Master Price Action From The Best! - Al Brooks | Trader Interview
Summary
TLDRIn this insightful discussion, the speaker, Al, shares his expertise on price action trading in the stock market. He begins by confidently asserting that he can teach anyone to make money in the stock market within a minute. Al emphasizes the importance of understanding market trends and patterns, suggesting that buying a stock index fund or ETF and holding it for an extended period, like 20-30 years, is a virtual guarantee for making money. He discusses the market's historical performance, noting its tendency to rise over time despite periodic downturns. Al also touches on the influence of news channels and advises against relying solely on TV experts for trading decisions. Instead, he encourages traders to focus on price action and learn to read charts to predict market movements effectively. The conversation delves into various trading strategies, including day trading and the benefits of trading on different time frames. Al also addresses the unpredictability of markets and the need for traders to be adaptable. He concludes by sharing his website, BrooksTradingCourse.com, where interested individuals can learn more about his trading courses and resources.
Takeaways
- 📈 The stock market has historically shown a pattern of rallying after a significant crash, followed by a period of being sideways for a decade to allow fundamentals to catch up with the price.
- 💡 Price action is a critical aspect of trading, and understanding it can lead to more informed decisions rather than relying solely on news reports which may be sensationalized.
- 🎯 Technical analysis, such as chart patterns and moving averages, can provide traders with a logical approach to identifying potential market trends and entry/exit points.
- 🚫 Avoid making trading decisions based on TV experts' opinions, as they are not managing your trade and may not share your investment time frame or goals.
- 🤑 Long-term investment in a diversified portfolio, such as a stock index fund or ETF, held for 20-30 years is a strategy that has a high probability of making money, regardless of market fluctuations.
- 📊 Trading on smaller time frames, such as a daily or even a five-minute chart, can potentially yield higher returns than long-term holding, but requires more active management and understanding of market trends.
- ⏰ Market timing is crucial; knowing when to buy or sell based on patterns and indicators can maximize profits, but it's also essential to manage risk with stop orders and position sizing.
- 🚨 Be cautious of trading in markets that are not well-regulated or have a high potential for government intervention, such as cryptocurrencies like Bitcoin, which can introduce additional risks.
- 🤔 The market is always in a state of balance with an equal number of buyers and sellers; understanding this can help traders gauge the likelihood of a price move in a particular direction.
- 🧐 Algorithmic trading by institutions now dominates the market, leading to more logical and rational price movements, which can be advantageous for traders who use similar systematic approaches.
- 🌐 The principles of technical analysis apply across all markets and time frames, making it a versatile tool for traders regardless of the specific market they are interested in.
Q & A
What is the one-minute lesson on making money in the stock market as mentioned in the transcript?
-The one-minute lesson is to buy a stock index fund, a mutual fund, or an ETF that mirrors the stock market and hold it for 20 or 30 years. Historically, this has proven to be profitable due to the general upward trend of the market over time.
What does the speaker predict about the stock market's behavior in the next few years?
-The speaker predicts that the stock market will likely experience a period of being mostly sideways for about a decade, similar to patterns observed after significant rallies in the past.
Why does the speaker believe that the market will eventually go higher, despite short-term fluctuations?
-The speaker believes the market will go higher due to the constant increase in the world's population and productivity per person, which are fundamental drivers of economic growth and market value.
What is the speaker's opinion on trading based on news channels like CNN?
-The speaker advises not to rely on news channels for trading decisions. He suggests that news channels are more focused on viewership and advertising revenue rather than providing sound trading advice.
How does the speaker describe the role of institutions and algorithms in the stock market?
-The speaker describes institutions and algorithms as the primary drivers of the market. They control a significant portion of the market's volume and their logical, calculated trading based on various programs and strategies influences market movements.
What is the speaker's view on trading cryptocurrencies like Bitcoin?
-The speaker is skeptical about trading cryptocurrencies like Bitcoin due to the lack of institutional control, potential for abrupt moves based on emotions, and the risk of government regulation impacting its value.
Why does the speaker suggest that Bitcoin is not acting as 'digital gold'?
-The speaker argues that Bitcoin's price volatility and its recent price movements, which do not mirror those of gold, disqualify it from being considered 'digital gold.' He also mentions that the concept was more of a marketing narrative than a factual representation of Bitcoin's characteristics.
What is the speaker's advice for traders regarding the recognition of a market trend reversal?
-The speaker advises traders to look for chart patterns such as a double bottom or a wedge bottom, as well as strong breakouts from trading ranges. He also emphasizes the importance of buy signal bars indicating aggressive buying.
How does the speaker explain the concept of 'fair value' in the context of the stock market?
-The speaker explains that the market tends to oscillate around a 'fair value' where both bulls and bears agree on the price. This fair value can change based on fundamental changes, such as shifts in interest rates or earnings reports, which can cause the market to move to a new trading range.
What is the speaker's recommendation for individuals looking to learn more about price action trading?
-The speaker recommends visiting brookstradingcourse.com for a systematic and precise approach to learning price action trading. He mentions that his course provides clear guidelines and strategies for traders.
How does the speaker describe the typical behavior of institutions in the market during a strong rally?
-The speaker describes that during a strong rally, institutions are mostly buying, and even when the market tries to go down, they continue to buy due to the expectation of a higher price. However, if the market stops going up for a few days, institutions may start to sell, leading to a change in market behavior.
Outlines
😀 Stock Market Mastery in a Minute
The speaker confidently asserts that they can teach anyone to make money in the stock market within a minute. They introduce their guest, Brooks, an experienced trader with decades of market exposure. The conversation revisits a past discussion about the rise of Bitcoin and its impact on price action. Brooks analyzes recent market downturns, referencing a monthly chart of the S&P cash index, and discusses the market's rally post-pandemic crash. He anticipates a market correction but doesn't expect it to drop significantly, hinting at a potential sideways market trend in the coming decade, drawing parallels with historical market patterns.
💹 Long-term Investment Strategy and Market Confidence
The paragraph outlines a virtual guarantee for making money in the stock market through long-term investment. It emphasizes buying a stock index fund or ETF that mirrors the market and holding it for an extended period, like 20 to 30 years. The speaker shares anecdotal evidence of a friend who adopted this strategy, consistently buying during market dips, and became extremely wealthy. The discussion highlights the importance of not panicking during market crashes and the potential for higher returns with shorter time frame trading charts.
