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At 5:08 in the video - what keeps us from shorting the close of the 2nd consecutive bear bar closing on its low and putting a stop above HOD? Is it one of the following?
1. Al mentions we're still above the MA, but isn't that always the case when we'd have a gap open that starts with two bear bars?
2. Is it just that the daily time frame is in a BTC bull trend, which seems to be the point of the video?
3. Maybe you'd want a stop entry below the 2nd bar bar which would have never triggered?
4. Brad Wolff often mentions not trading the first several bars, but the 3rd bar is pointed out as a potential entry here, so that's probably not it.
Or is shorting the close of the 2nd bear bar a reasonable trade and just would have been a loser in this instance.
Thanks very much!
Are you talking about 49A?
Apologies! 49F.
Hi Brooks,
Al mentions we're still above the MA, but isn't that always the case when we'd have a gap open that starts with two bear bars?
I think it's possible to have a gap up and still be below the EMA. For example, a strong selloff the day before will put the EMA high above. So it's still possible to have a gap up with bear bars and be below the EMA.
Is it just that the daily time frame is in a BTC bull trend, which seems to be the point of the video?
Yes, Al does explicitly say that because the daily is in BTC mode, any opening selloff has a higher probability of failing. So if you're selling the 2 bears for a scalp it's not good because low probability. If you're selling them for a swing, is it >40% chance to succeed? Probably less when taking the HTF into account, so it doesn't qualify for a good enough swing either.
Maybe you'd want a stop entry below the 2nd bar bar which would have never triggered?
Given how close the 2 bears are to the EMA, you probably want to STC them instead of putting entry order 1 tick below to give yourself a little more wiggle room.
Brad Wolff often mentions not trading the first several bars, but the 3rd bar is pointed out as a potential entry here, so that's probably not it.
It's good general purpose advice, especially when the open is TRish. But there's no THE BPA Rule to never trade the first 6-12 bars; you see Al Brooks constantly analyzing and finding trades for all bars of the day.
Or is shorting the close of the 2nd bear bar a reasonable trade and just would have been a loser in this instance.
I think it's fine to sell the 2nd bar and yes, it would've been a loss. The trick is to get out of such trades early. Especially when the reversal bars are strong against the position. Traders need to remember that the open has many reversals and be adept at evaluating strength of bars relative to prior bars quickly and take losses without hesitation. This is hard for beginners to do.
So in summary, if you don't take HTF into account, this would've been an OK sell even though it resulted in a loss, and that's why Al Brooks included such a helpful lesson for adding a little extra information to our analysis. In fact, he probably picked this particular day because it had such a good looking sell setup on the open.
Hope this helps,
CH
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Incredible - thank you so much for this super thoughtful breakdown.
