How do I know I’m in control?

I always mention day trading in terms of how I trade—no one wants to know the management bit. Last week, I said that managing my work trumps how I go about it. But that, in turn, bows to what is going on between my ears—the top idea in my mind.

In truth, everyone realises that I can’t profitably have one without the others over the longer term. It’s just that the ‘how’ tends to be more interesting. Jean-Francois Boucher puts it well in his chat with Etienne Crete. The getting in and the getting out are the easy parts. I also like how he mentions that trading is boring if you’re doing it right but not too dull. Charts are repetitive, with lots of the same every day occasionally thrown into turmoil.

Boucher has a reasonably distant safety stop-loss relative to his timeframe. A stop, as he mentions, that saves his account, not the trade. I do the same. Nearly all my transactions are manually rejected when they don’t work, but my safety stop is always in place, and I manually trail the safety stop in a winning trade.

I like to know what the value is versus the perception. In this regard, trading a currency pairing will be very foreign to an equity manager. Stocks and shares predominantly go up. Indeed most brokers only allow longs. In this regard, buy and hold is the way. Not so in currency pairings. With these, what is up anyway and to what? Price revisits the same level time after time. But this hope is dangerous too. It has been to me several times in the past. Okay, I get it a slow learner, but no different to many eventual profitable currency traders.

Over several days until mid this week, I’d traded light at no more than two lots per entry and added steadily to the fund. Then on a day of pure personal genius (cynicism), I traded my feelings rather than the chart with early anticipation of a market reversal—this has rarely worked in the past and certainly didn’t go favourably here. As a result, I dropped a thousand pounds. Not a lot in the big scheme of things, but I know it can quickly get away from me if I don’t halt and come back the following days with my head right.

I sorted my feelings, went back to basics and traded the two following mornings returning all the losses. It’s never about the profit. It’s always about working well. If I’m proficient, profits tend to look after themselves. Overall, not a big win week financially, but (correctly) bringing back a loss is very positive. It tells me I’m in control.

A day trader has to know when to go it alone

Look, to be consistently profitable in this game, we have to know a lot about the art of trading. But the rub is, the more we read, listen or watch, the further we are from that goal—what a dilemma. So finally, I had to get to the point where I was confident to put it all together. It takes a long time, though. No matter how well-meaning what I’m taking on board or how acknowledged the developer or author is, stuff will detrimentally plague my trading results. I can think of loads that did so for me. It still does if I don’t concentrate.

I include courses in this too. Education that costs thousands for what amounts to a couple of days. Of course, it’s not intended to throw us out for years to come. What is being explained works for one, the developer, not necessarily for the many? Okay, so why not stick to effective picture knowledge-based instruction and leave strategy to our creation. Great in theory, but it isn’t easy to separate the two. We seem to be solely attracted to the process.

An article on trade management—the primary contributor to our success rate— and a report on strategy will see only the latter digested unless the mentorship is consistent and always available as in a quality prop firm. As a home trader, it’s nearly darn gone impossible (as my online golf instructor says). Is there an answer?

The only one is to trade small until the account damaging picked up habits are eradicated. My ideas are self-generated, and my management is not complicated but so precise that I have no room for consideration or doubt. I have the flexibility to change with the market, and I’m consistently profitable. Then I’m ready to add size. I pleasingly did that this week—having been so long away from the screens.

In trading, everyone refers to an edge—what is it?

A recent chat with traders episode 231 with James Chen provided an acronym for realising an edge in trading. It was ASIA standing for Access, Speed, Information and Algorithm. Mr Chen’s trading routine is far different to my own. He lives in Australia but stays up all night to enter an Aussie dominated index during the USA trading hours.

However, I think “ASIA” has relevance in all forms of edge defining trades.

Access to me as an intraday trader is volume and, therefore, volatility during my trading day. A principal reason I’ve chosen currency pairings as these fit the UK workday perfectly. I have early access to the European market, with the UK opening soon afterwards. By early afternoon in the UK, the American market starts. I’ve found that concentration on a few markets is better. Indeed I concentrate on the British pound / Japanese yen. My alternative is the Euro / Japanese yen. Why so limited in market choice? Rhythm. I can more easily find the flow of a single market currency pairing, make fewer mistakes and trade more aggressively when appropriate. That, I feel, is an edge.

Speed means different things to different traders. For me, it refers to the speed of entry. But, of course, that is affected by our choice of broker. Trade spread, strong direct market connection and quality of market interface are broker factors that help or hinder. If the broker helps in each of these, it contributes significantly to an edge.

