know what is going to happen next to make money
• There is a random distribution between wins and losses for any given set of variables that define an edge
• An edge is nothing more than an indication of a higher probability of one thing happening over another
• Every moment is unique in the market
• The potential to experience emotional pain comes from the way you define and interpret the information you're exposed to.  With appropriate expectations, you will eliminate the potential to define and interpret market information as either painful or threatening
• As a trader when you are expecting a random outcome, you will always be a little surprised at whatever the market does, even if it conforms exactly to your definition of an edge and u win.  However expecting a random outcome doesn't mean that you can't use your full reasoning and analytically abilities to project and outcome.  You just can't expect to be right.  If you are right you can't expect that whatever you did last time will work next time even if the situations appear identical.  If you approach trading from the perspective that you don't know what will happen next, you will circumvent your mind's natural inclination to make the 'now moment' identical to some earlier experience.
• When I put on a trade, all I expect is that something will happen.  Regardless of how good the edge is, I expect nothing more than for the market to move or to express itself in some way.  I know from past market behavior the odds of it moving in my direction are acceptable, in relationship to how much I am willing to spend to find out if it does.  I also know how much I am willing to let the market move against my position.  There is always a point where the odds of success are greatly diminished in relation to the profit potential.  At that point it's not worth spending any more money to find out if the trade is going to work.  If the market reaches that point, I know without any doubt, hesitation, or internal conflict I will exit the trade.
• The loss does not create any emotional damage because I don't interpret the experience negatively.  Losses are simply the cost of doing business to make myself available for the winning trades.  If the trade does turn out to be a winner, I know at what point I am going to take my profits.
• The best traders are in the now moment because there is no stress.  There is nothing at risk other than the amount of money they're willing to spend on a trade.   They are not trying to be right or trying to avoid being wrong, nor prove anything.  If and when the market tells them their edges aren't working or it's time to take profits, their minds do nothing to block this information.  They completely accept what the market is offering them, and they wait for their next edge.

Ch 8

• Working with your beliefs
• Consistency is the goal, it is the result of a carefree, objective state of mind, where we are able to perceive and act upon anything the market is offering us
• carefree means confident but not euphoric.  You don't feel fear, hesitation, compulsion because you've eliminated the potential to interpret market information as threatening
• objectivity means you have conscious access to everything you have learned about the nature of the market.  nothing is being blocked by your pain avoidance mechanisms
• making yourself available = means trading from the perspective you have nothing to prove.  You aren't trying to win or avoid losing.  You aren't trying to get your money back or take revenge.  You come to the market with no agenda other than to let it unfold and be in the best state of mind to recognize opportunities it makes available
• "now moment" - there is no potential to associate an opportunity to get into, get out of, add to, detract from a trade with a paste experience that already exists in your mental environment
• Fundamental Truths
• Anything can happen - there are always unknown forces in every market at every moment
• You dont need to know what is going to happen next in order to make money - There is a random distribution between wins and losses for any given set of variables that defines an edge.  Trading is a simply a probability and numbers game.  All you need to know is:
• the odds are in your favor before you put on a trade
• how much it's going to cost you to find out if its is going to work
• The only variables you need to know is whether the variables you use to define an edge are present at any given moment.
• Every moment in the market is unique - it has never existed nor will ever exist again

Ch 9

• Nature of beliefs
• Just because you understand something is different than using it at a functional level.  Understanding is just the first step.
• Conflicting beliefs will sabotage your best intentions, and you will not be in the 'now moment'
• Now that you understand you don't have to know what's going to happen next, and that even trying to know will detract from your ability to stay objective in the moment you will have a conflict between your old and this new belief.
• It takes a considerable amount of mental work to integrate this new understanding into your mental trading environment
• Origins of Belief
• Pure memory - is only sensory information that is not organized or attached to words or concepts
• Belief - is a concept about the way the external environment expresses itself
• concepts combines sensory information with language
• They are a very important part of defining our quality of life, yet they are rarely thought about
• None of us are born with beliefs, they are acquired in many ways, usually instilled by other people.  The ones we struggle with the most are the usually the ones acquired from others without our conscious consent
• How beliefs shape our lives
• they manage our perception and interpretation of environmental information in a way that is consistent with what we believe
• they create our expectations (what we know projected onto some future moment)
• anything we do, or express, will be consistent with what we believe
• they shape how we feel about the results of our actions
• Our truth will determine:
• the possibilities we perceive in relation to what is available from the environment's perspective
• how we interpret what we receive
• the decisions we make
• our expectations of the outcome
• the action we take
• how we feel about the result of our efforts
• If we are in a good state, we can say what we perceived was consistent with our objective and what was available from the environment's perspective.  If we are unhappy we can say relative to the environmental situation, the beliefs we are operating from dont work well and are not useful.

Ch 10

• Impact of beliefs on trading
• Beliefs take a life of their own, and resist any force that would alter their present form
• All beliefs demand expression
• You must train your mind believe in the uniqueness of each moment, and deactivate any other belief that argues something different.
• Beliefs keep on working regardless of whether or not we are consciously aware of their existence in our mental environment

Ch 11

• 3 stages of trader development
• Mechanical
• Build self trust necessary to operate in an unlimited environment
• Learn to flawlessly execute a trading system
• Train your mind to think in probabilities
• Create a strong, unshakable belief in your consistency as a trader
• What separates the 'consistently great' athletes from everyone else is their distinct lack of fear of making a mistake.  They don't have a reservoir of negatively charged energy waiting to well up and pounce on their conscious thought process and kill them. Your mistakes help point you in the right direction, accept them as simply your current level of expertise.
• Subjective - you use anything you have ever learned about the nature of market movement to do whatever it is you want to do
• Intuitive  
• If you're going to become a consistent winner, mistakes can't exist in the kind of negatively charged context in which they are held by most people
• Work on acquiring a new set of positively charged beliefs about what it means to make a mistake, along with de-activating any negatively charged beliefs that would argue otherwise or cause you to think less of yourself for making a mistake
• How to develop self discipline
• Find a clear purpose why you want to monitor yourself
• Direct your attention to what you think, say, or do
• If you're not focused on your objective, choose to redirect your words, thoughts, or actions in a way that is consistent with what you are trying to accomplish.
• The more willfully you engage in this process, the faster you will create a mental framework that functions in a way consistent with your objectives
• Self discipline is a mental technique to redirect our focus of attention to the object or goal of our desire, when that goal or desire conflicts with some other component of our mental environment
• I am a consistent winner because:
• I objectively identify my edges - 
• objective means there's no potential to define, interpret and perceive any market information form either a painful or euphoric perspective.
• stay objective by keeping expectations neutral, always take unknown forces into consideration.  Unknown forces are other traders waiting to act on price movement
• I Pre-define the risk of every trade
• I completely accept risk or I am willing to let go of the trade
• I act on my edges without reservation or hesitation
• I pay myself as the market makes money available to me
• I continually monitor my susceptibility for making errors
• I understand the absolute necessity of these principles of consistent success and there I never violate them
• Exercise: trading like a casino
• Find a any set of mechanical market variables that defines an edge
• Find mechanical profit and stop loss targets based on this edge
• Stick with one time from to enter and exit, you can only use the others to help define the edge
• Take 1/3 profits on the scalp (1.5 - 2 pts emini or 4 ticks bonds)
• Take 1/3 profits on the profit target, Move stop to break even
• Use the carefree state to experience the 'now opportunity flow' and trade last 1/3 when it indicates to get out
• Look for 3:1 risk to reward edges
• Trade in samples sizes of 20 to determine if an edge is working or not
• Accept the risk that you can be wrong in all 20 trades.  For SPY 3 pts at 150 shares = $900
• This exercise will create a head-on collision between your desire to think objectively in probabilities and all the forces inside you that conflict with this desire.  The amount of difficulty will be in direct proportion to the degree to which these conflicts exist.  When you have a hard time, use self-discipline to refocus on your objective.  Write down the 5 fundamental truths / 7 principles of consistency so you can see while trading.  Acknowledge the conflict, and refocus on what you're trying to accomplish.

