241013 Psychology and Brooks practice

So this week I have continued to concentrate on working through the Al Brooks book, I'm about halfway through and have covered Price action,  TL and TC, trends, PB/RL and am now starting on ranges. Last week I was given some advice from a skilled trader who advised starting the Brooks method with the H2 and L2 setups, however although I had a glossary definition of them I didn't feel that confident trading them.  I have now covered them in the book and feel far more comfortable with the concept so thought I'd spend the London AM session trying to spot them as practice before continuing with the book.

Before continuing I would like to first mention a post from the same trader that included an insightful quote that I want to record in my journal.
New favorite quote, courtesy of "I AM RICHARD":

"Rather than work on complicating your chart, work on simplifying your mindset. Lately I win right around 50% of the time, which I used to think was terrible. Now, I understand that it is just the opposite. The ultimate freedom is when you don't have to depend on being right to make money. Think about that until you understand it."
http://scalppipping.blogspot.com/2013/10/october-23.html

I have rules regarding fear that I have bastardized from Curtis Faith's The Way of the Turtle. The reason I mention this is because I think in a small way they are related.  My "rule" ( theory is probably a better name for it) for dealing with fear is...
 "I only feel fear when I focus on the outcome of a trade (what might happen).  Anything can happen so focusing on what might occur is a complete waste of time and energy because I have no control over it. I must switch my bias from one of outcome to execution. If I am focusing entirely on how best to execute the next piece of price action (not necessarily trading it) then the probability of me "trading" it correctly increases dramatically".

Until now I only thought about this when I was experiencing fear however from reading the quote above I realised that this is not only a mindset I should focus on when fearful but one that I should endeavour to enact throughout the each and every trading day. I know the two quotes are not entirely related but I feel I would have a much better chance of achieving the former, particularly "simplifying your mindset"  if I focus solely on how to best execute a situation.

So to continue with the Brooks practice... One of the things that I hadn't understood was that as much as the H/L1,2,3,4  are setups, they are just as much and maybe even more importantly a counting method. The basic idea is that there are at least two legs in each trend (move with trend or counter trend) and in some degrees (although not always perfectly) H/L1,2,3,4 help you identify them.

Another concept which I think I was more familiar with although may not have had it quite so succinctly in my head is that "the market will usually try and do something twice,  if it fails the second time it will usually do the opposite (reverse)".

This morning I had a much easier and enjoyable time of reading price action because I was focusing on the execution rather than the outcome. Instead of looking for trades I was counting legs which was the best thing for me to do and resulted in me instead of jumping into (theoretical) trades waiting for a better/ higher probability setup (2nd entry on the 2nd leg usually).

This morning I started at 0730GMT ( on my charts this is 0930?)
I noticed that price had broken above 1.38 and had not PB , also it was approaching the top of the TC so i had a  bias towards a short scalp.

• at bar 1 price had formed a L1 but this was a first leg up so was unlikely to be a good short.
• at bar 2 an L2 triggered and this would have been a great trade, despite there not being TL break between L1 and L2 there was one on confirmation. The IPT target was approx 1.38 but a TSL tracking the the highs of each new low close would have been most profitable (1:6 RRR).
• bar 3 was an H1 but was weak because there was only one leg down and was still OE from 21EMA and 1.38.
• bar 4 was an H2 but there was no meaningful TL break between H1 (3) and H2 (4) so was void.
• bar 5  price closed below the TC low,  my initial thought was to prepare for a RL back into the channel.
• bar 6 changed the order of the prior H1 and H2, I could now clearly see two distinct down legs the first ending at bar 4 (so now H1) and the second ending at Bar 6 (now H2), however this was not trade-able because no meaningful TL had been broken.
• bar 7 was an L1 but because this was a first leg the probability was low that it would succeed. 
• bar 8 was an L2 which could be traded because a ST TL had clearly been broken and it even formed an "M". a PT around 61.8 fib which coincided with S would have yielded 1:1.4RRR or 0.5% if using a TSL.
• bar 9 marked the end of a clear 3rd leg down and was (i think for that reason an H3?)  a valid scalp back up to the 21EMA / 1.38 / TC.  for a high probability but low return 1: 0.5 RRR

Not that would I would trade it because it was outside of my session but...

• After 3 legs down and a Maj TL, break 2 up legs are expected. The first can be seen from bar 9 to 10 (an H1).
• bar 10 is the H1 entry but it is better to wait for a higher probability trade H2 as price has entered barb wire.
• Bar 11 is a nice H2 which can be traded back into 1.38 for just over 1:2 RRR  or a TSL could be used for to test the prior highs (4) (I believe this is a Brooks method although i need to check?)

Summary:  TBH I'm really happy with today. I'm amazed at how much I have absorbed without realizing it. I have been taking quite a lot of detailed notes while reading but I think it's Brooks style, which is relentlessly repetitive.  But that's great because if you miss the point the first time he repeats it another 5 times.