My Edge, what is it? And a crypto update

What is my edge?

As traders, we have to ask ourselves this question routinely—particularly if changing anything.

My edge identifies the market structure, trend and odds-based trades.

Identification of the market structure comes down to experience in the live market. Backtesting is a must but is no substitute for watching price in our chosen timeframe.

The trend is much talked about but remains elusive to most of us. I found the volume-weighted average price (VWAP) indicator on its session setting invaluable here. If trading a higher timeframe (such as the crypto investment), I like the anchored VWAP.

The shorter the time frame we use, the more we seem embroiled in odds-based trades: stops and targets—reward and risk—and the management of a transaction. So I have reintroduced trend line breaks and a two to one no quibble reward to risk. I’m also interested in the study of volume profiling.

As I’m still, and will be for many weeks yet, in the process of moving home—and making the one we’re moving to livable—I’m limited to an hour or so each evening backtesting the day. I do, however, take at least one day a week to dedicate to the charts.

Staying current in the currency markets is vitally important. But time out is also an opportunity to develop and reflect. Therefore, trading with clarity of method with practised (no mistake) purpose is vital.

Simplification is also a product of my time out. When busy in the game, I can be blind to development creep. That is, I introduce too many markets and systems without objectively examining what works and what doesn’t.

Getting back to an honest reflection of ‘what is my edge’? And only doing what that is.

Crypto.

We’d posted buy levels in Bitcoin and Ethereum—provided again below in British pounds.

Bitcoin provided both entry levels before returning to the all-time high. Those that bought, fundamentally and technically, you will find much information to influence whether you now stay or sell.

Taking at least some profit at this point would be sensible. Investing is a different approach. It’s for the long haul. But taking some, if not all, of the gain now is still advisable, and if we have a pullback in price, I will provide a suitable re-entry level. However, there is a 40 per cent chance that the price will continue higher and you are not on board!

Ethereum gave us only the higher entry-level. So we are only half loaded in Ethereum. It, too, although not at an all-time high, is at a distinct technical level. So the same profit-taking argument above with Bitcoin applies equally to Ethereum.

Bitcoin and Ethereum daily bars priced in British Pounds.

Crypto via PayPal

We spoke about purchasing Crypto via Binance previously.

However, Binance has become increasingly difficult in the UK.

If a UK resident, your bank may allow purchase through Binance, but later blocked.

Better to purchase through a personal PayPal account. PayPal has made the process extremely simple.

Previously I provided the buy levels in US dollars. The prices below are in GBP and simplified to only two purchase levels for both Bitcoin and Ethereum, respectively.

If you have £400 to invest in Crypto, then I’d suggest, in this example, £100 on each of the Bitcoin and Ethereum levels.

Ethereum (GBP)
1st buy level 2140
2nd buy level 1600

Bitcoin (GBP)
1st buy level 31200
2nd buy level 29700

The current value for Bitcoin is at about the first buy level. (21st September 06:20 UTC +1)
The current value for Ethereum is slightly above the first buy level. (21st September 06:20 UTC +1)

If you don’t have access to trading charts, then Google the current price, which is sufficient, or monitor periodically on PayPal and buy at or below the levels mentioned.

Again, this is an investment rather than a traders approach.

Crypto—did you buy?

Bitcoin and Ethereum activated the first buy level last week (See the previous post).

Price has briefly climbed again, but the weekend close indicates an imminent drop to at least the middle buy level is likely.

Information we’ve read suggests that crypto and, in particular, bitcoin and ethereum are only at the level of the big toe in terms of relative potential.

However, not all are singing crypto’s praises. Jack Schwager, author of the highly regarded ‘Market Wizards’ series, voiced in a recent podcast that the only value he’d give to crypto is what it gains from the ‘black market’.

But might this be similar to IBM’s comment back in the day, “I think there is a world market for maybe five computers”? At some 2.5 trillion in value, Apple, primarily a PC company, is leading the way.

I’m on the fence as far as crypto is concerned. However, if you are of a mind, a long-term purchase in line with our previous discussions is worth a punt.

From my perspective, 100% of my concentration is on my day to day trading with the slow trader fund. I’ve traded small recently, working on all aspects of my game.

The old but still highly regarded book ‘Mind over Markets” is an excellent addition to any traders knowledge. From which, I’ve applied slight changes to my approach.

Although ready to move up the gears again, I will continue to trade small for a few weeks more as I manage through the disruption of a home move.

Nearly a crypto buy opportunity

On the 7th of September, crypto markets dipped some 20% in value within a few hours.

A move, it is thought, engineered by more oversized crypto holders to remove leveraged traders.

If that were the case, it seemed to have worked!

That is why with crypto, it is best not to use leverage.

What we are considering is a phased value level purchase—dollar-cost averaging, in other words.

We have three value levels on both Bitcoin and Ethereum (yellow lines).

The initial drop in price on the 7th hit the first level in Ethereum and two lines in Bitcoin.

However, achieving a buy on the second level in Bitcoin was too fleeting.

These anchored value-weighted average price (VWAP) levels are slightly different in each timeframe.