Al Brooks Videos

• No emotions.  If you feel emotion when you are going to place a trade, don't trade it.
• Trade Small enough so you feel no emotion
• Great traders 
• Only talk to support / resistance and momentum
• No indicators or candle stick patterns
• Trade Management is the most important thing to making money
• Signals only work 40 - 60% of the time
• Get used to losses
• Trends
• Pullback is a short trading range in a trend.  Breakout likely in trend direction
• Long trading range (15 - 20 bars) loses its trend direction and more likely to break out either direction
• All trends start with a spike, and transition to a channel.  
• You need to know which part in the cycle you are in, including the nested pattern within the larger pattern
• Spike phase 
• you need to get long at the market
• smaller size to accomodate wide stop
• tight channel is a strong bull
• Weak bull is a channel
• if the swings are big, trade it like a trading range.  
• Buy low, sell high
• trade both directions
• Bull Trend in trading range, 
• take normal buy signals
• sell 2nd entry shorts and other reversal patterns
• scalp
• Bull Pressure (opposite for bear)
• More bull bars and they are bigger
• Consecutive
• Small tails on the highs, and tails below bars
• Follow through after breakout
• Consecutive bears decrease and get smaller
• Within trading range
• Look for which case is stronger based on the above
• No overlap between 3 bars back
• Always In
• If you had to choose a direction to be in, at the market, which side will you choose
• Bars
• Every bar is either trend Bar or trading range bar (doji)
• Every Trend Bar (or series of trend bars) is a: ...(only context tells you which one)
• Breakout
• Climax
• Spike
• Gap
• Setups
• Context is the most important
• You need prior evidence of your position
• 80% of reversals in a strong trend will fail, dont take reversals
• Weak trend and big swings, take both sides
• Selling in a weak bull
• need strong bear signal bars
• and selling pressure
• Weak Setup
• context and signal is weak, just wait
• 2nd entry or strong breakout
• If unsure
• Use half size with wide stop
• If stopped
• Double position to normal size.  However, if stopped again dont take 3rd signal since most likely fighting a strong trend
• Take profits at 'actual risk' measured move up (price from 1 tick above to 1 tick below lowest stop that would not have been hit)
• Just because there is a reversal pattern in a bear market, that just means it is a better entry to short.  
• Traders may not cover on the first attempt at to break below their position, but most will cover on the 2nd one
• Bull Signal Bar
• At least close above midpoint and close above open
• Close well above prior bar
• Lower tail about 1/3 to 1/2 height
• Small upper tail
• Little overlap
• Follow through is also strong
• Close reverses the high of many previous bars
• 2 Bar Reversal
• do not have to consecutive, on a higher time frame chart, they form 1 bar
• All Expanding Triangles are considered major trend reversals if they're accompanied by strong reversal bar
• Pullbacks
• Strong trends usually only have 1 leg pullback
• Weak trends, have 2 pullbacks.  At most 4 pullbacks.
• The high1, high 2, ect...don't necessarily have to break above the current bar, they just need to reverse the leg down
• Pullback ends when current bar high extends at least 1 tick above the high of the prior bar
• Wedges
• Usually Low 3 and High 3, 3 push patterns (reversal patterns)
• Double bottom is a high 2 (buy setup), Double Top is a low 2 (sell setup)
• 5 min trading range can be a pullback on a higher timeframe
• Channel
• Market is always in a channel
• Micro channel is different than regular channel
• Redraw the channel as it gets broken
• Eventually it will become a trading range (even if only 1 bar)
• All channels function as the opposite trend 
• Bear channel is essentially a bull flag (it will eventually breakout to the upside)
• Shrinking stairs, breakouts are getting smaller, so you may be able to fade them because bulls/bears losing momentum

12 - 22

• MicroChannel
• No pullbacks below the low of previous bar for 2 - 13 bars in a bull
• Weak bull you buy on 2nd entry or double bottom
• Strong bull, you buy above the high on stop, or below low with limit
• Trading Range
• Starts as a pullback, but after 20+ bars the trend has lost its direction.  Upside or downside breakout equally as likely
• 80% of breakouts in a trading range fail.  Markets will race to the top and then fail and reverse
• There will be many attempts within the trading, and its hard to tell when it will happen.  When you look back it is obvious where the trend began, but at the time it is confusing
• Vacuum effect
• Race to a support or resistance, or measured move, or trendline
• Once it hits, market will reverse back.
• Institutions waiting for the spike up because they know it will get there and can get better prices
• Beginners see the move as very strong and ignore the bars to the left and want to catch the 2nd leg
• Buy with limit order below the low of the bar
• Range Breakout
• Strong Breakout
• Weak Channel
• stop goes below breakout
• Major Trend Reversal
• TL break, retest and reversal
• On the first trend break, it often moves to the MA before continuting w/ trend and then failing w/ a higher / low top
• Final Flag
• Bull Flag that doesn't continue in a trend
• bull trend for many bears (30+).  Forms a High 2  / triangle / trading range just below resistance
• wait for failed breakout and a reversal down
• Wedges
• Down sloping wedge usually leads to a bull breakout 75% of time.  25% it fails
• Failed 
• Measured move from start of wedge to end of wedge.  Then two legs in the other direction
• Successful
• Moves to top the wedge as 1st target, and then another measured move up as 2nd target
• Wait for reversal pattern at the apex
• Double Top / Bottom
• Every double top bottom is a high 2 buy or low 2 sell.  
• Take 1/2 profits at 2x times risk (ie: stop = high + 1 tick - low *2)
• Expanding Triangle
• Always a major trend reversal
• Reverses the trend at 3rd test of trendline

23 - 32

• Climax
• Always end at support or resistance
• Nobody looking to buy for many points, or 10 - 20 bars
• Swing vs Scalp
• 40 ticks+ = swing
• Swing = profit target at 2 times risk
• Use measured moves to find where traders will take profits
• Brooks uses actual risk to find the measured move rather than initial risk

