The PriceBob Strategy

Dow was in Easy Mode today. One trade, two R, no heat.




My problem is, I don't really see the reasoning behind this. Why am I not in just another normal distribution when I buy / sell a break of the 10:05 M5 bar?

One of the best post of the week at FF! And a lot to be learned from this post.

PC

And that is the mindset of the roulette epiphany.

Once you see it, you can't unsee it.

Once you experience it, you can't be stopped by anyone but yourself.

Cheers PC

Its great bcs its true, honest, spot on and what it takes to be a successful trader, leave emotions and ego out of your trading office.

(We all read it in countless books), but to implement it is fckn difficult. Thats why I "surrendered" to algo trading, it dont carry my bad habits LOL.

Respect buddy!

PC

I believe that nothing is more harmful to day trading than a trader's belief that he or she needs to know the "logic" behind every move the market makes, as though there is any grand logic operating behind the scenes pulling the strings. Almost every contract traded has not a retail trader like us involved, but instead has one large institution buying from another large institution who is selling. And the vast majority of these institutions are profitable almost every day. There is no logic other than the momentary shifts of supply and demand. If, for the moment, there are more institutions wanting to buy more contracts and shares of stock than there are institutions willing to supply that demand with contracts and shares of stock at that price, then price must rise to induce additional supply to come to market.

Supply and demand, the moment to moment balance or imbalance between the two, is the only thing that moves the market.

Think of the patterns we trade.

i-o-i, the inside bar-outside bar- inside bar, is a pattern of balance. It is breakout mode because once one side or the other is no longer satisfied by the available demand for or supply of shares of stock or futures contracts, price will be forced out of that balanced price range. If more institutions want to buy and that demand for purchases cannot be supplied by the institutions willing to sell for a price within that balanced price range, the breakout will to higher prices. If suddenly the supply being offered for sale by large institutions rises above the demand for shares or contracts by institutions, price will be forced to move lower out of that balanced price range.

Most institutions only transact business when the US stock market is open. The opening range may be viewed as indicative of the initial balance between buyers and sellers at the time when all this volume floods the open market. The break indicates an imbalance. The ORB set up for us retail traders seeks to capture the move on those days where that initial imbalance causes price to move out of the range far enough for us to make a profit, to buy high and sell higher, or sell low and buy back lower.

Institutional traders working their day jobs. They are, like most workers, creatures of habit. These habits create different time markers throughout the day. The opening 5 minute range. I believe that the opening 30, 60, and 90 minute ranges are also important. 90 minutes is also the first 18 5 minute bars. I have heard talk in some corners of the trading internet the high and low of the range from 9:30 AM to 12:45 PM Eastern is significant, as it is the exact halfway point between the opening and closing bells. I never looked into it, just mentioning it because it makes sense. The worker bee institutional traders who move the market go to lunch at 12:00 noon, and start trickling back to their desks between 12:45 and 1:00 PM, so for them that is the morning price range. Maybe there is something to it?

Anyway, the answer to why did the market go higher or why did it go lower is never the news or the moving avergaes or the oscillators. It has always been and will forever be the minute to minute fluctuations between the interests of institutions needing to buy shares and futres contracts and institutions needing to sell shares or futures contracts. That is the job of the institutional career traders. Some are needing to buy shares because they just received a huge deposit from an employee pension fund. Others need to sell because they are making a market in put options making them net short puts, so they hedge their short puts by shorting shares or more likely, shorting futures contracts.

There si now way any of us, not even the "smart money" institutions, can ever figure out the exact reasons behind the momentary balances and then imbalances between supply and demand.

However, what we do know because we can see it repeat on a regular basis is that these balances can be seen when we plot the transactions on a graph. Likewise, we can see when demand is outstripping supply, because as we plot these prices on our graphs the prices are increasing steadily. Similarly, we see when prices are dropping steadily, and at those moments all we can know is that the supply of shares and contracts by institutions needing to sell at that moment is greater than the demand for new purchases of shares and contracts by institutions who may be induced to buy up that supply at some level of balance below the current market.

Once you accept that the "logic" of the market is really the unknowable infinite variety of reasons some institutions need to buy and others need to sell at each and every unique market moment, then you can relax, focus on your set ups, accept that sometimes your set ups will not result in the movement the edge tends to forecast and so you take your loss and await the next set up.

That's it. News algos do there thing, true. But the market is going to do whatever it was going to do once the 30 seconds to 5 minutes of news algo spiking is done. How many times does the news cause a big spike down to a low that ends up being not only the low of the day, but far below the market's ultimate closing high? Was the news bearish? Or bullish? I'd say it wasn't either. The news algos did what they were designed to do to make as much money as they could for the institutions whose business is writing and trading news, and then the regular market forces took over and price did what is was going to do regardless of the news.