📉 Understanding Bear Markets and Trading Strategies
The speaker delves into the intricacies of bear markets, identifying patterns like lower highs and lows, and contrasting them with bull trends. They discuss the potential for making more money through day trading on shorter time frame charts, such as a five-minute chart, compared to long-term holding. The paragraph also touches on the importance of identifying the sweet spot in trading time frames to maximize profits while avoiding the pitfalls of scalping or overly fast trading.
📈 Price Action Over News: The Key to Successful Trading
This section emphasizes the importance of focusing on price action rather than news reports when trading. The speaker criticizes TV news for prioritizing viewer ratings over accurate market analysis, suggesting that the content is more entertainment than education. They argue that understanding price action and chart patterns is more beneficial than listening to TV experts, whose predictions are often short-sighted and not tailored to an individual's trading strategy.
🚫 The Perils of Following TV Experts' Financial Advice
The speaker warns against taking financial advice from TV experts, explaining that their primary goal is to entertain rather than educate. They highlight the difference between an expert's long-term predictions and the immediate actions a trader should take. The speaker also discusses how TV experts tend to reflect the current market sentiment rather than provide balanced insights, which can mislead viewers. The advice is to view TV as a source of entertainment and not financial guidance.
🤔 The Market's Balance and the Role of Institutions
The paragraph explores the concept of the market's balance, where there are always an equal number of buyers and sellers, even during significant price movements. It discusses how institutions and their algorithms drive the market based on logical decision-making. The speaker also addresses the criticism that markets are driven by irrational behavior, countering that institutions and their algorithms promote rational trading patterns. They also touch upon the unpredictability of markets and the importance of managing risk.
🚫 Skepticism Towards Bitcoin and Cryptocurrencies
The speaker expresses skepticism towards Bitcoin and other cryptocurrencies, citing concerns about regulatory risks and the potential for government-issued cryptocurrencies to replace them. They also discuss the volatility and unpredictability of Bitcoin, comparing its price movements to those of the NASDAQ. The speaker prefers trading stocks or futures due to the reduced risk and more established regulatory environment. They also mention the association of Bitcoin with criminal activities and the ethical concerns this raises.
📊 Technical Analysis and Trading Patterns Across Markets
The speaker emphasizes the universality of trading patterns across different markets, regardless of the time frame. They argue that these patterns are a reflection of rational human behavior and can be applied to any market, including Bitcoin. The paragraph discusses various technical analysis tools and strategies, such as wedge patterns and double bottoms, and how they can be used to predict market movements. The speaker also addresses the challenges of trading in a volatile market and the importance of risk management.
📉 Market Behavior in Downturns and Upturns
This section discusses the behavior of the market during downturns and how it reflects the actions of disappointed bulls and bears. It explains the process of short covering at the start of a bull trend and profit-taking from long liquidation at the start of a bear trend. The speaker also describes how market trends begin and the role of trader sentiment in driving market movements.
🔄 Market Oscillation and the Concept of Fair Value
The speaker explains how markets tend to oscillate around a perceived fair value, which can change based on fundamental changes, such as interest rate adjustments or earnings reports. They discuss trading ranges and how they represent a balance between buyer and seller sentiment. The paragraph also touches on how external factors can shift the market's perception of what constitutes a fair price, leading to new trading ranges.
📚 Resources for Learning Price Action Trading
The speaker provides information on how viewers can learn more about price action trading. They mention BrooksTradingCourse.com as the primary resource, where viewers can access a chat room and other educational materials. The speaker also mentions the systematic and precise nature of the course, which is appreciated by many traders for its clarity and focus on real-world application.
Mindmap
Keywords
💡Stock Market
💡Price Action
💡Moving Average
💡Bear Market
💡Bull Market
💡Buy and Hold Strategy
💡Technical Analysis
💡Trend Reversal
💡Support and Resistance Levels
💡Bitcoin and Cryptocurrencies
💡Day Trading
Highlights
The speaker confidently claims they can teach anyone to make money in the stock market within a minute.
Discusses the importance of price action and its influence on market trends with decades of experience.
Analyzes the recent market crash and its impact on price action, comparing it to past market behavior.
Predicts a potential sideways market trend for the next decade, based on historical patterns.
Advises on the strategy of buying a stock index fund and holding it for an extended period to ensure profits.
Shares a personal anecdote about a friend who consistently bought stocks during market dips, leading to significant wealth accumulation.
Explains the concept that trading on smaller time frame charts can yield higher returns than longer-term investments.
Warns against the pitfalls of extremely short-term trading, such as a 15-second chart, due to the speed of market changes.
Identifies a 'sweet spot' in trading where the time frame and strategy can maximize profits.
Provides trading tips on how to enter and exit positions based on chart patterns and moving averages.
Criticizes the reliance on TV news and expert opinions for making trading decisions, advocating for price action analysis instead.
Details how to recognize trend reversals in the market through chart patterns and strong breakouts.
Speaks on the rational behavior of institutions in the market and how it creates predictable patterns.
Addresses the unpredictability and risks associated with trading cryptocurrencies like Bitcoin, compared to traditional markets.
Advises against trading Bitcoin due to its amateurish perception and potential for facilitating illegal activities.
Discusses the concept of 'fair value' in the market and how trading ranges represent a balance between buyers and sellers.
Provides resources for those interested in learning more about price action trading through Brooks Trading Course.