39 - 46

• Strong Bear / Bull Breakout
• Enter on stops in trend direction, look to enter on micro trendline pullbacks
• Only enter in trend direction
• Buyers / Sellers are below / above so enter on stops above / below the pullback bars or on high 2 / low 2 setups
• All will transition to channels and the channels then become a part of a larger trading range
• Stops go below swing points and below higher lows once your trade is positive 
• Take profits at reversal bars or strong resistance
• Strong Bull / Bear Channel (tight channel)
• Enter on stops. Trade in direction of bull / bear channel at obvious support or resistance of the trend channel lines.  
• Enter only in trend direction
• Wedges and triangles are also part of this group
• Use more conservative setups, ie: high 2, low 2 setups
• Stops go below entry bars  / signal bars. 
• Aim to take profits at new highs or resistance
• Weak Bull / Bear Channel and Trading Ranges
• Buy on limit orders below / above bars when you want to buy / sell
• Reward is 2x your risk
• Buy at the bottom of the range, sell at the top
• Eventually you will be wrong, but you want the number of times you were correct to greatly outnumber times you were wrong
• Opening Ranges
• You must be looser with your criteria to take trades, usually ends around 8:30pst, however 7 - 10am is total range
• 20% of the time high / low formed in first 5 mins
• 50% of the time in 1st hour
• 90% of the time in 2 hours
• Breakout or failed breakout
• most of the time it will fail
• Swing trade from the breakout or breakout pullback, or failed breakout
• Lots of 2 sided trading means it will probably be trading range days
• Climax that accelerates near the end of the day often reverses

47 - 53

• Swings in middle of the Day
• Starts after opening range swing usually after 8:30am
• Weak Channels are common, however trading range and trend from the open do occur
• 80% of reversals in a strong trend will fail
• Swings at the end of the day
• Setups
• Look at how many bull bars / bear bars have occurred in the middle of the day and in a range to give a clue how the day might finish
• Higher highs / lows
• Consolidating above / below MA
• Targets for close
• Final hour usually tests support / resistance for the day
• Look for measured move targets
• Previous days, open / close
• Prior swing high / low (and untested big trend bars)
• Trendlines, Channel lines
• trading ranges above / below
• Final hour of the week
• Open of the week
• High / Low Close of last week
• Look to take profits if there is a buy / sell climax at the low or high of the day if moving from one side of the range to the other.  It will often lead to a 10 bar / 2 leg correction
• Best Trades
• Major Trend reversals, 
• wait for TL break 
• Should retrace to the movina avg
• a 2nd entry after a higher high or higher low, enter on stop
• Breakouts
• As long as it is strong, get in immediately
• Usually a measured move target
• Trading Range Reversal
• Make sure market is actually in a range, 80% of breakouts from the range will fail
• Wait for 2nd entry so momentum in the down is fading
• Often there is a new high or new low that fails, buy after the failed new low, sell after the failed new high
• Pullbacks
• If there are pullbacks, you're in the channel phase
• swings in strong trends, scalps in weak trends/ trading ranges
• Strong trends you buy high 1
• Weak you buy high 2, wedges, or triangles

How to make money in stocks - good times and bad - O Neil

Ch1 'C' QoQ eps change

• 5 - 10% is not enough to fuel change, it needs to be above 25%
• Of all big gainers between 1970 and 1982
• Median was 34%
• Avg was 90%
• 76% were over 10%
• 75% showed eps increases avg 70% in the last report before the stocks began a major price advance
• Only 2% of stocks show this kind of gain.  Success is built on dreams
• Sales and Eps should be similar (so profit margins are still around the same)
• Omit 1 time gains
• Limit your search to QoQ of > 20%.  Apply this to one or 2 previous quarters
• Look for accelerating eps growth
• 2 qtrs of major eps decleration may mean trouble (ie: 50% to 15%)
• Industry should have at least 1 other stock showing good eps
• 4 weeks Before eps report, stocks participants start making trades for the eps report.  It may give you a clue

Ch2 'A' Annual Earnings Increases

• Each eps should be greater than prior years, 1 may be done as long as it quickly recovers
• Look  for 25% to 50%
• Stability of eps over the 5 years
• PE ratio mostly get depressed during bear markets, but the avg was 20+.  

Ch3 'N' New product, management, high

• 95% of big winners had a major new product / service, new management, or important change in their industry
• Buy on the breakout.  The stock should be close to or actually making a new high after undergoing a price correction and consolidation.  Consolidation can last from 7 - 8 weeks (normal) to 15 months.  As it emerges from this base, it should be bought just as it is starting to breakout.
• Avoid buying more than 5 - 10% off the base

Ch4 'S' Supply & Demand

• Low float is better than big float
• Large % ownership by top mangement
• Today's hot product will find sales slipping in 3 years, so management must be an entrepreneurial style
• Not many layers between CEO and customer
• small medium companies
• More than 95% of companies had fewer than 25M shares during their greatest period of eps improvement.  Avg was 11.8M and median was 4.6M between 1970 and 1982
• 3 to 1 and 5 to 1 stock splits after huge run ups make institutions sell (this doesn't seem relevant)
• Comapanies buying their stock in the open market
• Reducing debt to equity over last 2 to 3 years
• Small cap with less liquidity and no institutional sponsorship / ownership should be avoided.
• Trading volume should be light on corrections and increase significantly on rallies (50% to 100% more)

Ch 5 'L' Leader or Laggard

• Most people buy stocks they are familiar and comfortable with, like an old friend.  These will be the slowpokes rather than the leaders in the stock market.
• Buy the leading security in the industry you want to get in among the 2 or 3 best in a group
• Relative strength > 70 mean it outperformed 70% of the stocks in a comparison group over the last 6 - 12 months
• Avg for best performing equitites between 1953 and 1993 rated 87 before major increase began.
• Investors Business Daily has these numbers
• Look for charts in a bull flag or trading range and buy near the top of the range, but not more than 5 - 10% out of the range
• ...this doesn't seem like a good idea
• Once a general market decline is over, the stocks that bounce back to new highs first will generally be the leaders.

Ch. 6 'I' Institutional Sponsorship goes a long way

• At least 3 - 10 mutual fund sponsors, corporate pension funds, insurance companies, large investment counselors, hedge funds, bank trust dept, education institutions.  
• Certain mutual funds are better than others, so these will help define your quality of sponsorship
• Over owned by institutions may mean the largest moves are over

Ch. 7 'M' Market Direction

• Learn to interpret daily price and volume chart of general market averages.  You want to be on the correct side of the trend of the market, or 3 of your 4 positions will lose money.
• Market top
• General market tops are later than individual stock tops
• poor market rallies and rally failures in the SPX will occur
• Discount Rate
• When it is successively raised 3 times usually marks beginning of recession, when it is lowered usually signal end of bear market
• Wait for adam eve bottom
• Stages of stock market
• Economic indicators bottom AFTER the stock market, thus are a poor choice for stock market returns
• Big money is in the 1st 2 years.  After this expect occasionally 8% to 15% drops
• Railroad equipment, machinery, and other capital good industries are late moves in the business / stock market cycle
• Bull markets begin when institutional cash positions are higher than normal and end when cash positions are lower than normal