In other words, a trader viewing the buy levels on a daily chart will achieve a different entry-level to a trader in a lower timeframe, such as a 30-minute chart.

However, as we are dollar-cost averaging and with a long term hold in mind, the daily chart is more than suitable for our purpose.

Be patient and wait for staged purchases to be at or below the levels indicated by the yellow VWAP lines.

Take only one entry per level per crypto market.

Buy on the way down rather than up as price might not get to the second or third level. That is up to each investor to decide for themselves. And, of course, we must refer you to our disclaimer page.

Crypto via PayPal

Nick has pointed out that purchasing crypto is now possible, or coming soon, through PayPal.

With the help click, PayPal has a simple crypto explanation, too, worth a read.

However, Binance provides a significantly more detailed crypto explanation.

Crypto will only be available on PayPal through a personal account—not open through a business account.

The transaction fees with PayPal are 1.5% if purchasing more than £1000—the percentage is more if buying less.

Also, with PayPal, the spread (margin as they refer) would generally be a minimum of 0.5%.

PayPal purchase makes it very easy, but I think it is expensive.

Better to purchase Crypto through Binance if you can do that, as it is significantly cheaper.

Ethereum is doing well, but I’d wait.

The future of crypto continues to look bright. With general prices still below their all-time highs, this is not the wrong time to start accumulating.

However, the price is not favourable enough for me to invest. Bitcoin may pull back to at least the higher of the VWAP yellow lines drawn. Depending on the price action at the time, I might favour a purchase if price retreats to the lower VWAP lines. (See charts below).

I will report as soon as I see a possible great opportunity.

If following, be ready with your Binance account or similar.

In the meantime, for information, review Chris Lee’s awesome Crypto newsletter. In addition, Chris provides a reference list for those that want to research further.

As expected, Ethereum has taken the more significant leap in price. It is almost getting back to its high in May this year.

I am not in the business of predictions. But, on the other hand, Bitcoin has been less dynamic of late, and a pullback of some sort is more probable.

Bitcoin and Ethereum, the early bird has gone—however….

Soon after suggesting an investment in either Bitcoin or Ethereum, the price of each ballooned.

That is not to say a buying opportunity will not present itself again, but the likelihood of the same ‘early bird’ has probably gone.

But let us wait and see. First, of course, we are considering the dollar-cost averaging approach. But as a trader, I cannot entirely agree with entering in this manner. I want a defined risk and a reasonable probability of success.

Let us see what develops. In the meantime, to understand Crypto better, working through the excellent post by Chris Lee is a good start.

Moreover, as you will see within Chris’s notes, he recommends buying with Binance.com. A good YouTube link on how to create an account is Binance tutorial for beginners.

Binance.com has a UK warning attached as they allegedly do not wholly satisfy the UK’s definition of money laundering. As a result, some UK banks do not allow transfers, but most do.

Stay ready. If either Bitcoin or Ethereum provides a buy signal, you will be the first to know.

Have you considered investing in Crypto?

How goes the fund?

I am trading small for the time being and putting a lot of time and effort into my skill development.
August is well known as the holiday month for most industries, undoubtedly reflected in the market.
Volume is exceptionally light so far this month. Being in training mode right now, therefore, is no actual loss of opportunity.
My work continues as an intraday currency trader.
I am significantly more trend-oriented than previously and enjoy incorporating my understanding of the Volume Weighted Average Price indicator (VWAP).
I am using the VWAP in both the session mode with standard deviation lines and (which is proving to be a pleasant bonus) the anchored VWAP.
I’d spent a lot of time previously on the Commitment of Traders (COT) report.
And, although the VWAP and COT are worlds apart in how they have derived and their respective timeframes nonetheless, I feel that being familiar with one has aided my adaptability to the other.

Crypto investment


I’ve had a few questions recently on the best place to put aside money for grandchildren. Long term investing.
The usual ISAs are an option, but if you’ve filled those and want somewhere with a significant oomph, you must consider Crypto.
If you’re looking long term and you are not going to get too stressed about the ups and downs—in essence, you’re happy to use dollar-cost averaging. Then you have to get in on this.
Consider going back in time and having the opportunity to buy Apple while Jobs and Wozniak were still operating out of a garage.
That could be Crypto right now. I know you’re not convinced, but the more I study the subject, the more I realise the potential of Crypto.
In a nutshell, an investment in Crypto has a probability of a 50% loss or a 500% gain.
It could be worth the ride!
I will provide links here soon to simple explanations on what it is all about.
The two that I’m watching are Bitcoin and Ethereum.
They are very different. However, each has an overarching reason to invest.
Bitcoin has a hard limit of 21 million coins, and Ethereum (as early as next year) could provide a yield.
Volatility is mainly due to the small number of big players and low institutional involvement. But that is all changing.
Crypto is a billion-dollar market. However, it has the potential to take a significant slice of the Bond and Gold trillion-dollar market.


But how do I invest?


The first advice in Crypto is don’t use leverage. It would be best if you bought it. And this is easier than you might think. Again, I will provide the links on how-to soon.


To get you thinking.


