Hi all,
I'm almost through re-reading Bob's second book "Understanding Price Action". A truly fantastic job he did on this one. My only complaint is that he didn't include an extensive section on setting initial stops like he did on the first one, since he models his 5 minute method with a fixed 10 pip stop and 20 pip profit target, and advocates that if you take only the most conservative trades you shouldn't even need to actively manage things. But you can easily just apply what he wrote in the first book to this information.
Some overall notes:
* The concept of the 'combi' (outside followed by an inside bar for a breakout) is pretty interesting but also prone to a fairly wide interpretation (sort of reminds me of Al Brooks's ii, iii, ioi, etc.). You have to really, really be sure the context is right, which he emphasizes.
* As with the first book, Volman is all about having small stops and as a result he's against anything that doesn't have proper buildup. This contrasts with other trading approaches where if the signal bar is right and the context is good, you're good to go. You do end up passing on a significant amount of trades over this (which is probably a good thing, though it also overlooks certain contrarian approaches such as failure tests). Granted his 'trade for failure' setups are a good counter-trend concept, except here you're fading a buildup as opposed to fading a climactic trend bar (the latter of which Al Brooks likes to do).
* If you're doing this method right and using the 5 minute chart, you have to be sitting for both the London and New York sessions, which is a considerable stretch of time 2 am EST to 4 pm EST, though most of his setups become invalid after 11 am EST. That's about 10-11 hours in front of the screen. If not, you can end up missing out considerably. The only other solution is to trade a smaller time frame, which is how I'm trying to use his method.
* If you end up trading a market that has gap opens like the stock index futures, you may have a problem getting a setup in the morning session without seeing the Globex data. This is particularly important with Volman's method because he's all about 'squeeze' and seeing gradual pressure emerge. In the stock index futures examples he gives, Volman uses tick charts which is probably the best way to go here. Otherwise the night time session is going to be a tough read on the 5 minute.
* Volman is an interesting contrast to Al Brooks. First of all Volman is a much better writer overall, second Volman is way better at explaining context than Brooks's somewhat ambiguous and intuition based 'always in long/short' idea. Third, Volman keeps his setups fairly clear and straightforward, and defines them better than Brooks does. Brooks has many more trading gambits, and he makes like 10 trades a day on an average ES day, but it's way more difficult to define them and put rules around them, unlike with Volman (even though his method is quite discretionary in the end). Volman definitely provides a better template to work from. You may be getting miffed over not being involved in some strong trends, but then again, Brooks is all about scaling in and out of trades, which is for people who are trading multiple contracts. Volman keeps it simple with all in/all out.
One piece of advice I have when you start doing your own research is to take the 6 months' of chart data on EUR/USD and then set up your own platform to show those same exact months (March - August 2012), then try to replicate the trend line markings the way Bob does. This is a big help because in the book, the charts are portrayed the way Bob likes them (squeezed down vertically), while most trading platforms stretch things out vertically. When you're training yourself to see what a 'combi' or sufficient pressure looks like, it's important for you to see it in your native charting environment. This was a biggie for me because when I'd look at the charts naked and would be trying to find setups, I was like 'what the heck, I see a perfect squeeze like once a week here...'.
Either way, I'm super pleased I got this book. It's definitely given me new things to think about.