Ch. 9 When to Sell if your selection / timing is wrong

• After each qtr focus on the relative returns of each investment in your portfolio, not the price you paid for it.
• When you buy a stock if it is down 7 - 8% from your purchase price you should cut your loss.  However dont sell your winners if they are down 7 to 8% from their highs.  You must give your winners room to run.
• Don't avg down, don't worry about how many potential "turkey's" you had.  Your "red dress" has now turned into a "yellow one".  Get rid of that "yellow dress" and go find the "red dress"
• Self confidence
• holding losers makes you less confident.  If you cut your losses quickly and with discipline, you make the hardest decisions without wavering.
• There are no good stocks, they are all bad - unless they go up

Ch. 10 When to sell and take your profit

• Most good investors / hedge fund managers sell on the way up.  They dont buy at the low and sell at the top
• Jesse Livermore
• Pyramid and buy more as it goes up.  You want to make a lot of money when you're right, and cut your loss quickly when wrong
• Revised profit plan
• sell 20% profits (except with the most power of all stocks.  If it goes up 20% in < 8 weeks, then hold at least 8 weeks.  If it is still very strong, you will want to hold for 6 months)...Take your 8% loss
• buy exactly at the breakout pivot buy point, do not pyramid 5% beyond the buy point
• Selling pointers
• Buy at the right time.  This will solve half your problems
• Buy off a proper base structure, do not chase or pyramid when the price is too extended past your buy point.  You will be able to sit through most corrections
• Beware of big block selling.  The best stocks can have sharp selloffs for a few days or a week.  You shouldn't get shaken out in a normal pullback
• If the price is extended from a proper base, its price closes for a larger increase than on any previous up days, watch out! this climax is at or very close to the peak
• Ultimate top may occur on the heaviest volume day
• Big investors like to sell on big run ups when there is liquidity
• new highs on low volume means there is temporarily no demand for that level and selling may soon overcome
• after and advance, heavy volume w/o further upside price movement means distribution
• Look for clear reversal days (low at the previous days low after an up day on several days.)
• Sell if a stock breaks badly
• Consider selling  a stock if it takes off for a good advance for several weeks and then completely retraces the advance
• When qtrly eps increase slowly or decline for 2 consecutive qtrs, in most cases sell
• Consider selling if there is no confirming strength by another important member of the same group
• If a stock declines 8% from its peak, check if it is just a normal pullback.  If it declines 12% to 15%, you may want to sell
• If a stock has made an extended advance, and suddenly makes its greatest 1 day drop since the beginning of the move, consider selling if confirmed by other signals
• When you see heavy selling near the top, the next recovery will either follow through on weak volume, show poor price recovery, or last a short number of days.  Sell on the 2nd or 3rd day of the poor rally.  It will be the last good chance to sell
• Sell a stock if it closes the end of the week below major lon term uptrend line or breaks key support on overwhelming volume
• Number of up days vs down will change will change after stock starts down
• Wait for 2nd confirmation of major changes to market avgs.  Don't buy back stocks you just sold because they are cheaper
• Learn you mistakes by plotting past trades on charts
• Sell quickly before it becomes completely clear a stock should be sold.  Selling after an obvious support level break could be a poor decision.
• In a few cases you should sell a the trend channel line overshoot
• Sell when your stock makes a new high in price of it's 3rd of 4th stage
• Sell on new highs off a wide and loose erratic chart price formation
• When to be patient
• Have a line on ur chart below your buy point where you must sell if price is touched.  Raise this as the prices move below the low of the 1st normal correction.  Don't move too close because any weakness will stop you out.  If your stock increases 15% after purchase, move the sell line up to less than 5% below pivot purchase
• Objective is to buy the best stock with the best eps at exactly the right time and hold until you've been proven right or wrong.  Give 13 weeks after your first purchase before you conclude that it was a faulty selection (if not stopped out first)
• Any stock up 20% should not be allowed to drop into a loss.
• Always pay attention to the general market.  If the markets are topping, most breakouts will fail
• Major advances take time to complete.  Dont take profits during the 1st 8 weeks unless there is serious trouble or there is a rapid run up on a split.  If the stock shows 20% gain in 4 or 5 weeks, it is capable of a 100% to 200% move.  Only go for these long term moves after you are up for the year
• Try to hold through the 1st correction if you already have a profit
• Investors who can be right and sit tight are uncommon.  It takes time for a stock to make a  large gain

Ch 11 - Diversify, Invest for Long Pull, Margin, Short

• Portfolio > 3M should have 6 to 7 stocks.  Most people should have 4 to 5.
• No well run portfolio should have losses carried for more than 6 months
• Use margin after you have experience and you're young and still working.
• Margin should never be 100% all the time, you must carefully choose when to use margin
• Never add cash to meet margin call.  Sell the position
• Real Estate - buy it at the right time
• Dont buy in:
• Area that is not growing or deteriorating
• At inflated prices after several boom  years and just before a severe economic setback in the economy or geographic area where the real estate is (major industry layoffs or closing of a plant).  
• Mortgage is greater than the rent
• Frequent natural disasters

Ch 15 Patterns

• Cup and Handle
• 7 to 65 weeks, peak to low point is 12% - 33%
• Shouldn't correct more than 2.5x the general market
• Handle is 1 to 2 weeks and has a price shakeout, volume should be very low on the pullback phase of the handle
• Should consolidate above 200dMA
• Handles that don't properly shakeout (10% - 15%) are prone to failure
• Pivot Point
• Line of least resistance should be broken with volume at least 50% > normal.
• If you try to buy before this point, the stock will never get to the buy point.  If you buy 5 - 10% after you are too late
• Objective is to buy a the right time before the move, not the cheapest price
• Not necessarily the old high, could be a trendline from the old high
• Double Bottoms
• Likes when 2nd bottom is lower than 1st to get a shakeout
• Flat Base
• Usually after a run up from cup w/ handle, saucer, or double bottom.  Moves sideways for 6 - 7 weeks and does not correct more than 10% - 15%.
• Tight Flag
• Occurs after 100% move in a short period of time
• Corrects sideways w/ no more than 10% - 20% decline.
• Only occurs a couple times / year
• Overhead supply
• After a run up and significant pullback there is now overhead supply.  When the stock moves up again, you have to be able to tell where the overhead supply is using the charts

Ch. 16 - How to make money reading financial pages

• Investors Business Daily 'New America' Articles show new companies
• Find stocks in the top 80% of all performers
• Look for large volume flowing into stocks
• Review leading industries.  S&P classificiations of industries is not correct, you should use revere

Ch 18 - picking the best industry groups / subgroups / sectors

• There are many more industry sub groups that are actually related than those categorized by S&P.  You should use these sub groups to find the performance rather than the industry group.
• Only pick industries of the future
• A stock's weakness can spill over to the rest of the group, so be aware
• especially the best stock in the sector
• avoid buying stocks unless there is one other important stock in the same group that shows strength and attractiveness
• this doesn't apply to companies that are completely unique (he gives Disney as an example)
• 
  