Even though we are dollar-cost averaging, it is better to not throw money at it willy nilly.
I want to provide critical moments based on VWAP signals and technical analysis on value and break out points.
You would then do your purchasing.
One of the advantages of Crypto is that you can buy small amounts. Let’s say you had £1,000 (or multiples of) to invest in Crypto.
I’d follow Chris Lee’s suggestion (more of his links in the next blog) and split the investment equally between the two coins.
Of the split amount, I’d put half (£250 split into quarters, say) into value entries and the remainder into breakout entries. Then, finally, I’d give you the timing to enter each.
That is enough for now. As I say, this is food for thought, with more to follow soon.

Withdrawals are closed for a while, sorry

The trading account is closed to withdrawals for a while.

Not that anyone has taken money out, but I know it is disconcerting not to be able to.

I made a big mistake, and it’s put us back many weeks.

I’ve wondered repeatedly what in the world was I doing—as risk management is so crucial.

Trading heavily in the run-up to announcing our profits, I wasn’t necessarily trying to bolster the coffers—although that will be an aspect—it was, ironically, the protection of it.

But rather than protection, it became the fear of losing. So how does this come about?

I had committed to a weighty trade to XAU/USD (gold) and gave it more room to move than I do on any other transaction. I noticed a higher timeframe structure for its significant support (a fundamental error) and a probable return to the entry price, which it did.

But beforehand, the trade (as it’s now on a higher timeframe) needs to be carried overnight. Something I don’t do!

So if the price came back to the entry, what was the issue?

I’d loaded the account significantly higher than usual in anticipation of trading bitcoin in the future. The margin on bitcoin (no surprise) is exceptionally high. I’ve not traded bitcoin with any weight, so to have loaded prematurely was a mistake.

Moreover, my broker—something that wasn’t a factor before—offloads the trade automatically as the margin gets to 50%. So when margin and drawdown (losses in this case) combine, it can cut the account (the now more extensive version due to the bitcoin argument) at an eye-watering rate. 

When I checked the chart at 4 am—sleep had been brief—and the price was in the ascendancy to the entry-level, my immediate thought was of relief. 

But short-lived, as I noticed what had occurred with the automatic margin reduction and the subsequent cut to the account.

The responsibility for this is all mine. What the broker has in place is correct. I’d gotten myself into a position that should not have occurred, and I can say quite assuredly, never will again. I say that with such conviction because the stress from it is so enormous that you never want to experience it again. That’s for darn sure!

I have regrouped, been honest with myself as to what I did wrong and learnt from it. I’m trading small to build confidence, reassert strategy and recentre. 

Trading small at the core amount of one lot and up to three lots per setup is in the region of tens to hundreds of pounds per day.

I was trading at a core of fifteen lots and up to 45 lots per setup. So you can do the per day expectation.

I will work steadily back up to that level but with much-improved dependability—no more big bangs!

Apart from a greater awareness of risk management, what else have I changed through this lesson?

  • Patience.
  • Probability.
  • Know what setups work best for me and only take those.
  • I’m quicker to exit when it’s not working and better at holding when it does—loading appropriately on my best entries.
  • I now trade from a higher intraday timeframe for structure, only venturing to the lowest timeframe for the fine-tuning of an entry.
  • I now view more pairings looking for the ‘charts in play’.

My trading journal provides a daily profit—to know if I’m consistently profitable rather than an obsession with P&L—and I log entry quality which I score from one to ten with a brief explanation of lessons learnt. 

A daily or even weekly report on the blog would be too much—for you rather than me! However, I think a regular end of month synopsis of my trading journal would be beneficial. 

Develop your own trading style

There are so many styles of trading, so what makes sense is the direction we go.

However, we do spend an awful lot of time following what we happen to come across initially.

To a developing trader, I’d say try a wide field of methods to see what fits best.

But even a good find is constantly evolving.

In years gone by, day trading acquired a bad name. So much so that present traders, to make the distinction, refer to it as intraday trading.

Day or intraday trading has changed due to improvements in technology—and consequently tighter bid/ask prices—and greater liquidity.

More (if not the majority) proprietary firms are intraday trading today.

What I’ve liked recently is anything by Mike Bellafiore. Start with Chat With Traders episode 162, followed by One Good Trade (available on Audible) and The Playbook—an inside look at thinking like a professional trader.

As he is known, Bella teaches stock trading, but the material is excellent for whatever we have on our screens. For example, if you haven’t considered watching the order flow (also known as Depth of Market)—and the chances, like me, are no. Then Bella will make you reconsider.

The VWAP is an excellent tool for stocks and shares, commodities and (probably) indices. Not as valid for FOREX. Read The VWAP roadmap by Zach Hurwitz.

I trade gold (XAU/USD) intraday, which can provide a VWAP signal throughout the day (UTC+1) and recently the DAX (DE30) from early morning until early afternoon and watching again the US 500 (S&P) and US 2000 and US 30 from midafternoon (New York stock exchange open) onwards.

I watched bitcoin for a few weeks and decided to give it a miss—at least for now. A great introduction to bitcoin, and one that will change your mind if you have a negative bias, is the Digital Slowmad letter by Chris Lee.