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Hello
I recently finished the Brooks trading course. I understood the concepts of trading ranges very well. "Big up, big down, big confusion, buy low, sell high and scalp" approach makes sense to me. However, I am not a day trader. Day trading stresses me out. I am more comfortable with longer term trades (3-10 days) and putting on 3-5 trades per week.
I would rather scan dozens or hundreds of stock charts and put on 3-5 trades per week than trade a single instrument day in and day out. Basically, I would be putting on trades on the 4h or the Daily chart and trade a single leg up in the trading range or a channel.
My main questions
1) how to put together a reliable and repeatable system that would allow me to trade the broad trading ranges and channels.
2) How would one go about back testing such a system?
At this time, I am trading stocks.
Thank you
Mitch
Hi Mitch,
Personally I don't think back testing really helps you, the most important thing in trading is screen time, you have to sit in front of the system.
Hi Mitch,
- Buy low, sell high and scalp works for any chart if the chart is in trading range.
- There is no reliable system for trading which can make profit. I don’t think back testing with historical data can help you to get a profit. AL mentioned that trading is related to probability and risk/reward. 40% can swing a trade successfully and 60% you will get a small gain/loss even you have either a high2 or low2 setup. There is no perfect setup and you need to manage you trade well by placing stop loss or even scale in.
- For day trading, Brad Wolff told us in the blog that "If one has trouble trading the open, they should consider waiting for 6-12 bars.”. The reason is “by the close of Bar 7, there is 50% chance that you have seen either the H or L of the day” (quoted from The Brooks Encyclopedia of Chart Patterns, Part A-B, slide 58). It is difficult to confirm whether it is a trading range day or not. It will be more easy to confirm when bar 12 or 18 is being closed.