• Follow on stocks
• If oil prices rise, oil stocks go up, but so do oil service stocks.
• When new efficient jet aircraft took off, airline stocks did well.  So did hotel stocks.
• Cousin Theory
• Suppliers of the main group will do well
• Boeing sold new jet lines, and its Monogram (sold toilets for airplanes) did well
• Fleetwood (RVs) helped Textone because it supplied vinyl clad paneling and cabinets
• Defensive stock cues
• If you see increased buying of defensive stocks after a couple years of bull market, it may indicate a near top.
• Gold, Silver, Tobacco, Foods, Grocery, Electric / Telephone Utilities
• Prolonged weakness in the Utility Average could also forecast increasing interest rates and bear market ahead
• Look at $spx, $util, $tran in stock charts
• Stocks require a wall of worry, doubt, and disbelief to climb
• Generally masses are wrong, so are investment managers
• Stock market is about 8 to 9 months ahead of economic indicators
• Fed, Tax Policy, and Interest rates are most important
• 
  

Ch 20 - Most Common Mistakes

• Most investors do not use a good selection criteria
• Miserable results will follow buying on the way down in price
• Even Worse is to avg down your buying than average up
• Low priced stocks (< $10)are low because they are inferior in the past or something wrong happened recently
• 1st time speculators want to make a killing too fast without doing the necessary study and preparation
• Don't buy on tips, rumors, stories, or advisory service recommendations.  People are willing to risk their money on what someone else says instead of knowing for sure what they are doing themselves.  
• Investors buy 2nd rate stocks because of dividends or low P/E ratios.  Dividends are not as important as EPS.  Low P/E is most likely because it is inferior
• People buy company names they are familiar with.  Many of the best stocks will be newer names you won't know well but could and should know if you do a little studying / research
• Most people don't know anything about the market, so their advice is probably worthless
• 98% of people are afraid to buy a stock that is beginning to go into new high ground, pricewise.  It just seems too high to them.
• The majority of unskilled investors stubbornly hold onto their losses when the losses are small and reasonable.  They could get out cheaply, but being emotionally involved and human, they keep waiting hoping until their loss gets much bigger and costs them dearly.
• Investors take profits too easily and hold their losers, they exact opposite of correct investment procedure
• Investors worry too much about taxes and commissions.  Key objective is to make a profit.
• Dont focus on short term options.  Don't sell naked options.  Focus on longer-term options
• Just use market orders, you are going for large gains not 1/8 and 1/4 of a point
• Most investors who are unable to buy or sell have no plan because they do not know what they are doing.  You need a plan, a set of principles
• Most investors cannot look at stocks objectively.  They have favorites, are always hoping, have personal opinions rather than paying attention to the opinion of the marketplace
• Investors are influenced by things that are not crucial - splits, increased dividends, news announcements, advisory recommendations

Parting Advice - Have courage, be positive, and don't even give up.  Anything is possible with hard work.  It can be done and your own determination to succeed is the most important element.

pg.181

Al Brooks - Price Action for the Serious Trader

Ch 1 - Price Action

• Think of all bars as either doji ( 1 to 2 tick on 5min) or trend bars.
• Everything is relative.  A series of doji's w/ increasing closes is trending.
• signal bar is the bar you used to enter the setup.  It is usually the bar previous to the one that is currently being traded.  When you begin, you should only take trades that are trend bars.  Place your stop order 1 tick above the signal bar for a buy, or 1 tick below the signal for a short.
• Only goal of trader is figure out whether in a trend or range
• Signal bars
• bull reversal bar
• open near or below the close of the prior bar and a close above the open and above the prior bar's close
• a lower tail that is about 1/3 to 1/2 the height of the bar and a small / non-existent upper tail
• not much overlap with the prior bar or bars.
• When considering a countertrend trade in a strong trend, you must wait for the trendline to be broken and then a strong reversal bar to form on the test of the extreme, otherwise its low probability.
• if there is too much overlap, it will most likely fail because there are no trapped shorts.
• Small Bars
• inside bar
• Inside bar after 1st close below EMA in several hours in a bull trend, will likely test the HOD at minimum
• ii or ii pattern (2 or 3 increasingly smaller inside bars in a row)
• small bar near the high or low of a big bar(trend bar or outside bar) or trading range (esp if a body in the direction of your trade indicating your side has taken control)
• not a good fade setup if it a doji (small relative to recent bars) eps if no body, it is near the EMA and between 9 - 11am PST
• in a trend, a small bar on a pullback is only a With Trend setup.  place stop to open in direction of trade 1 tick above/below the previous bar in the direction of the trend.
• Double Twin (top or bottom) - consecutive bars in a strong bear w/ identical lows (highs) and preferably small bottom(top) tails
• same as above but w/ close and open swapped.
• Reversal bar failure - buy above a bear reversal bar in a strong bull
• Shaved bar - no tail at one or both extremes in a strong trend
• Exhaustion bar - huge trend bar
• Outside Bar - high above previous bar high , low below previous low
• ex: market sold off below a swing low for the 2nd time and reversed up from a trend channel line overshoot, you're looking to buy.  Keep moving a buy stop order 1 tick above prior bar's high until filled
• if outside bar is in the middle of range it is meaningless, unless followed by a small bar near the high or low, which sets up a fade.
• iOi bar can setup an entry in the direction of the breakout of the inside bar.  only take if you think the market can move far enough to hit your profit target.  ie: ioi is at new swing high, downside breakout could be a good short since it likely a 2nd entry (low of the outside bar will probably be the first entry.
• New high Reversal after wedge top usually leads to two legs down.  Then expect a test of the extreme

Ch2 - 

• Trendlines
• All trendlines and their breaks are important, but once you know where they are remove them from the chart.
• Trend channels are useful for projecting price points
• Any big bar should be considered a one bar trend
• Micro trendline  - 2 to 10 bar trendline where most bars touch the trendline
• good for small scalps on false breakouts with the trend
• Horizontal Line
• On strong trend days these should be used for entry with the trend
• Most days are not strong trend days and these should be used for finding failed breakouts which become swing hi and lo
• These lines are especially useful for the  2High or 2Low entry pattern (2High is a higher high than previous bar after a series of continuous lower highs)
• 
  
• Trend Channel lines
• Trendlines are below the lows in a bull, opposite for bear
• channel lines have close to the same slope as the top
• overshoots usually reverse back into trend, but some will result in a steeper trend
• most trendline breaks fail, but they generate a new swing point that creates a new less steep trendline
• shorter term trend channel lines that intersect longer term trend channel lines are good for signaling when to go long
• reversal on channel overshoot may lead to two legs up

