Building Setup

My first question is What kind of setup should I build

1. Based on fix rules

This can't work, otherwise someone would have figured it out already and taken all the money in the stock market.

2. Based on some fix rules + Some cognitive reading of the price action (in live market)

3. Based on cognitive reading of the price action (in live market)

Not sure what you mean with cognitive reading, I would say you need to start reading in SIM using the PA techniques that you have learnt. At the end of the day, compare your reading with Al's to get to know where you are. You can also give a try to the webinar where you can follow Al's thinking process.

My second question would be

1. If your answer to first question is 2. or 3. then don't you think your trading would be too much dependent on your way of seeing the price action... 

Entirely, we can only trade what we see.

as every you may see price action unfolding in the live market in a different way, so how would you achieve consistency in trading to be consistently profitable?

There are many readings, but only one correct (don't confuse with strategies, there are several of them and all can be correct... providing the reading they are based on is correct as well). Only once you get rid of the bad readings, you will be able to trade consistently (the second part of the learning: first, read; second, trade).

My third would be 

1. If your answer to first question is 3. then how would you back-test your setup, as a major problem would be while back-testing is would you be able to back-test the setup with an rational mind.... (as I think while back-testing these kinds of strategy you have to think like you are thinking in the live market)

Backtesting is difficult, the chosen variables can skew the results completely. For me, when talking about PA, is a completely waste of time. Happily, to fullfill the same need you have here the daily setups section. In there Al shares his EMINI reading. So you can go there and compare, if your trade is marked, it was good, either loser or winner.

Take advantage of it because it is the fastest resource that will tell you whether you are right or wrong. If you complement the study with the bar-by-bar analysis in brookspriceaction.com and give a try to the webinar for a few months, you will get as much feedback as you can get, and your learning curve will become much more friendly!

That was very helpful

Thank you very much ludopuig

Hi Rishi Patel,

Regarding fixed rules setups, I've just recently read the book trading sardines of Linda Raschke. She mentioned about trading with mechanical fixed rules. It does work but the edge from a mechanical is hard to find and won't last since all the smartest minds and computers in the world would directly/indirectly exploits the edge. Therefore, the difficulty with trading fixed rules (in the sense that it's completely mechanical machine auto executable) is not only in find the edge but also in constantly checking if the edge is fading away to adjust the parameters or just stop trading the setup.

That's not beginner friendly and the opposite of Al Brooks price action method of trading in my opinion. So that lefts us with option 2, and 3.

In regard to your second question, yes, I think that's correct. Our mind is the edge. Our trading performance will depend on our ability to read price action correctly and objectively.

mechanical is hard to find and won't last since all the smartest minds and computers in the world would directly/indirectly exploits the edge

Hmm.... Water Buffalo I now really think what you wrote is really true

Thank you very much

Further could you please or could any one please suggest me some books that talk about trading in general (about there experiences and all that stuffs) like Water Buffalo mentioned about book TRADING SARDINES

Again thank you very much Water Buffalo

I think first read all Al Brooks books.

Another book which I'm reading is "Diary of a Professional Commodity Trader". It's interesting because the author deprived his trading method from the book "Technical Analysis of Stock Trends" which what I heard was the same book that Al Brooks deprived his method from.

Great job for finishing the course. Looking back, I have asked myself hundreds of times, "what would I do differently Had I just started studying Al?" I have no idea how long you have been studying Al, so the above is more of a what would I do differently looking back. 

First, I would focus as much as I can on the fundamentals part of the course (videos 1-29) and only study thoughts. This is because too many people (including myself) have gotten caught up in "how to make money" instead of following the overall market direction. I would find myself constantly buying too high in a Trading Range or selling too low. So right now, I would not worry so much about "building a setup to trade" I would focus as much time as I could looking at charts and identifying the market cycle, always in direction, support and resistance. Do worry about structuring a trade until you are very confident in reading the market. Remember, support and resistance (aka context) is much more essential, and if you can get good at reading support and resistance, you will be able to progress much faster. Looking back, I would have saved myself so much time had I focused more on the fundamentals rather than be so eager to trade and make money.

I know the above does not answer your original question, but I really would recommend that you take a hard look at the fundamentals. Once you feel solid with those videos, I would start studying the "How to trade Prerequisites" (videos 30-36). Next, I would move on the the How to trade Section. 

I am sure all of the above seems obvious. Still, I genuinely believe that people focus on the how-to trade aspect (structuring trades) too quickly, and it causes them to lose sight of the overall fundamentals of trading (support and resistance). 

Once you feel like you understand the overall video course well (if you feel this way now, great!) I would start looking at higher time frame forex markets like 15 minute, 30 minute, 60 minute, and 240-minute charts and see if you can structure trades like an institution would but trade so small that you would not care if you lost 50 trades in a row. I say that joking, of course, but you want to see if you can structure trades profitably and do not need additional pressure, such as trading too large of a position size. Also, trading forex and very small allows you to be very flexible with taking profits, using wide stops. A big problem I think many people have with the emini or micro-emini's is that they are forced only to trade one contract, and the risk can still be $50 or more, which adds too much pressure to someone starting. 

Another thing to note, I have never liked trading only 1-2 setups and have always wanted to be flexible with trading. Others may disagree and recommend you only trade 1-2 setups which is a good strategy. It all comes down to personal preference. 

Lastly, perhaps take a look at Brooks Price Action Best Trades (daytradinginsight.com)

It is a 6-hour course that Al and Richard, (BTC Admin" created that does an excellent job helping someone focus on four key setups, so perhaps consider starting there. 

Hope this information helps. 

Brad.

Thank you very much for the deep explanation...