Transcripts
i can teach anyone to make money in the
stock market and i can teach them in one
minute okay and here we go here's the
one minute lesson on how to definitely
make money in the stock market
welcome back everyone today we're
sitting down once again with our brooks
al is a master when it comes to price
action been in the market for a
many many decades so a lot of years in
the market of course uh good to talk to
you again today al good to discuss price
action again see how you are doing and
kind of catch up on we discussed last
time so we'll come back in the podcast
once again thank you very much again
it's always good to hear from you i hope
you're doing well definitely definitely
so we'll have to catch up and kind of
see what happens since last time we
spoke i believe it was around
a year ago or some kind of close to that
aspect and i believe we're talking about
the the rise of bitcoin the rise of
cryptocurrencies and how that impacted
price action now what we've seen in the
past let's say
month two months or so was the uh kind
of like a crash of the markets in
general the s p been going down the
american market has been going down
quite a lot tell me kind of what that
means for price action these days and
kind of what you see is changing in the
market compared to a few months back all
right well this is a monthly chart of
the s p
cash index and
we had an incredible rally this is the
pandemic crash that we had
in 2020 and then we had a very big rally
after that
and when we were going up here everybody
knew there would be some profit taking
at some point we had been above the
moving average for 20 bars more than 20
bars
and
traders are willing to pay above an
average price a 20 bar exponential
moving average is one measure of what is
average and traders have been eager to
buy
at an above average price for a long
time
so you'd expect when they're finally
able to pay an average price they'd be
very eager to to do it so i was pretty
confident that
whatever reversal we got would not go
down all that far
and i thought there'd be buyers around
the moving average and we broke below it
a couple months ago we broke bullet last
month
and then in july we rallied back up to
it
so i don't think there's much left to
the correction you know can we get below
this low i think so can we get down here
the pre-pandemic high around 3300
and i think maybe a 30 chance
i've been saying
for a few years that at some point in
the next three to five years the stock
market would go sideways for about a
decade
and i still think that's true
and it's simply because that's what the
market typically does
let me see if i can
go back here
in the 90s we had a very big rally and a
40 50 correction another 56 correction
and the market was sideways for a decade
after a very big rally
back in the 50s and 60s we had a very
big rally
and then we were sideways for a decade
we had several corrections 30 40 percent
and i think what we're doing now is
a similar thing we're
going far
high far higher in price than what is
justified by the fundamentals
and it will take about a decade for the
fundamentals to get caught up with the
price
is this the final high
probably not anybody looking to pick a
high and a bold friend is making a
mistake
is this the final high is this the final
high which of these is the final high
you know chances are in a bold trend
you're not going to know the final high
until a long time afterwards so i still
think this is not the final high
but i believe that the market is going
to be doing this over the next decade
and what's the reason well the reason is
technological
this is accelerating at a parabolic
wedge by climax and when it does that
you get profit takers and the market
goes sideways for a long time
so i think we'll probably get one more
new high maybe we'll get up to 5000
maybe a little bit more but at some
point in the next few years it'll be
comparable to this
and will be mostly sideways for about a
decade
i want to say one other thing
i don't have a yearly chart
but if this was a yearly chart
going back 100 years you'd see that
the market has gone pretty much straight
up
it crashed in 1929 and it lost 89
percent of its value back in 1929
and i don't know if i go back to 1929
here i don't think so
and 89
loss is obviously
a huge loss
and on the daily chart there was a very
protracted bear trend that lasted four
years a bear trend is a series of more
highs and lower lows
a bear market
is a market that sold off 20 percent
from the high
and this is the monthly chart we've had
lots of bear markets where it fell more
than 20 percent
here here here
and we've had a bear trend here a series
of lower lows and lower highs and a bear
trend here
but this is not a bare trend on the
monthly chart we don't really have lower
highs and lower lows yet so it's a bear
market
and i'm taking a a
a long way around to talking about the
yearly chart
which i i don't have the yearly chart
the yearly chart of the stock market has
never been in a bare trend
it has never had a series of lower highs
and lower lows even though it lost 90
percent of its value in the crash in
1929 it was just a four-bar pullback in
a bold trend that had began with
the beginning of all markets thousands
and thousands of years ago
so um
you know the market is constant it's
always going to go higher
it may pull back for a few years it may
go sideways for a decade but it's always
going to go higher
and this is a lead up to me
um teaching everybody how to make money
in the stock market virtually guaranteed
99 chance i can teach anyone to make
money in the stock market and i can
teach them in one minute
okay and here we go here's the one
minute
lesson on how to
definitely make money in the stock
market
if you're a 30 year old person or a 20
year old person
um a 40 year old person
and you can
buy
a stock index fund some kind of mutual
fund or etf that mirrors the stock
market and hold it for 20 or 30 years
you're definitely going to make money
trading stocks
right your debt because that's always
been the case for thousands of years the
world's population has increased
productivity per person has increased
and
it's going to be increasing for the rest
of your life at some point the
population will stop increasing
but that's not going to be in your
lifetime
so absolute guarantee
if you buy
a
fund that mirrors the stock market and
you hold it for 20 or 30 years for
example in your retirement account
you're going to make money
and you just leave it there and you
don't panic out during
36 percent crashes here you don't panic
out during 56 percent crashes here i
have a friend
and
i'll call him um
forest
and
i never thought he was particularly
bright
and i've i've known him since college
he is a lawyer
and all throughout his life
anytime he had leftover cash he'd uh
save it
until the stock market fell 10
and then he'd put all of that cash into
the stock market and he did this for 40
years
and even though he's not a particularly
bright guy
you know he's extremely rich
you know because for 40 years all of his
cash has been putting in the stock
market
every time the market drops 10 percent
i
talked with him back here early in the
pandemic when the market was down 10
and he said
al i just i had a bunch of cash i just
bought the stock market and i said
forest you know i'm using forest as his
name as in forest gump
i said forrest
why are you buying the stock market when
it's collapsing you could probably buy
it down 20 or 30 percent
and he said
al i don't care
all my life every time the market is
down 10 i take all my cash
and i buy more stock and i hold it
and
he's right you know so he bought here
and even though we sold off
23 here
he still made a lot of money on his new
cash and then
he started trading
back in the 70s
i don't even have it on the screen
back here
so back there the stock market was
around
200
and the stock market is now
4 000
so he made 20 times his original money
and so
if you want to make money if
anybody can make money in the stock
market if they buy and hold now
with that in mind
can you make more money
if you
buy on a smaller time frame chart and