Ch 3 - trends

• It's important to recognize trend because most trades should be in that direction.  You should take every With Trend entry.  If you see a trend setting up within the first hour or two of the day, there will likely be several HP With Trend trades.
• Countertrend setups will likely make you miss much of the profitable with trend entries..  The market draws in countertrend traders and if you entry where they exit at a loss it will drive the market in your direction, even though the market looks overextended.
• Best risk/reward(RR) occurs when you enter on the First Pullback after a trendline break, before there is clearly established trend.  This new trend must first break an older trendline or trading range
• Wait for trendline breaks before looking for counter trend setups.
• Whenever you find yourself waiting for a long time for a great reversal, you are oblivious to the trend in front of you.  When a trend is so strong it is nowhere near a trendline, you are missing the most reliable trades that exist.  All minor pullbacks, even a single, small inside bar, are great With Trend entries.
• Signs of strength
• Failed wedges
• Gap
• No climax and not many large bars.  Often the largest trend bars are countertrend, trapping traders into looking for countertrend trades and missing With Trend trades.
• Small pullbacks (if ES has 12pt range, all will be less than 3 - 4 pts)
• Sideways correction after trendline breaks
• Repeated High/Low 2 and M2B and M2S(2 leg pullback to EMA s= short) With Trend entries
• Strong trends you can use a 2 point money stop.
• First time a close below the EMA in a strong trend, it will likely fail and thus a buy
• An outside bar that traps traders outside a trend often leads to a strong trend leg as traders are forced to chase the market up
• Reversal Day
• Some of the strongest trends begin in the middle of the day and originate as trading range breakouts or trend reversals.
• It can runaway where it trends relentlessly with only minor pullbacks,.
• You must enter quickly, even if the new trends looks climactic and overdone and swing most of your position.
• Trend Resumption Day
• trend off the open, sideways action for couple hours, and finally breakout and resumption of original trend.  Midday action sometimes has 3 counter-trend lazy swings, and sometimes the 3rd fails to surpass the 2nd, forming a H&S shoulder flag (most fail and become continuation patterns).  Because the pattern has  3 Pushes instead of two, it traps trader out, thinking that this counter-trend action might in fact be a new trend.  
• The quiet midday period leads traders to give up on the day when it is in fact an opportunity.
• Trending Trading Range Days
• Don't hesitate to trade both directions, fading the trading range extremes
• trend days  are made of a series of 2 or more trading ranges separated by brief breakouts.  On the daily chart, it is clearly a range day.
• It is common for the day to reverse at least one of the ranges in the final 1 or 2 hours of the day
• If it reverses it will likely test the countertrend signal bars in the prior range
• Tight Channels / Spike / Channel bull or bear
• Channel beginnings usually get tested within or day or two, so look for reversals the next day
• Some days have early strong momentum move ( a spike) and then the move continues in a less step channel the rest of the day, but the channel is only tradable in the With Trend direction because the channel is so tight or the pullbacks are not far enough for countertrend to be profitable.
• Do not take countertrend High/Low 2 entries because there will be no trendline break. Their failures are great With Trend setups
• Stairs - broad channel with clear bull / bears active, but one side is controlling
• Shrinking stairs is when the breakouts get smaller and smaller.  It often leads to a 2 leg reversal and trendline break.  
• One stair might accelerate and breakout of the trend channel.  If it reverses this overshoot and reversal will likely result in at least a two legged move.  If it does not the breakout will probably continue for a couple more legs in a measured move(distance beyond channel should be about the same as the distance within in the channel

Ch 4 - pullbacks

• Pullbacks usually have two legs, if the pullback fails, the trend will resume
• Buy the High 2 near the EMA, where most traders think the trend has reversed
• If trend that is now pulling back ended in a climax like a TCL OSR (trend channel line overshoot and reversal)  or any significant trend reversal pattern, the trend has changed and you should not be looking to enter pullbacks in the old trend
• it is over, at least for an hour / maybe rest of the day.  
• After a strong rally, if there is a wedge top, or Lower High after a break of the bull trendline, you should now be looking for shorts and not pullbacks in the old bull
• 1st pullback sequence - bar, minor trendline, ema, ema gap, major trendline
• 1st minor pullback in a strong trend is a 1 or 2 bar pullback ( typically a High / Low 1 entry), which is almost always followed by a new extreme.  It is often a High / Low 2 setup but can be another High/Low 1 in a strong trend
• EMA and Gap Pullbacks
• In a ball or sideways market, and high is below ema, there is a good chance that he market will move to fill that gap.  Sometimes the bar will go above the previous bar, but then the continues down after a bar or two.  If the market again goes above the high of a prior bar, this is a Gap 2 Bar, or a 2nd attempt to fill an EMA Gap, and the odds are excellent that there will be a tradable rally off this setup.
• Gaps above EMA will tend to get fille din a bear or sideways market.
• 2HM (close away from ema for 2+ hours)
• Fade all touches of EMA 
• 1st EMA Gap bar (in a bull buy 1 tick above the high of the 1st bar where the high is below the EMA, esp if this is a second entry).  Swing part of the position because the market may run.  EMA tests are particularly reliable in stocks and often provide great entries all day long.
• Breakout Test - in a a bull reversal, if the high of the entry bar == swing higher low bar (low of this bar), it is the start of the bull move and it will create a measure move of the bull reversal low to the swing high
• High / Low 1,2,3,4
• Reliable sign that pullback has ended in a bull trend is when the current bar's high extends at least one tick above the high of the prior bar.  This High 1 ends the first leg of a sideways or down move, although this leg may become a small leg in a larger pullback.  If the market does not continues sideways or down, the next High 2 is the ending of the 2nd leg.
• There needs to be a a tiny trendline break between High 1 and High 2 to indicate that the trend trades are still active, without this, do not yet look to buy since the High 1 and High 2 are more likely to be part of the same first leg down.
• In a strong upswing, the High 2 can be higher than High 1.  Some pullbacks can continue to extend to High 3 and High 4, it is likely the market is no longer pulling back and instead in a bar swing.
• If you think you are in a trading range, w/ simply a strong new high and then see a Low 2 above the old high, but instead of falling, the market continues up, you should be looking for High 1 and 2 entries.  It is likely that bull strength is long. You should defer looking for Low 1 and 2 shorts until the bears demonstrate enough strength to make a tradable down move likely.
• High 2 variant, there is no high 1, just a bull bar.  Use this bull bar the end of the 1st leg down
• The most reliable High 1 / Low 1 entries occur when there is false breakout of a micro trendline because mTL are only present in the strongest segments of trends.  The one or two bar false breakout that creates the High 1 / Low 1 is a high probability With Trend scalp.  The other time when you need to take these entries is when there is a strong move well beyond the EMA and then a High 1 pullback to the EMA.

Ch5 - Trading Ranges

• 5 - 20 bars is a range
• Generally they are continuation patterns, they often break out in the direction of the trend that preceded them.  They also tend to breakout away from the EMA.  Below EMA => goes down, opposite for above EMA.  If they are far from the EMA then generally retrace towards it.
• Can be easier to read on 15 or 60 chart.
• After a climax, the market can breakout in either direction.  This is because the climax has generated momentum in the opposite direction and you will  not know whether it will lead to a breakout or trend continuation.
• Only fade after a trend bar failure at the top or bottom of the range
• Look for failed failures as a reliable 2nd entry.  
• Barb Wire
• Middle of the day, middle of the day's range, near the EMA.  3 or more bars largely overlap and one or more is a doji.
• odds favor a With Trend breakout
• results in repeated losses for breakout traders.  Wait for the 1st sign of conviction w/ trend bars, but odds are high it will fail, so fade it.
• If a bull trend bar that breakouts out to the upside by more than a 2 ticks, as soon as it closes, place an order to go short 1 tick below the breakout bar.  If short entry fails, reverse the order at 1 tick above the high, which is a breakout pullback entry.
• If a trading range sets up near the EMA, never look to buy if the bars are mostly below the EMA, same w/ short if bars are mostly above.  The move will most likely set up some sore of M2 entry in the direction of the EMA.