Don't tell the business journalists however. They make their living by pretending they can sort it all out and tell us at the end of the day exactly why the market did whatever the market did that day. But if they really could do that, they'd be able to tell us in the morning where the closing price was going to be in less than 8 hours time, culdn't they?

It is all supply and demand, shifting minute to minute, moment to moment.

The traders who buying and selling determines this balance and imbalance are creatures of habit.

There habits form identifiable patterns in the graphing of their transactions.

Pick a pattern of habit you like, and trade it, rising their coattails in the direction the pattern indicates, and cut your losses when the pattern's movement is so short lived it doesn't offer a profitable exit.

You only need one of those patterns to make a living.

One chart One Timeframe One template.....

This is my focus (at the moment) and I do have my blinders on to concentrate on execution.
Al Brooks talks alot about probabilities. From the first 18 bars to patterns etc...

I want to highlight a key concept of Al's that could potentially,,,drastically improve your probabilities for success.
So when I say one chart well.....I would like to talk about another timeframe rather than the 5min.

And Al does as well...this is all from Al.

Now I know/we know when we look at the 5min chart and perhaps we have a Prev day H/L marked off etc that in essence
what we are looking at , bigger picture, is a daily candle,,, OHLC.... And personally I find them useful/important.

Again as we all know markets are fractal and these 5min bars are constructing the daily bar,,, we have an incredible amount'
of detailed information with the 5 min charts.

Al talks about the probabilities of setups and each setup can have varying degrees of probabilities depending on the context
surrounding that setup...

So what is one easy way to increase your chances of success ? Easy its by looking at the daily chart in your market prep.
And utilizing my favorite quote...Timings Levels Behaviour of Price.

This week was an excellent example of using the Daily to trade the 5..Whether its an ORB trade or MeBob... When I executed my
first ORB trade on Friday( a short)....I knew it was low probability but I executed nonetheless as per my current plan. Despite it
being low probability the market can do anything (Mark Douglas) so I was positioned to capitalize if indeed it broke down.

Lets get into the daily chart and a simple way Al Brooks uses the Daily chart when trading the 5min... It's TAILS. (for now)

Al has several great videos on Youtube where he talks about how the 5min chart forms the tails on the daily bars..and when those
tails are formed... Early on for ex.


I should clarify one thing about me...I am a momentum trader.. I have traded the last 4 or 5 years strictly on momentum setups.
Mostly time based based on OR/IB and Als 18 bar prob's. So even though I am trading the 5min ORB , I am looking for those larger
swings and strong momentum moves... Which is why enter with multiple contracts....starting with peeling off at +10 and looking for
upwards of 30-40pts+ as the market has been giving for awhile now... Let alone it will offset my losses from the amount of failed BO's
that I will take.

Thus looking at the Daily is very important for me... In the context of how Al Brooks looks at/uses it.

In a Nutshell nothing new in trading...and this is just a simplistic age old way of ananlysis.
What is the daily chart doing ? Markets only do 3 things... Up Down Sideways... KISS principle.

SO we are trading an ORB or a MeBob...These are early session setups..And as Al says (slides in another post after this)
And as Al says the market likes to put the H/L in early.... Such important concepts to know.

So what is the daily chart doing ? Well weve had an extended leg down on the daily,,,and if you look at the tails of those candles on that
down leg and when those tails are formed on the 5min...you may go ah-hah...

This week has been range bound..approx 100 pts. Now if you look at the chart above (last one) and look at where do those tails line up with
on the 5min... Is it within my timing ? and how does price behave at those tails(levels) within your timing ?

Now this is a rule based thread where we are not just making willy nilly discretionary blow in the wind decisions.
But adding context/confluence can greatly increase your odds.

I can guarantee you If Al was trading Friday... he would be all over buying the market low...And more importantly he would only do
with a SETUP... You must have a rule based setup.. ORB Mebob etc...

So here's a couple of charts from Friday...One with the 5min ORB and one with MeBob...( one weekly Globex as well)





Peeling back the Onion is simply this. Be aware of what the Daily is doing and how it is behaving.. IMO no need to complicate things. No need
to look at the 15 or hourly or monthly... The daily in your market prep and One timeframe whilst trading.

And remember we are Risk managers bottomline...We trade Risk...and thus need to control it and capitalize on it.

Cheers
Blue

Just some pertinent screenshots from one of Al's videos.

Can't lie, getting a tad confused. Are we incorporating the ORB system in conjunction with the MEBOB system?

Also, in my opinion, all the candlestick patterns are sudo filters. Candlesticks are representations of price and time, as are many indicators and filtering techniques. Seems a bit arbitrary to only allow this form of filtering and not others if at the end of the day profitability is the only goal.

