Slow Trader Diary – week 38

First diary post after being away for some three weeks.

We are 2% up overall. The only trade left open while I was away was gold. And, although we are still open in gold, its current position nudges us into the positive.

Let’s review: A while back, October last year, as you know, we took a double hit when the market dropped and then dropped again against all indicators.

I thus reviewed my trading technique. I went from indicator based to price action based. How to best explain these? Indicator-based is like painting with numbers; it’s never going to be independent but is steady.

To get good at price action is like the artist. It doesn’t happen overnight. There is a lot of effort and practise put in along the way. But, as with the results of an artist over paint with numbers person, the results can be outstanding.

Let’s do some sums:  if we start with £100 and gain £2 that’s obviously £102, a 2% gain.

The simple mathematical issue with losing money, however, is this: if we start with £100 and lose half (50%), making our new amount £50, then to get back to our original figure of £100 we need a 100% increase.

To be clear, if we lose 50%, we need to do 100% to get back to the start.

Sorry for the oversimplification, but I feel that we all forget about the importance of not losing money (notably when trading or investing) because of the doubling effect is shown above.

And that is what I have had to do with price action since October. Where a 2% increase for the investor is unexciting, for me, the trader, it has been because I’ve had to nurture the fund up with a substantial increase to get back to the beginning.

I love the price action way. So much so I managed to get about 50 hours of price action concentrated practise done through dedicated modules while I was away. That’s the same as a pilot having to do time in a simulator. It’s necessary.

I continue to run the fund primarily with daily signals reported weekly.

Price action works the same on all charts regardless of the time frame. I would not have more than one fund account in the same timeframe, too confusing.

Next post: what makes it investing, trading or gambling?

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