get in and get out yeah somebody trading
a daily short a fast monday trader
is going to make more money than
somebody
this is the daily chart
he'll buy he'll make more money than
someone who just keeps putting all of
his money in a retirement account and
holding it forever this is a daily chart
it's a bear trend we have lower highs we
have lower lows bear trend and now we're
starting to get
higher lows
we have a higher low here some higher
highs
the bulls are hoping this is the start
of a bull trend and it might be i don't
know yet
however a really good trader
a trader who buys here and then sells
there buys here and sells there
is going to make a lot more money on his
on
his account than somebody who buys and
holds for 40 years
okay so somebody trading a daily chart
can make a higher rate of return than
someone trading a
monthly chart
and someone trading
an intraday chart let's say a
five-minute chart
is going to make more money
for example here's the e-mini 5-minute
chart and somebody trading a five-minute
chart
a good trader is going to make more
money than somebody trading a daily
chart
and so how far down can this go
here's a 15-second chart
here every bar is 15 seconds
and theoretically somebody trading a 15
second chart really well
is going to make more money than
somebody trading a five-minute chart
right so there's some sweet spot in here
between trading a yearly chart where you
know you're going to make money
and trading a 15 second or even a five
second chart
where you're going to maximize your
profit
and for most people trading a very small
time frame like a 15 second chart or two
second chart here's a
a two second chart
okay
um you're going to lose money the stuff
happens so fast
you're not going to be able to place
orders quick enough also if you're
scalping you're typically looking for a
profit that is less than the size of the
most recent bar
so
everything will be happening so fast
you're going to lose money
so two seconds is too small
a yearly chart is too big and where's
the sweet spot where can a person make
the most money
if you have the time to be a day trader
trading a five minute chart like this or
a 15-minute chart
like this is really good
once you learn how to read charts you
can make a lot of money
and you don't even have to be all that
bright
okay here's a five minute chart you know
are you going to be selling or are you
going to be buying look at the past
couple days here
you know there's zero reason to sell
right so you buy and you say well now
how do i buy it's just going straight up
well
you can just buy at the market or every
time the market has a bar closing near
its high you just buy on a stop above
the high of the bar and you put a
protective stop below the most recent
level
and you can add to it as it goes up and
you can make a lot of money on a
five-minute chart and you don't have to
be
you don't have to be a genius to do it
but the art is knowing
when a trend is likely to continue
or when it's
likely to reverse
and also if they're optimal
there are all kinds of little patterns
taking place in here
and there's a lot of stuff going on in
here so there are a lot of tricks to it
that can help me make more money the
market's been above the moving average
for about 20 bars place a limit order to
buy at the moving average a lot of bull
bars
you place an order to buy below the low
of the prior bar the first bear bar
closing here it's low you buy the close
of it a bull bar closing near as high
you buy on a stop above it so there's
all kinds of little stuff that you can
learn
that will
help you do pretty well as a trader
i love how we just talk about how the
market's going in the new gym straight
to the charts to how to trade it that
that shows how amazing you want to
trader and how you think about like all
the price section there
that's just that's just crazy but i i
didn't like that stuff so one thing i'm
really curious about is the fact that
you know like when you look at the
the news events or especially the news
like you look at cnn or whatever like
you news channel
they talk about like the crash in the
market right now how the market is
crashing so bad it's like the bull trend
or something but then you look at this
like a price action level that's on a
higher time frame like
showing us a monthly chart and it looks
completely different doesn't look that
bad and that kind of shows why i think
you should not focus just on the news
but most mostly on price action
and it shows that if you just think
about per section then it's like not
actually what you hear on the news it's
different
so how can someone kind of make their
own amount of the chart based on price
action how does that kind of work out
you brought up a few i think interesting
points
let me go to the daily chart and
on television
the purpose of cnn
is not to help you or help me or help
any of the viewers
the purpose of cnn is to help
the shareholders the people who want
stock in the company
and the way they do that is
getting as many eyes
watching the show as possible so they
can charge more for advertising
all right so
cnn is going to do whatever it can
to
make more money get more viewers
and if the market is going down
on tv typically they'll put on one
expert
right
and at any instant there are as many
institutions buying as selling when it's
doing this there might be a few more
buyers but there's still a lot of
sellers when it's doing this there are a
lot of sellers but there's still a lot
of buyers when it's doing this cnn is
going to put on a bear
and that bear they're going to introduce
the bear by saying this guy predicted
the crash
in 2007 right
and as if he's
going to be able to predict every crash
and when it's going down here he's going
to he'll be saying oh the market's going
down to 2000. it's going to go below the
pandemic crash right
and when it's doing this they'll put a
bull on some guys are just always
bullish or always bearish when it's
doing this they'll put a bull on oh the
market's going to go up forever
right and then it does this
never pay attention to
what the experts on tv say because
whenever the market's going down they're
only going to put a bear on and there
are bulls i'm a ball
when the market was down here i said the
market is going to rally for a couple
months and close these two gaps and
probably get up here
which it's doing
on the monthly chart
at the end of last year i said the
market will probably correct for a few
months at some point in the first half
of 2022
and then rally into this into the second
half of the year possibly up to a new
high
and we sold off for six months i said
two or three months it sold off for six
months i said i thought the low would be
about um thirty seven hundred maybe
thirty nine hundred there's a gap here
in the monthly chart
around
30
below 30-900 and i thought that gap
would get filled and the market would go
up
and
so so far it's doing what i expected it
we came down we tested moving average we
closed that gap on the monthly chart and
we're reversing and i think we'll go up
over the second half of the year we may
test down and get some kind of a double
bottom here we had a double bottom here
another double bottom attempt so we may
here down and then down a few months
later so i wouldn't be surprised if we
test back down you know maybe september
or october
but i think the market is going to be
sideways to up for the remainder of the
year
going back to your question about tv
experts i'll put up a daily chart again
when the market's way up here
and the guy on tv says ah it's going
higher buy
right
well he might be right
but should you buy because he says buy
apple daily children of apple so up here
the guy on tv is saying buy the market
apple's great stock warren buffett owns
it it's going up should you buy apple
well
when a guy on tv talks
he's
he's not managing your trade
right he's saying buy apple well he's
right apple will eventually go above
this price
and it might do it over the next few
months right but he's not managing your
trade and when he says apple is a buy
what does he mean by that
does he mean apple is going to be higher
three or four years from now