Hi MachineLearn

Imho and I only speak for myself... Mebob thread is yes about Mebob AND Al Brooks methods... Al Brooks can be confusing with just
the sheer volume of information he provides... It's vast.

The basis of Mebob is just a "Breakout of a Range on a time based interval" 5min ORB is the same concept.
So the overlaps are similar.

How one trades with regards to risk parameters is an individual choice.. But also I believe Vidvads idea here is to explore
Al Brooks concepts around the basis of the thread which is Mebob. And how perhaps to enhance Mebob ...

Just my take on things and I apologize if my posts re the daily etc are confusing things...not my intention

Cheers !

MeBob and ORB are same method, different reference bar.

Price action is continuous flow and immediate. Filtering by a moving average or oscillator is applying a mathematical formula to the raw data that is price, and then using the result as a value by which to judge a current price by a value that is derived from price, often many bars ago.

Thursday ORB for example, what moving avergae or combination of moving averages would have signalled the trader to get long at 5706? And even if you can find one, what guarantee does a trader have that that would have been the particlar combination he was suing that morning?

Wedge top at last week's high, three bar reversal, lower high double top, all would have had a price action trader short before price had even pulled back to the 20 ema, for example.

No sir, I cannot agree that price action is a pseudo filter. As Brooks says, "price is truth." Each tick that prints is a transaction and each transaction tells us something about the market.

I do agree that price bars and candles are themselves indicators. However, the signals such data provides is derived from price itself, or at least as close to price as we can reasonably be expected to draw an edge short of attempting to trade a single tick chart.

In the end, the closest one can get to trading price itself is to trade in a pit which doesn't really exist any longer, or trade using the price ladder and reading the bid/ask sizes as transactions are immediately reported to the "tape."

I can't do that and that is beyond the realm of this thread. Reading price bar by bar is as close as we can get to pit trading or trading using something like the jigsaw trading platform.

Your indicator verse candlestick argument makes sense. While candlesticks are indicators, they're the purest version and I definitely respect that.

Not necessarily agreeing with multiple setup bars for a range but that's just my opinion.

Cheers!

Positioning your trades in the wicks ..
This takes me back to a thread that was started , quite a few years ago and i came across a couple of months back.
Something tells me you and a few others (Vidvad? ) have had some exposure to the Pipeasy thread as well.

Practice makes perfect .. Not only Mark Douglass has stated this ..

Contextualizing our operations is important, but even more important is how we manage risk. Excellent post bluesteele!

I guess that was poor wording from me. I did not mean the "reason why the market moved up", I'm completely happy with supply vs. demand as an explanation for all moves up or down. My question was, do we have reason to believe that a breakout from a certain range at a certain time will return results that don't simply follow a normal distribution ("normal" as a math term, https://en.wikipedia.org/wiki/Normal_distribution).

Because in order to show positive expectancy for the setup, this distribution will have to be skewed in the direction of the break. Otherwise we're just flipping coins or playing pachinko.

Thought I would share a little bit of my work...Again I do things old school...I dont program.
I dont use any software..Just my eyes and the charts. When I'm doing this I'm also looking at
days of the week and prev day OHLC etc..

So here's some of my notes from Oct 2024 until now..and how I mark each day.

ES
# of times the 5min on first close outside of the OR hits 20 pts 30 pts and 40pts+
without a close on opposite side of OR or a wick.

Oct 24
11 days 1-20+ 5-30+ 5-40+

Nov 24
13 days 5-20+ 4-30+ 4-40+

Dec 24
7 days 4-20+ 3-40+

Jan 25
5 days 2-20+ 3-40+

Feb 25
10 days 1-20+ 3-30+ 6-40+

Mar 25
7 days so far 1-20+ 1-30+ 4-40+

As well I have noted days that go 10+ and also days that when a second BO occurs
how often does the market extend 10-20-30-40

Saturday fun !

And here's a chart..Very simplistic but it works for me

Cheers
Blue

In an interview several years ago Al Brooks was asked what the biggest mistake beginning traders make and he said: "The biggest one is focusing on risk. They focus on risk and end up using stops that are too tight or taking trades that have really low probability [because the risk appears small]."

Another smart trader who used to post to a lot of trading forums (though I don't believe he ever was an FF Member) used to say that most traders focus so much on trying to not to lose that they bring about the very result they are trying to avoid, i.e. they lose.

Mark Douglas makes this point as well. In fact, one could argue that Mark Douglas's exercise is really meant to take the focus off of risk and fear of losing and put it squarely on the only thing that matters: Focusing on the process of trading according to a rule based plan rather than the outcome, i.e. "win or lose?" of each individual trade. In fact, Mark Douglas's entire project was to try to persuade traders that focusing on risk is bull$hit to distract you from focusing on what really matters: Having a trading plan and following it without hesitation or fear.

