Slow Trader Diary – week 40

A small move in the right direction, we’re now up by a total of 3%.

I won’t break this down into broker costs as I think you’ve got the idea of broker costs now. Also, I will only show the percentage gain as a whole number (rather than its actual of 3.74%, as we have trades open and therefore the percentage is only a snapshot).

Again, this month has been light on trading as the S&P, on the daily charts, is at a junction. Let me explain:

Snip20151010_4

The S&P 500 is at a trading range turning point. From here the S&P is statistically more likely to go down and stay within the price range of the last few weeks.

This is reflected, to some degree, in individual shares within the S&P. And here’s the trading dilemma. We have to be patient and wait for the next move to show itself before we commit.

Fake moves may also occur that dummy one way and go another. Part of the joy of trading.

80% of trading range moves will stay within the trading range. Therefore, statistically, we favour a down move at this point. However, a breakout of the range, and a move up, is clearly a probability. A 40% to 50% probability.

There are many price action techniques that will guide us as to the next move as it develops.

Returning to the week already traded, here’s where we got our gain. It’s a trade, taken unusually for the Slow Trader fund, on the 5 minute chart. As there was nothing on the daily charts I took a day trade similar to one in my personal fund. Here it is:

Snip20151010_7

For those not familiar with charts in different time frames this can be odd. The 5 minute chart immediately above is the S&P price movement throughout a single day shown in 5 minute bars. In other words, the chart immediately above is the price movement within the very last, rather small, bar of the top chart above.

We made money from the market going down. I’m not saying from this that I’m favouring the S&P market going down, just that for that part of the day we had a 60% chance of the market dropping. So we took it. Our exit was (in this time frame) at a major support level.

You will notice from the chart above that after we took the trade we dropped to, what I would call, a minor support level. We were in nice profit, and then the market turned back up again.

This is a swing, and is something an inexperienced trader finds hard to manage. An inexperienced trader jumps ship too soon. Our target was the major support, however, we had to see our profits build – go back to zero – and then build again, as we roller coaster our way to our target exit point.

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