he might does he mean apple is going to
be higher a month from now
he might but he's not telling you
so when somebody in tv says buy this or
sell that
um
they're not managing your trade what's
their time frame when will they get out
so you should never never never
do anything
that someone on television recommends
right if you bought apple up here and he
was saying apple was going a lot higher
you know what would you have done when
it lost 30 percent
right same with the stock market if uh
if you bought at the top
when the idiot on tv is saying it's
going a lot higher what do you do when
it's down 10 20 23
you know they're not going to manage
your trade tv
has one purpose
one purpose for you
a different purpose for the advertiser
the purpose for the
the television company cnn their purpose
is to make money for the people in stock
your purpose when you're watching tv
and for no matter what show it is is
entertainment you want to feel good
that's the only reason to watch tv
right you don't watch tv to make money
you know
you're not going to make money watching
tv you're going to get entertained so
anything you see on tv
any advice you get on tv
just look at it as as entertainment
you know as i said up here
the heart of the market go down when the
guy on tv said it's going up
because the market is constantly in
balance there there are constantly just
about as many buyers as sellers
and who's selling up here well
institutions who think it's overpriced
who's buying down here institutions who
think it's now cheap right so even when
it's doing this there are institutions
saying wow
this is this is great what an
opportunity to buy and they're buying
but they're not the guys you're seeing
on tv
the they only put the um
the bears on tv when it's going down and
just think about it look at apple what
happened when it went below this low it
went up
what happened below this low it went up
what happened below this low it went
back up above that low below this low it
went up it below this low it went up
if it's so bearish why is it going up
because you got bulls buying at every
new low expecting it to go back above
the prior lows
all right and at some point the bears
stop selling because they see all the
way down
bulls buying at every low are making
money
and if you're a bear
and you're seeing bulls making money at
every new low
aren't you a little concerned you know
something's not right you know here you
are thinking the market's going down
yet people buying every new low are
making money so something's wrong with
this bear trend and it's not just an
apple it's the entire market i've been
talking about this you know since the
market sold off in in january i said
look at this a trader who bought that
low and bought more 50 points lower made
my i traded about this slow what more 50
100 points slower made money so all the
way down
pools are making money
and that ain't right right if the trend
is going to go down a long way
it's going to be really hard for bulls
to make money and it's been easy for
bulls to make i've been buying every
time it makes a new low i've been buying
right i've been making money
so um there's something wrong with this
bear trend and it's not as bearish as
the clown on tv says
so yeah we may get a new low but what's
going to happen if it goes below this
low
al is going to buy a whole bunch of
institutions are going to buy so there
are we know there are a whole bunch of
buyers down here and there may be so
many buyers down here
that if the market sells off
the bulls are so afraid it will not make
a new low they'll start buying above
this low and we'll end up getting a
higher low and then
we'll start converting into a bull trend
and i think that's what's going to
happen i suspect this is probably the
low for the year
and i'm hoping we get a new low
because i want to buy below this level
and i'm not alone there are a whole
bunch of institutions that and you're
not seeing them on television they're
all hoping for a new low because every
time we get a new low
they're making money buying and they
know that's probably going to lead to a
trend reversal at some point and the way
this is accelerating up
there's a pretty good chance
this is
this this will be the low of the year
and that if we come back down maybe to
these lows bulls will start buying
higher lows instead of waiting to buy
below the prior low the bulls will be so
afraid there will no longer be any new
lows they'll start buying above the low
and they'll start getting higher lows
and they will start getting a trend up
again and i think
right now after this week i think that's
probably what's going to happen i think
we've seen the loaf of the year
and we'll work our way up here maybe all
the way up to a new high by the end of
the year
and i'm hoping for a selloff so i can
buy again i'm a trader
so you know
i buy if the market goes up you know for
example i bought down here and
i bought a bunch of different stocks and
when they went up about 10 i took my
profits i did the same here
so every time it goes down i'm looking
if it goes down you know i'm looking to
buy and i'll i'll exit with 10
and you don't have to do that too many
times a year to have a pretty good year
on the daily chart so and i think a lot
of institutions at this point are hoping
it'll go down
now why would an institution buy here
when they could buy a pullback and have
less risk
well the institution buying here
is hoping that they know one of two
things is going to happen
they know either
it's going to keep going up they'll make
money
or it's going to go down
and bulls will buy
aggressively and it'll go back up so an
institution buying here
is hoping it'll go up
but they're willing to buy more if it
comes down here and if it comes down
here they're very confident it'll come
back here
that would allow them to get out break
even on this buy and with a pretty good
profit on this buy
and i think that's the psychology that's
taking place now i think the market is
switching into
a bullish mode traders are buying
confident that anytime it sells off
it'll go back up so
they're hoping it'll be as bullish as
this
big big sell-offs people buy sell-off
buy buy
right i don't think it's going to be as
bullish as this i think it'll probably
be more of a mirror image of this
where it goes up you know five or ten
percent down five or ten percent so i
think the legs up and down will be
bigger
but i think
we're going to work our way up to this
double top maybe up to the
high
so that's a long answer don't listen to
tv except for entertainment
i love that i love that now speaking of
trend reversal how do you know when the
market has reversed going let's say from
a bear trend to a bull trend are there
clear signs that this has happens and
now you can start to look for lungs with
like more certainty or you just have to
keep it low risk and kind of add in
until the trend starts
well both both are acceptable but there
are chart patterns for example here we
had a wedge three three pushes down that
reverse up one two three and we had a
lot of big bull bars closing on or near
their highs that is really aggressive
buying
and so it was reasonable here we have a
double bottom and a higher low
reasonable to buy above that we have a
very strong breakout here three
consecutive bull bars closing on their
highs breaking above a minor lower high
similar to this
and this was a good candidate for
the resumption of the bull trend and a
new high but it failed instead we got a
double top and then a new low
here we have a wedge bottom and a
breakout and a new low
and
it was a really strong attempt at the
bottom
i i was very confident we would try to
get another
bottom here
but this is unusual normally if you have
a major bottom you'll have a very good
buy signal bar you know but you'll get
bars that look like that at the low and
we're not getting that and that's the
one problem with this level the absence
of a really strong bicycle bar
it's a second attempt to reverse the
bulls trying to get a wedge full flag
reversal here it failed and here we have
um two legs down you can call it a lower
low double bottom um i thought we were