Ch6 - Breakouts

• Breakout can be of anything, trendline, trading range, hi/lo of the day / yesterday.
• Fade it if it fails, as most breakouts do, and re-enter in the direction of the breakout if the failed breakout fails and becomes a Breakout Pullback
• When a trend is strong, enter With Trend on a High / Low 1 or 2 pullback, before or after the breakout, not on it.  However, once u recognize that a strong trend is underway, just enter since every tick is  a With Trend entry w/ a reasonable swing stop.
• Breakout Test
• Breakout Pullback comes within a few ticks of the breakout entry price, it is a Breakout Test.  The test bar is a potential signal bar, so place an entry order 1 tick beyond the high in a bull trend.
• Breakout tests often run the stops of traders, so depending on the instrument, place your stop accordingly.  GS is notorious for running breakeven breakout stops.

Ch 8  - Trend Reversals

• Only buy after major trendline break and wait for the test of the old extreme
• Typically, the initial move will break the trendline and then test the old trend.  Traders will look to initiate countertrend trades on this test
• In a bear trend, if there is a sharp move upwards that extends well beyond the bear trendline, traders will look to buy on the 1st pullback, hoping for the 1st of many higher lows.  Sometimes, the pullback extends below the low of the bear trend, running stops on the new longs.  If this lower low reverses back up within a few bars, it can lead to a strong swing up.  However, if the lower low extends too far below the prior low, it is best to wait for another break, upward momentum surge, and then higher or lower low pullback before going long again
• Most trends end with a breakout of a trend channel.  Either an overshoot that fails and followed by a reversal down and trendline break, or market can fall through trendline without overshooting the channel line.  if the bull ends with a failed breakout of the channel line, there will be 2 legs down, and the 1st pullback will almost always form a Lower High as its test of the bull high. 
• If the bull ends with a trendline break, the test of the bull high can either be a Higher High or Lower High and each occurs equally frequently.  Since at least 2 legs down are expected, a Higher High should be followed by 2 legs down.  A lower High maybe followed by just a single leg, since the first leg formed the Lower High.
• In a bear after a Lower Low reversal, it is imperative to buy the first Higher Low because this reinforces the premise that a major bottom is in
• Trends last much longer than most trades would imagine, most reversal patterns fail and most continuation patterns succeed.  Be very careful trading countertrend based on reversal pattern
• Most minor trend channel line overshoots as With Trend setups and enter where the losers are exiting on their protective stops
• Trend reversals are often gradual and form patterns like Double Top Bull Flag, Spike and Trading Range, Spike and Channel
• Major reversals from bear markets are volatile with large bars and several pushes up and down.  People think that the worst is over and realize they are too early and sell out quick.  This can happen several times before the bottom is in and accounts for why many major major reversals end with large range bars and either a a Failed Flag or 3 Push Pattern
• Signs of strength in trendline break
• Covers many points
• Goes well past EMA
• in a bear reversal, it extends below the final Higher Low of the bull and in a bull reversal, it extends above the final Lower High of the bear
• Last many bars ( 10 - 20)
• Other strong prior trendline breaks
• reversal back to old trend extreme lacks momentum, shown by overlapping bars with many being trend bars in the new direction
• reversal back to the old extreme fails at the EMA or the old trendline does not get close to the extreme
• Strong Reversals
• Strong reversal bar
• 2nd entry signal
• Trap bar(trapping traders out) forming a small Higher Low in a new Bull or Lower HIgh in a new Bear
• Began as a reversal from an overshoot of a trend channel line from the old trend
• Reverse a significant swing high or low
• Break well beyond the trendline of the old trend
• Break EMA by many ticks and close beyond it for many bars
• Break above the last Lower High of the prior bear or Higher Low of the prior Bull
• The pullback from the 1st countertrend leg forms an M2B or M2S
• The first leg lasts many bars and reverses many bars of the prior trend
• Trending anything, closes, highs, lows or bodies
• Trapped Bars
• Prior trend bars with reversal of all those bars in a single bar, which is again reversed
• Failed Low 1 / High 1 that is a small Higher Low.
• CounterTrend spike w/o pullback - a large spike down that is followed by a slow rally that retraces most of the spike will usually be followed by a 2nd selloff that tests the low of the initial spike.  Spike is not just one bar, it is many bars in the same direction that are reversed.  Usually it exhibits a curved shape
• Climax Reversal - does not have to have a pullback that rests the extreme.  
• Reversal targets are the highs of the bull signal bars after a bear
• Wedges - usually lead to reversals after overshooting a trend channel line
• wedge might only form with the candle bodies
• if it fails, the market will usually run up quickly in a measured move, about the height of the wedge
• usually lead to two legs down
• Expanding Triangles
• type of 3 push pattern that can be continuation or reversal, with each push greater than the prior.  It's strength comes from trapping traders

Ch 9 - Minor Reversals: Failures

• A failure is any trade that does not reach its goal, resulting in either a smaller profit or loss.  Failures are excellent setups for trades in the opposite direction since the traders who were just forced out will be hesitant to re-enter in the same direction, making the market one-sided.  As they exit with losses, they drive the market even further in the opposite direction.
• Most failures become a 2 legged continuation pattern
• Most reliable reversal is one that takes place at the end of a pullback in a strong trend, near the EMA because you are entering in the direction of the larger trend.  
• One Tick failure  - (like a 1 tick false breakout)
• big traders view stops as good short setups, knowing that weak hands will be buying.  It is a reliable sign that the market is going the other way.
• The price will be hit by 1 tick and then move the other way quickly
• Know where traders will place their stops and do the opposite there
• Failed high / low 2
• if it fails there will usually be 2 more legs with Trend.
• usually failed if there is no strong trend line break.
• Failed Higher High / Lower Low breakouts
• most days are trading range days so you can fade swing high an low
• when price goes above swing high and momentum is not too strong, place an order to short the Higher High at 1 tick below the low of the prior bar on a stop.  If not filled after the bar closes, move it up until the high has so much momentum you need a 2nd entry to confirm.
• First failed breakouts below a swing low is a Lower Low buy setup.  Odds are higher if setup bar is in the direction of your entry, so its best to wait for a bull reversal bar before buying.
• Failed Trendlines and Trend Channel Lines
• failed trendline usually means a reversal, if that reversal does not appear or is weak, look to short again
• failed trend channel line means a strong continuation of the trend.  look for with trend entries
• Failed Reversals 
• Place entries where other traders place their stops for good scalps or a 2 legged move.
• Always scalp at least part of your position and move to breakeven if the pattern fails
• Failed Final Flag: Tight Trading Range
• Horizontal trend that extends sideways for several bars, breaks a trendline, and then breakouts to a new extreme, but then quickly reverses in the next few bars.  
• If this reverses, it will lead to 2 legs down
• Mostly horizontal and sometimes as simple as an ii pattern
• Failed Wedges
• After a wedge reverses, the reversal fails, and the trend resumes only be followed by a failed breakout to a new extreme.  This is a failed failure, which is a second signal and likely to result in a two-legged correction.
• Wedge top in a bull and market drops, then reverses strongly to a new high.  That new high fails, this can lead to a strong bear move since it is a 2nd failure by the bulls to push beyond this price area.
• Failed scalps
• If scalp only moves 5 ticks instead of 6 ticks for ES, this is a failed scalp.  After a series of successful scalps, when one fails that means shorts will exit at breakeven.  Usually this coincides with something (LOD, trend channel line)

