Keeping stops tight means very well considered entry positions if we are to have a chance at profitability.

09:00 My watchfulness of the market has, I think, increased. I take very early exits as required. Here’s the trade from this morning. I entered on bar 1, a type of pattern break pullback (pbp); seemed reasonable at the time. My concern was the significant number above the entry position. However, if bar 1 had closed even slightly above the close of the previous bar, I would have exited. If bar 1 had pushed up – before closing to one pip above the high of the last two bars – I would have exited. When bar 2 closed, as a combi long, I exited which coincidently was breakeven.

14:22
An odd-looking entry. My reason was in the price action of the three bars before entry. Also, I’m looking for opportunities where the stop (and therefore the risk) is small. Not a perfect ‘Bob’ entry, but this time it worked.

14:28
Of interest, I moved the stop to its position at two pips above entry only after the bar below the 7,160 level closed. I took the scalp due to the ranginess of the day which was also the turning point and the ceiling test of the bar to the left at 08:20.

Many systems trade a trend. That is they are trend breakout methods. But there is a glitch with this. No matter what timeframe we observe the market is in a range for most of the time.

I’ve read that 80% of the market cycle is ranging. And this can be more or less confirmed with a brief observation of a broad section of one’s charts.

To, therefore, aim for a ‘trend’ dependent system is to spend much of the time sitting watching. It’s worse than this because it is difficult to determine if the price is in a range or the early stages of a trend. It is only apparent once the day, week or month – depending on our chosen timeframe – is well underway or completed.

Moreover, a discipline that works well in a trend may not work so well when a market is ranging and vice versa. So what is the answer? My view is that as the market spends most of its time in a range, I’d like a procedure that works consistently well in that environment.

When I get to the occasional trend – as long as I stick to my methodology – my account shouldn’t come to too much harm and as long as I can withstand the frustration that being out of a trend generates I’ll be fine and remain ready to do battle when (all too soon) the range starts again.

The secret here is sticking to our methodology. It is very tempting – and we have all done it – to alter how we trade to try to fit in with the new and dynamic looking trend. For the range based trader there is only one thing for it when the big move hits, let it go.

Unless…

Many have mentioned that they are interested in doing whatever it is that I seem to do. There is a side to trading that attracts.

And I’m not referring to the gambling types but those that genuinely want to learn a craft based on a desire to learn a strategy, a method and discipline. A good start is to read the books by Bob Volman.

What follows is copied directly from our daily Skype chats. This is something I will probably post more regularly so others get a feel for what happens day trading in real time.

Buzz 07:48

Worth a look at my statistics for yesterday. A Monday and often a slow day. A total of 14 trades of which 6 were winners (5 actually as one win was small). However, my gain was £642 for a £270 loss. All the profits were scalps as a ranging day. I’m trading tight with my stops. On one occasion I was out only to re-enter the same direction, and on another, I was out and bet on the opposite direction within a bar or two. The most important thing to me is context. Once I’m happy with that, I find that I’m closely watching the detail (individual bars).

For clarity, my planned stops are not tight, but my manual rejection of the trade (my actual stop) is close. I would still not trade without the planned stop in a proper position and for the reward/risk to make sense; this is only one technique. I think trading as Bob does in book two works well if done consistently. My outs are more in line with Bob’s writing in his first book.
08:06
I made the conscious decision yesterday to try the tight stop regime. But that was in a range. A trending market might show different results. Also, I figure that the more I practise the tight stops then, the better I ought to get at it.

Nick, 08:33
Its interesting to note your average times in winning and losing trades. 20 minutes for winning trades, and your out of losing trades in an average of 3 minutes. Thats good practise that I need to learn.

Buzz 08:37
An example from this morning – which I missed. The entry short for me would be on the pullback on bar 3. Quite near the top of bar 2 actually. My planned stop would have to be above the high but my actual out (manually) would be at the tight stop arrow – as price goes above the top of the bar before bar 1.

The FTSE 100 has seemingly gone into freefall taking out all gains since mid-2016. 

A fall in the value, to some extent or other, can be seen in all indices; and with much uncertainty to follow in 2019.

Selfishly, this is not our concern with the Slow Trader fund. We are over 41 per cent up since the start and without the worries that plague traditional funds. See Slow Trader Hedge Fund.

We can make that last comment with some confidence because of the way we trade. We day-trade on a small time frame, but we buy or sell (long or short) with little bias to the fundamentals. We only go where the price action is going.

A justified objection to day trading is the unexpected effect that short-term news can have on results; this is valid. But we trade away from news events whenever possible, and quite often a warning of a prior news spike will show to the watchful trader.

‘Breakout day trading’ parts one and two provide in some detail how we traded for most of last year: an aggressive breakout style that can result in significant gains; and, as much fun as that is, in matching losses too. Not so much fun. 

However, much of the information contained in ‘breakout day trading parts one and two’ is valid hence the reason for leaving these pages available for review.

We have moved to a more cautious style of breakout trading. The gist of which is in ‘my mantra‘ or can be glimed from a glance at the selection of trades posted in the ‘chart debrief, Buzz‘ section.

A detailed description of our ‘conservative’ trading method will follow as 2019 progresses. 

We know that our revised and cautious and compounded trade procedure will provide the future build in the fund that we want.