going to get a wedge i was hoping for a
wedge a third low didn't get it
and that's the one problem with this
bottom the absence of a
strong bottom talk about the month
weekly chart also
look at this bottom look at that bull
bar look at this bottom look at this
bull bar right typically when you're
getting a major reversal you'll get a
really good looking bicycle bar but look
at this we have a two bar reversal down
and up
this just does not look as certain as
confident as definite as that or this
you know major lows usually have a lot
of big bull bars closing on their highs
and
that's the only thing that reduces
the probability here that the bottom is
in we still might get one more new low
at this point i don't think we are
so one thing you're looking for is a
good buy signal bar and
some kind of a pattern a double bottom
or a wedge bottom like this this bottom
failed
here you get a lower low double bottom
or two reversals up
but no good buy signal bar so one thing
you want a pattern but sometimes you
don't get a good bicycle bar or a clear
pattern and instead you get a series of
bull bars closing on their highs a
breakout so we've got a bare channel and
we're breaking out so if you do not have
a really great bottom
you then look for a strong breakout and
neither one of those things is a reason
to buy here we have a double bottom or
low which is really good
and we have several bull bars closing
near the highs which is really good
so um
this is good it's after the initial low
but it's a high or low major trend
reversal and we're accelerating up here
and again here
so to me i don't know i i would say
there's a 50 50 chance
um that um
we're not going to come back down here
50 50 chance we are going to come down
here and right now maybe a 30 chance we
go below here so probably 70 chance
we've seen the low
um and if we do go below here
um i think they'll be buyers below
so you're either looking for
a good
pattern like
you can call this a double bottom you
can call it a wedge bottom so you're
looking for a good pattern with good buy
signal bars or
you're looking for a strong upside
breakout this was a strong upside
breakout of this bare channel but it
failed and the bulls are trying again
trying to break strongly above this bare
channel so you're looking for a pattern
or a strong breakout
and for the bears opposite
we had a big wedge top one two three
and a strong breakout i don't have a
trend line drawn but we broke strongly
above
strongly below the bare channel then we
had a double top bare flag we broke
below the neckline and we almost reached
to measure move down from this double
top neckline i should move down
and people need to understand this is
something you can apply to any kind of
market as well any market will move
pretty much the same way with some
exceptions of course
you have more gaps in some market less
than other markets but it's still these
principles you talk about when you share
with traders apply to all kinds of
markets well you know if you think about
it everything that's done is by the
institutions they control the markets
it's done based on logic
right any kind of a trade you know if
you and i are trading um you know i give
you an apple you give me an orange you
know we have some kind of logic in our
in our process
and
a chart is just a map a map of the logic
that's taking place
it's
rational human behavior
and it doesn't matter if you and i are
doing a trade for apples and oranges
over the course of one minute or if
we're trading an apartment building in
new york for an apartment building in
singapore and it takes us two years to
do the deal
the same logic applies and if you have a
lot of these trades taking place and you
map them out
you'll get a chart and it might look
like this chart right so it doesn't
matter what the market is it doesn't
matter what the time frame is it's all
based upon rational human behavior
and
that behavior creates patterns those
patterns are present for any market and
on any time frame
so if you're a trader looking at
patterns you don't care what the market
is you know you know
you're going to trade it the same it
doesn't matter if it's bitcoin or crude
oil or apple or an etf it doesn't matter
you're going to look for the same
patterns because you're looking for the
same rational human behavior
and any big market is going to attract a
lot of institutions and they're very
serious about their money and they're
going to be looking for logical ways to
make decisions
so um
you know traders you know when they're
looking at charts they don't care about
the time frame they don't care if it's a
one minute chart or a
one month chart they're going to look
for the same patterns and trade them the
same
you know you're never going to be as
certain as you want
because
the market's always in balance even when
it's going up there are a whole bunch of
sellers thinking it's going up too fast
and even when it's crashing there are a
whole bunch of buyers thinking it's
going down too far too fast so the
market you should always think of the
market as in balance it's always in
balance it's always about the same
number of bulls
and bears and because of that
the probability of making money is never
as high as you want you know you want to
buy and
be 100 certain well no one's going to
sell if they're 100 certain that they're
doing something stupid right so
probabilities for the buyers and the
sellers hover around 50 i always think
of it as a band of between 40 and 60
percent
if you're more than 60 certain of
something you're you're wrong if you're
less than 40 certain of something you're
wrong you should always assume that when
you're trading whether you buy or sell
at any minute
there's a 40 to 60 chance it'll do what
you want and a 40 to 60 chance it'll do
the exact opposite of what you want now
it's interesting you said that because
we often hear that the markets are
irrational that that humans are making
decisions that are not rational in the
market and that that causes price
movement in the market now you're saying
it's actually the opposite institutions
control the market more than investors
or i guess normal people so how would
you explain then the big moves and like
some cryptocurrencies that are not based
on logic but based on just i guess greed
or kind like a bubble aspect how would
that be based on rational emotions the
more institutions are involved with the
market the more they become logical and
rational and the more the training is
done by algorithms computer algorithms
this is the e-mini okay
and
you know you and i and everybody
listening
could buy the market
and the market might move one tick you
know we're tiny the institutions control
95 of the volume in the stock market
and probably 75 percent of the volume is
traded by computer algorithms
and computer algorithms are logical
right their computer computers running
software programs and they just keep
running and running them over and over
again they have a basket of programs and
um
if a certain type of program is working
well and then it's working less well
they'll switch to another type of
program you know the way i think of it
is when the market is doing this the
trend programs are
making a lot of money and the trading
range programs looking for reversals or
not so at some point all the
institutions start to trade trending
programs
and eventually you run out of
people willing to take the other side
and it stops trending and it starts to
go sideways
and the institutions then start to
switch to
trading range programs looking for
reversals and once a certain critical
mass of them
are trading that way there's no one to
take the other side and it goes back to
trending bitcoin is kind of an outlier
because i'm not certain
about how much institutional
participation there is you know bitcoin
it's unclear and a lot of the
institutions are
um
[Music]
how should i say um
i don't trust them you see these guys on
tv called bitcoin whales and they have
billions of dollars in bitcoin
and you know if you're a bitcoin whale
what's your main reason for going on tv
to make money you know you're trying to
influence public opinion so um
you know you're going to say things