I've said this before in this thread: Most of the internet cliches about trading are nothing but bull$hit. For example, most successful daytraders, including institutions, have a risk reward that is usually less than 1, and on average no more than 1:1. That is, every BS youtube and discord Furu "teaches and preaches" you have to have a 2:1 or even a 3:1 profit to loss ratio. That's bull$hit.

They tell you the most important thing is to focus on risk as the main matter of attention. Also bull$hit. The main focus should be on your own behavior. The specific behavior to focus on is following your trading rules and your trading plan and training yourself to focus on trading as a process and not worrying about whether your most recent trade or two trades or three trades were losses. Did you follow your plan and trade your edge? Great! That is all you need to do to make a lot of money and live a life very few can afford.

If you instead focus on "finding" 2:1 or 3:1 reward to risk trades, or you focus on taking trades not because they offer a 60% or better chance of winning but because it offers "a small stop loss," then you have fallen into the same trap that has kept and will continue to keep 99% of us from ever succeeding.

This thread you're reading right here, The PriceBob Strategy thread, this is the FF systems thread where we beat the bull$hit, escape the trap, and get on with earning our piece of the incredible profit opportunity that online trading now offers people all over the world.

In an interview several years ago Al Brooks was asked what the biggest mistake beginning traders make and he said: "The biggest one is focusing on risk. They focus on risk and end up using stops that are too tight or taking trades that have really low probability [because the risk appears small]."

What Al Brooks assumes here is that Traders risk based € per Pip/Points, instead of Risking each Trade lets say 1%(what most Traders do).
They are taking tight stops, because they are greedy and want a High RR. The Risk seems then small compared to the potential Reward.
The Stoploss then isnt placed on a Point where it makes sense (whether thats ATR, Market structure or whatever) but instead placed tighter without much reason behind it (emotional).

Another smart trader who used to post to a lot of trading forums (though I don't believe he ever was an FF Member) used to say that most traders focus so much on trying to not to lose that they bring about the very result they are trying to avoid, i.e. they lose.

Its again more about the management of a Trade, adding to losers, expending your Stoploss, because you dont want to take the loss and instead hope for the Market to turn.

Mark Douglas makes this point as well. In fact, one could argue that Mark Douglas's exercise is really meant to take the focus off of risk and fear of losing and put it squarely on the only thing that matters: Focusing on the process of trading according to a rule based plan rather than the outcome, i.e. "win or lose?" of each individual trade. In fact, Mark Douglas's entire project was to try to persuade traders that focusing on risk is bull$hit to distract you from focusing on what really matters: Having a trading plan and following it without hesitation or fear.

Mark Douglas's psychological principles emphasize removing fear from trading, but that doesn’t mean ignoring risk. His work focuses on trusting the edge over a series of trades rather than focusing on any single outcome. However, this doesn’t mean traders should abandon risk parameters.

I've said this before in this thread: Most of the internet cliches about trading are nothing but bull$hit. For example, most successful daytraders, including institutions, have a risk reward that is usually less than 1, and on average no more than 1:1. That is, every BS youtube and discord Furu "teaches and preaches" you have to have a 2:1 or even a 3:1 profit to loss ratio. That's bull$hit.

The claim that successful traders (including institutions) don’t prioritize risk-reward ratios is misleading. Many institutional traders focus on asymmetric risk-reward setups, where potential gains significantly outweigh potential losses. While they may take 1:1 or lower risk-reward trades in certain strategies, they also focus on optimizing win probability, trade frequency, and drawdown minimization.

There is a reason that even big Traders emphasise on the saying "Cut your losses short, let your winners run"

They tell you the most important thing is to focus on risk as the main matter of attention. Also bull$hit. The main focus should be on your own behavior and the behavior to focus on is following your trading rules and your trading plan and training yourself to focus on trading as a process and not worrying about whether your most recent trade or two trades or three trades were losses. Did you follow your plan and trade your edge? Great! That is all you need to do to make a lot of money and live a life very few can afford.

Risk management is supposed to be INSIDE your Trading plan, its not a seperate thing.

If you instead focus on "finding" 2:1 or 3:1 reward to risk trades, or you focus on taking trades not because they offer a 60% or better chance of winning but because it offers "a small stop loss," then you have fallen into the same trap that has kept and will continue to keep 99% of us from ever succeeding.

Again... not the problem of focusing on Risk. Using a tighter Stoploss than you are supposed to is an emotional thing, its not the problem of having the wrong focus.


There is not a lot you can control in Trading.
Besides

1. When you enter the Trade
2. How you manage your Trade/Risk

So it certainly should for a Trader be an important factor in Trading.