Information as a technical day trader is chart based particulars. I always want to trade the chart, not a bias. An example is that many trading software provides a sentiment biased target. A sentiment target influences direction. As we’re trading a different timeframe and a different trend, such an indicator would be disastrous. I’m constantly aware of market information that can move prices wildly. Other than that, to be in my information bubble is an edge.

More relevant than an algorithm is a term automatic. I’m a discretionary trader, and as every day is different in the market, my trading system needs to be adaptable to what the day brings. Nevertheless, each entry and exit is instinctual without procrastination or hesitation. That comes through a well-tested system over so many chart hours that the chart read and trade management is precise, mistake-free and systematic. When achieved, that, I’d say, is worth it and most certainly an edge.

I’m back!

I’m back in the trading room, thank goodness. Six months was somewhat longer than I’d anticipated. The self renovation (sounds better than labouring for my builder son-in-law) and the home move took more than I thought.

I backtested the markets most evenings to keep in touch and continue to develop my trading system.

Of course, the currency markets recently have seen volatility, and there will be more to come. However, as a short-term derivative currency trader, my ethos is to trade the chart without bias.

I’m working with volume indication showing anchored VWAP signals imposed onto range bars. The entry screen uses price action signals from a tick bar chart.

I get it. To most, that sounds as dull as dishwater, but I’ve worked with it for many months, and I think it’s excellent!

I found the diagram below revealing, though. It shows how long it takes to brute force (i.e. crack) your password.

Talk again soon.

Crypto, how goes it?

An indifferent few weeks in the crypto world!

The levels posted (texted to those that ask) are shown below—shown in British pounds and rounded for ease of entry.

Ethereum

As we can see, thus far, Ethereum has achieved the upper level provided with two or maybe three opportunities of getting in at the higher entry-level.

Ethereum seems reasonably balanced and within a broad area of consolidation.

Bitcoin

On the other hand, Bitcoin made a torrid—if not entirely unexpected—time.

Bitcoin is not ranging, as seen with Ethereum. On trying to balance, Bitcoin dropped significantly, only gaining a positive footing hitting our lower published entry-level.

However, I understand that taking an entry while the ‘knife’ is falling is not a prudent action and viewing the chart whilst it happens is fanciful if we’re not a full-time trader/investor.

What to do?

Those who have invested or consider doing so in crypto join a rollercoaster of an event.

If you are in the camp that believes crypto has a future, then as an investor, I hope you have been patient and grabbed as sequentially as possible the proposed levels made available.

You will recognise the importance of taking small bites at the levels proposed.

Binance

Binance has changed its investor identification requirements to make it more acceptable to the UK and such.

In that regard, larger banks may still block such investment through Binance. However, it is possible through smaller banking institutions such as Monzo. (Nick tells me).

Advantages with Binance over PayPal is that it is more suitable for trading as limit or stop orders are possible, and selling costs are minimised if exiting but not withdrawing.

Another thought comes to mind that once bought, investors looking at their portfolios every two to three years are verging on too many!

Crypto—if you missed the buy, hold tight.

Price

Our required price for bitcoin and ethereum was probably too fleeting on Friday for most of us to get.

Price in both of our interested crypto’s has gapped slightly high this morning.

If we now revisit the price we desired, that could signal the level failing.

If you missed Friday’s signal, I’d suggest staying out—even if the price revisits the recommended levels.

We’d need time to take another read as to what is likely to happen.

PayPal

The buy mechanism with PayPal is limited in that it does not seem possible to set a future price—so if you are not on when the price is at the level you want, you miss it.

Equally, a stop level with PayPal is not possible.

As crypto has the high potential of significant price gaps, a stop level is not solid anyway. Hence the big recommendation is not to use a leveraged account in this regard.

I will monitor bitcoin and ethereum and update you technically as appropriate. But, for now, hold tight.

Buy levels for bitcoin and ethereum

Divide your investment amount by six, with three of those lots going to bitcoin and three for ethereum.

Bitcoin

I suggest the first buyback of bitcoin at about (or below) £44,000.

Buyback in stages. I cannot emphasise this enough.

The next buy level, if we see it, is in the region of £42,000.

These are value entries, albeit after a minor reversion.

I would like to see a momentum entry too.

But that won’t show itself until the current pullback turns bullish again.

If I were to prioritise a coin, it would be bitcoin due to the recent launch of the first-ever bitcoin ETF.

Ethereum

That position is happening as I write, the first buy level is £2,800.

I would also consider £2,650 and, after that, as with bitcoin, wait for a momentum entry.

Lesson

It seems that the PayPal personal account needs to be pre credited to allow crypto purchase.

Disclaimer

The levels given are my thoughts only. Individuals will need to take responsibility for their investments and the reason for doing so.

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.