to make try to make the market go
whatever direction
your current position is long or short
so um yeah i'm not as confident that
bitcoin is as institutional as it should
be
it's kind of like the the meme stocks
you know amc
um over the past couple of years
um you know if most of the participants
are little guys and a lot of it is
institutional a lot of it is emotional
um
i don't want to trade it because you
tend to get much more abrupt moves
there's a weekly chart of bitcoin
and um there are patterns in here here's
a
small wedge here's a higher high double
top a micro double top a pretty good
reversal down so theoretically it's a
short
and very strong breakout from a treading
range so you buy at any point
if it gets a big bear bar closing there
it's low you can exit below the bar it
did not go below that bar
um it did go below these bars if you get
a wedge top you could exit especially if
you get a bear bar so if you bought
anywhere in here you're going to exit
there um
you know the patterns are going to be
there
but um i'm not as comfortable
buying bitcoin also right now
another problem i have with bitcoin is
um
here's bitcoin
and
here is the
nasdaq
and what do you notice
they kind of look the same bitcoin is
starting to trade like a nasdaq stock
you know i trust the nasdaq and i'm i'm
not worried about big surprises with
government announcements about new regis
legislation that could affect the price
action
so again this is the nasdaq here's
bitcoin
you know the charts look the same
so i'd rather
trade the nasdaq
because i don't have to worry about any
kind of crazy surprise coming from the
government can you trade bitcoin
yeah but why
you know
it mirrors the nasdaq and you don't have
the
risk of some uh
china or europe suddenly announcing one
day that
nothing bitcoin is no longer allowed or
the united states suddenly announcing
that they're going to try to ban bitcoin
and with the united states announcing
that it's coming out with a um a
cryptocurrency its own cryptocurrency
or the united states and the eu
announcing hey
there's so much crime
being conducted with bitcoin in
cryptocurrencies we're going to create
our own international cryptocurrency
there's a a small but real risk of
bitcoin going to zero over the next few
years
and
since it trades like the nasdaq
which has no risk of going to zero
you know i'm going to trade the nasdaq
the weekly chart of bitcoin
and yeah it can go up to
50 000 it can go up to um 70 000 and go
up to half a million
the way some of the bitcoin whales are
saying
and i may trade
at some point like when it's
doing this early in a rally i'll you
know i sometimes will trade a bitcoin or
a bitcoin etf
but um
you know i
since it charts like the nasdaq and has
more risk i'd rather trade the nasdaq or
the e-mini or or stocks or a whole bunch
of stocks that trade the same way you
know here bitcoin it went from seventy
thousand to twenty thousand well a bunch
of stocks did that too
and a lot of the stocks are pretty good
companies here's shopify it went from
180 down to
40. so the percentage drop in shopify is
about the same as the percentage drop in
bitcoin
and if we rally up to this high
you'll make 100 percent
it might take a year to get there but
you'll make 100 in a year
for me there's no um
you're not missing out on anything
if you do not trade
bitcoin
but i understand bitcoin is in the news
and a lot of people view it as kind of a
meme stock type of deal
and get rich quick and now they're
starting to come up with
smaller units you could already buy
tiny units of bitcoin or ethereum or any
of them i i can make more money with
less risk
trading stocks or futures so i'd rather
do that
also do you remember a couple years ago
uh when bitcoin was becoming popular
back in here
this is a weekly chart well they put a
bitcoin
bitcoin weekly chart
a few years ago when bitcoin was
becoming really popular everyone was
talking about it as digital gold
not only is it
going to be the new world's currency
but it's also going to be a store of
value
and then when the market was
doing this and gold is not doing that
people have you heard anybody talk about
digital gold in the past year
and the answer is no
and why are they not talking
right so in other words it was it was
nonsense it was a lie right and you had
all these bitcoin whales on tv oh it's
digital goals it's a store of value
and it's not behaving like gold
so you know it's not it's not digital
gold it was just a stupid lie
here's gold
okay it's not down here the way bitcoin
is down here
so it's not digital gold it has nothing
to do with gold right
so so that argument is gone
and then you get the argument that oh
everybody's going to start transacting
in bitcoin
instead of in uh master and mastercard
and visa
well the the bid ask spread in
coin you know if you're buying you're
going to be paying
quite a bit above the current price if
you're selling you're gonna be selling
quite a bit
to the current price the bid ask spread
is huge so that's not good if you're
doing transactions
and then bitcoin
they can only uh you can only do about
seven transactions a second
and do you have any idea how many
transactions a second visa card or
mastercard can do
thousands and thousands and thousands of
them right
so nobody's going to be buying uh
anything with bitcoin because um you
know you can't do enough transactions so
so it's not
a currency
it's not a store of value
and what it what is it it's a fad
right it's you know it's a get rich
quick type of deal you know
you know you can make a lot of money you
can lose a lot of money it's exciting
it's fun but for me
you know i'm in this to make money
that's all that's that's my goal all i
want to do is make money
and i can make more money trading other
things with less risk
than i can in bitcoin
and one other thing about bitcoin
as you can tell
but one thing about bitcoin is it makes
it easy for crooks to do things
and i don't want to be you know so i
feel dirty participating in it
you know i don't want to be involved in
anything that helps crooks
i know you can argue well if the fbi can
trace bitcoin transactions and get the
money back from the crooks
well
yes
and if somebody does a transaction uh
and steals 100 million dollars or a
billion dollars
the fbi is going to get that money back
right but if they steal 70 000 or 90 000
which happens all the time i'm sure
transacting in bitcoin the fbi is going
to say it's too small we're not going to
bother so it's still pretty easy for
crooks to transact you know fifty
thousand hundred thousand two or three
hundred thousand dollars with impunity
no risk of um
[Music]
being
traced to no risk of having the money
called back by the fbi
so for me it feels dirty and i don't
want to be participating in something
that feels dirty
if it gets cleaned up with legislation
and they get the crooks out of it
and it actually becomes
a currency
then
i'll look to trade it but at that point
it'll be
trading like the euro or the dollar and
i probably will continue to trade the
euro or the dollar instead i don't see
myself
spending a lot of time trading bitcoin
so it's tradable we have a wedge bottom
here three bottoms one two three
and we have a micro double bottom a
second reversal up so it looks like
we're going higher maybe to the 20 week
moving average maybe to this gap and you
know that's about a 50 gain
but you know i can i can do that trading
stocks as well you know i suspect a lot
of people watching this um interview
are trade bitcoin
but for me um i just don't um there's
not enough compelling reason to do it
another thing i don't like is it feels
amateurish it feels like
it's a toy
and um i don't want to be playing with
toys i want to i want to be out there
playing with the adults i have a hard
time
getting excited about bitcoin i honestly
believe i can make more money doing what
i'm doing trading stocks trading futures
so let me apologize to the bitcoin fans
out there you know yes it's tradable and
yes the patterns are the same as with
any other market
but um for me i'd rather
trade betray the other stuff
i think it's a fair answer i think the
