Day trading tight stops

Many thanks to Nick for providing notes from the book “Understanding Price Action – Practical Analysis of the 5-minute Time Frame” by Bob Volman.

We have permission from Bob to provide ideas and information from his book, but we want to avoid posting large swaths from the text that can be unfairly copied and pasted to any mainstream financial trading forum.

Hence our page on ‘day trading tight stops’ is password protected. Our page on ‘day trading wide stops’ (a strategy developed by Buzz) is also password protected to prevent confusion as we discuss more heavily within our blog posts at the moment the ‘tight stop’ version.

Before we post any more extracts from our real-time day trading Skype chats, we thought it worth a brief explanation, of the salient parts and hopefully improved understanding of our conversation. Of course, the best way is to buy Bob’s book and get reading, but we appreciate that it represents a substantial commitment in time. If the gist is all you require, then you may find it in this blog.

As you will know the number of financial trading methodologies and platforms is large. But we can place each method into the broad categories of fundamental and technical. The former generally involves the analysis of financial statements and the latter the reading of price on a chart.

For our business, our only concern is technical. That in itself attracts a myriad of approaches, systems and timelines. Determining which, if any, is suitable to our personality and situation can take years. It is good to have a trusted mentor that can guide us from confusion to productiveness in the briefest of times. Bob has done that for Buzz and he, in turn, has introduced others.

For those wanting a no effort solution to earning lots of money sitting in pj’s day trading the financial markets then we’re sorry as this is not it. Spending a few pounds on a book, dedicating several weeks to reading and jumping in is not going to produce results. For a start, it is not a read but a dedicated full-time study over an extended period.

As with many good things the concept is magnificently simple but the correct execution of which is quite monumental to achieve. In brief, we day trade conservative breakouts from tight price action build-ups.

Price action is the understanding and interpretation of a financial chart (in our case a bar chart) in a similar way that a musician will read a sheet of orchestral music. The difference being that in financial charts the music (so to speak) never stops and with the prior harmony, tone and rhythm we can only interpolate how the next and subsequent notes develop. More often than not the music is by Charlie Parker rather than Kenny G.

“The more a trader adheres, Bob says, to a strict set of entry and exit rules, the less likely they are to fall prey to challenges of the emotional kind”. These rules and our interpretation of them is what you may glean from our Skype chats. You will notice how we debate the merits of each of our trades taken or missed and how we managed the trade to its most successful or otherwise conclusion.

In our chart notes you will come across Bob’s abbreviations:

pb: pattern break pbp: pattern break pullback pbc: pattern break combi pr: pullback reversal tff: trade-for-failure @: entry somewhat aggressive exit: news exit exit: resistance exit exit: reversal exit F: false break T: tease break W: W-pattern middle-part M: M-pattern middle-part Ww: Ww-pattern variant Mm: Mm-pattern variant SHS: head-and-shoulders variant MS: Morning Star ES: Evening Star

We will endeavour to explain and provide an example as necessary as supplementary to our chat notes. You will also be taken through our trade setups and be provided with chat discussion on price action theory and importantly how that fairs in practice.

We will venture into the all-important psychological understanding both of the crowd type and its effect on price and our personal feelings and how they can favourably or adversely affect our decisions.

Finally, you may have to ignore some of the more delicate points of writing as our Skype chats, relatively unedited, are thrown on in the moment of trading.

Published by Day Trader

I flew fast jets for 30 years of my life. I've traded full-time, more or less, for the last ten years, initially from fundamentals and over the last few years as a dedicated day trader. I live on the North Norfolk coast.

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