Ch 10 Day Trading

• Trade SPY instead of ES at first to get used to it.  Don't scalp unless your commissions are <= $1
• Have several stocks on your watchlist and watch for patterns to swing those stocks
• You must have 2 reasons to enter a trade
• Reversal Bar
• Good Signal Bar
• EMA pullback in trend, especially if two legged (M2B, M2S)
• Breakout Pullback
• Breakout Test
• High Low  2 or 4 (must have prior trendline break if fading a strong tend)
• Failure of anything: Prior High or Low, flag breakout, reversal from trendline overshoot or TCL, scalp 5 tick failure
• Except for these cases, you must have 2 reasons
• anytime there is a strong trend, you must enter on every pullback that does not follow a climax or failed flag breakout, even if the pullback is just a High or Low 1
• If there was a TCL OS and good reversal bar, you can fade the move
• In a trading range or trend, there is a 2nd entry
• Anticipate trades so you're ready to place your orders
• ex: After bear trendline break,  there is a 2 legged break below a major swing low, or an overshoot of a trend channel line, look for a reversal, or if there is a ii breakout, look for a reversal.  
• Once you see outside bar or Barb Wire, look for a small bar at the extreme for a possible fade
• If there is a strong trend, be ready for the first EMA pullback and any 2 legged pullbacks to the EMA and for the 1st EMA Gap pullback
• Enter on stops to go with market momentum
• After you enter a position, the initial stop is at 1 tick beyond the signal bar.  If the signal bar is too large, use a 2 point stop or 60% of bar range.  It depends on the volatility for the day.
• Try out some trades, and see what works best, sometimes its a 2 point stop, other day sit may be 4 or 8 points
• After the entry bar closes place your stop at 1 tick below the entry bar.
• When a protective stop is hit before making a scalper's profit, you were trapped, and so reversing on the stop is occasionally a good strategy.
• ie: a failed Low 2 short in a pullback in a bear is usually a good reversal into a long trade.  
• Stop run in a tight trading range is not a reversal
• When to enter on a limit order:
• 2nd entry after TL break and strong reversal bar.  
• ex: if you just bought and the market test the exact low of the entry bar several times over the one or two bars consider placing a limit buy order to double your position at one tick above the low of the entry bar and risk just two ticks

Ch 11 - The First Hour

• Best trades initially are usually related to patterns from yesterday 
•  look for failed breakouts, 
• breakout pullbacks, 
• Trends from the Open and their first pullbacks, 
• highs / lows - usually get tested within the 1st hour for a breakout or reversal
• swing highs and lows
• trendlines
• large flags
• trading ranges
• These setups you usually lead to one extreme of the day and are important swing setups for part of your position
• 
  
• Look for reversals in the 1st hour as they are the rule not the exception.  Exception is a trend.
• 3 minute chart trades well for the 1st hour, but it is prone to more losers
• Trend Bar on Gap Open, 1st or 2nd Bar
• If there is a gap open and the first bar is strong, small tail and good size body trend car, trade its breakout in either direction.  If you enter and your stop is hit on the next bar, reverse for a swing trade because the market will usually move more than the number of ticks you lost on your 1st entry.
• If there is a gap and there is a trend bar in opposite direction of the gap, the gap is usually closed.  Traders will be taking trades at the top of the bar.  If it fails, they will cover leading to a reversal.

Ch 12 - Daily, Weekly, Monthly

• Same Ideas apply to these as intraday
• Huge Volume Reversals
• When a stock is in a bear and there is volume 5 - 10x normal, the bulls may have capitulated and a tradable bottom may be present
• Traders not necessarily looking for a bull reversal, but there should be a 2 legged reversal to the EMA

Ch 15 - Best Trades

• When first starting don't trade more than 2 contracts no matter how large the account
• If market is trending, buy every high 2 where the setup bar touches or penetrates the EMA.  Move your stop below the entry bar.  Scalp out half and move stop to breakeven.  Add on every opportunity.
• When market is not trending, fade 2nd entries at new swing high or lows.  These days will have several swings lasting 5 to 10 bars, and trendline breaks, leading to an opposite swing.  If the momentum is strong, wait for a 2nd entry.
• Once profitable, focus on volume of trades rather than new setups.  25 contracts at 2 pts / day = 500k / year
• Avoid Barb Wire and 1 minute charts
• Best reversal pattern is the trendline break w/ strong momentum followed by a 2 legged test that results in a new extreme.  The 2 legs of the new extreme (Higher high / lower low) are effectively 2 attempts to reestablish the old trend.  The failed 2nd attempt has a high probability of leading to a strong reversal that should have at least 2 legs up and results in a new trend.
• Trading stocks in the 1st hour. 
• Focus on failed breakouts and Breakout pullbacks from patterns yesterday.  If there is a strong reversal bar, take the first entry.  If there are 3 or more largely overlapping bars, wait for a 2nd entry.  After you have a scalpers profit, move stop to breakeven and take off half to third and let the rest ride all day or until a very clear reversal happens
• Major Reversals
• reverses a trend that has been in effect for a couple hours or days.  Best entries have a significant trendline break before the setup.  Enter on a pullback that tests the trend extreme (Lower High or Higher High in a new bear, opposite for new bull).  If it overshoots too far, the trend has resume and wait for another trendline break
• Pullbacks in  a Strong Trend
• Most days it will not be obvious the market is trending until after the first 1 - 2 hours
• Look for a 2 legged pullback to the EMA.
• Swing every With Trend trade on a strong trend day
• At every new setup, you either add back your scalp or place a full position on top of your current open swing position.  Once you scalp out part, your swing portion is twice the size of your normal swing
• Micro trendline failed breakouts form High 1 long entries in a bull and Low 1 short entries in a bear that are With Trend entries.  If the entry fails a bar or two, you have a failure of a failed breakouts, which is a Breakout Pullback
• M2S and M2B may not look like good entries, but you must trust they hold in a strong trend
• When there is strong momentum look to buy a High 2.

Trading Ranges (different book)
Chapter 11 - Trends Converting to Trading Ranges

• Any pullback is a trading range on a higher time frame chart
• If a bear trend forms a downward sloping wedge, the market will try to correct to the top of the wedge where the earliest bulls began to buy.  If the market can reach there, the bulls will exit with a breakeven trade and not want to buy again until the market falls.  They expect the original low of the wedge will support any pullback and buying at that level will give them a defined / limited risk.
• the earliest signs of 2 sided trading allows perceptive traders to anticipate when a pullback might form and how far it will extend.

Trade management

• Every trade has an 'expected' probability.  High 2, Low 2, M2S, ect... are all about 60% profitable swing trades that should have a rewards 2x the risk.  You should understand that if you risk X points, you need to be taking trades that yield at least 2X points.
• 10 pts / day is totally reasonable in the Emini
• Many swings turn into scalps as they trade doesn't work out