live people are in the same situation as
you they don't understand it or they
think it's like it's above all this
thing it's never going to work for
keeping it long-term so they don't trade
it now one thing i'm close to here is
your thoughts on choppy markets like
these markets where you have a bunch of
like wigs bunch of heights and lots of
you would think if institution controls
the market like they just want to go
from point a to point b they want to go
there and move around and trade these
these levels but what caused market to
be choppy going back and forth around
the same level for a long period of time
well it's institutions you know in part
let me go to okay here's a weekly chart
of the emini it's going up and it's in a
very tight channel
um institutions are mostly buying
anytime it tries to go down they're
going to buy
because they know if it's in a tight
channel chances are it's going to go
higher until there's some kind of a
topping pattern
and um
on the daily chart we had
a wedge over here on the monthly chart
we had a micro wedge which is just a
reflection of the daily chart
up and down up and down up and then a
third reversal so a micro wedge as i
said there are always buyers and sellers
and some
there are always slightly more buyers or
slightly more sellers but they're always
going to be buyers and sellers and the
computer algorithms
are based upon logic and testing and
even when it's going down
you have
computer bull programmers buying all the
way down
and
some of them have
very wide stops or to use a bitcoin term
they they're total
uh hold on for dear life
type of deals where they have no stop at
all they just know that eventually it's
going to go up so traders with
institutions with very long time frames
are going to be buying as it goes down
if they're getting a lot of money coming
in and their fund
and they have to invest they have to buy
as it's going down
so um
and it's okay
you know they know eventually it's going
to go up
you know obviously if you're a shorter
term institution if you're
a high frequency trading firm
um you're not going to be buying during
this you're only going to be selling but
there are all kinds of time frames going
on and it's just a question of whether
more dollars are buying than selling
that we go up and down
as far as these this this kind of stuff
a lot of institutions
buy here
hoping that there will be more
institutions buying here
right and at some point
if it stops going up for a day or two a
bar or two or three
a lot of the institutions look at that
and say huh it's changing its behavior
people are no longer buying at the high
and the next bar is no longer another
bull bar
and the the market's changing its
behavior
and the institutions start to sell out
of longs and if it starts to go down
fast enough
not only are institutions selling out of
lungs but a whole bunch of institutions
are shorting betting that will go down
at least a little bit more let me just
show you something about yeah this is
kind of an example um very strong rally
and if you're a bull and you see that
bar you're a little bit disappointed and
you see two more bear bars you're a
little bit more disappointed
and if you bought that closed you might
decide uh if it gets back to that close
maybe i'll exit just in case it goes
lower i can back back lower
and it got to that close again right
here
and did this
so what happened here
what do you think happened there
it's mostly
the bulls who bought here disappointed
by this
exiting so bulls are panicking out and a
whole bunch of them panicked out because
a whole bunch of them decided uh we've
got a wedge top
and now we have a micro double top
we might get a pretty good correction
so this is bulls giving up
and you're getting an increasing number
of beers shorting
opposites true at the bottom
right you got
bearish selling down here
and then
um
it stops going down it stops going down
and the bears who sold
become disappointed by this they hope it
comes back down to this price so they
can exit without a loss it got near it
they held it got near it a second time
and we have a big reversal
the bears are panicking out so the start
of every bull trend is mostly short
covering the start of every bear trend
is mostly
profit taking from the bulls long
liquidation and then as it goes down
more and more traders short as it goes
up more and more traders buy there are
no longer very many bears covering
shorts it's mostly bulls buying i mean
that's alright that's how i look at
charts and i think that i think that's
pretty accurate but i i don't worry
about the wiggles the wiggles you're
talking about
the market was sideways here for a year
no one talks about it they talk about
the market went up and the market went
down well it's really been sideways for
about a year you know for example if we
go back up here which is where i think
we're headed we'll probably get profit
taking and go down
and you know
people are going to say well the
market's been in a trading range
since this no it's been in the trading
range since over here or here we went up
we went down we're going up and i
suspect we'll come back down some point
next year
as far as
the mar the market's looking for fair
value
and it tends to spend a lot of time in
trading ranges because
it raises up to a value that both the
bulls and bears think it's fair
and as it goes down it's cheap the bulls
buy the beer stop selling it goes up
it's expensive the bulls take profits
and the beers start to short and it
tends to oscillate around some price
where the bulls and bears think it's
fair
and then something
happens fundamentally to change the
perception of fairness you know the fed
might start to raise interest rates
and instead of the fair price being up
here it then is down here and the market
goes down to a new fare zone another
trading range
and then you start getting good earnings
and the market decides uh this fair zone
is no longer good
the earnings are really good maybe the
fair price is somewhere up here so it'll
go up to the new fare zone and oscillate
around there for a while until there's
some other really important fundamental
information
that makes traders conclude that the
price is no longer fair and you have to
race up or down to another fair zone
interesting we could go through this
stuff and discuss it for like hours and
hours but i want to respect your time
we've already been like an hour into
this a great knowledge on i'm sure
people are going to notice from this a
lot uh if they want to learn more from
you and you have a course you have a few
books who are just behind you as well so
what would be the next step for people
who want to learn past action why can
they connect with you what can they
reach out to be able to learn from you
the best thing is just go to
brookstradingcourse.com
that's my
primary website i have a chat room
website as well but you can access it
through brookstrainingcourse.com
also i'm merging the chat room
website into
thebrookstradingcourse.com website so
everything will be there
awesome and you do put out a lot of good
work to for traders and you do a lot of
referred to how people get profitable
and use perception correctly so that's
awesome i really appreciate this i know
people who went through your course and
some traders who got good results out of
it they like how like very systematic
and precise it is like they don't have
to think about anything else on their
own
like there's no discretionary it's very
based on like like real space and very
clear so that's good people like atlanta
generals that's awesome i'll leave links
below the description for people to
check it out click these links to see
what you're doing and i'll i hope we can
discuss this in the future again i hope
we can connect again in the future talk
about prospection again
see how you are doing see how things are
moving in the market and of course learn
more from you i think that's been
awesome all right i appreciate it hn
it's always good to talk to you i hope
that your viewers find it useful
awesome i appreciate it and we'll catch
you guys in the next video pretty soon
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