To Achieve the higher levels of ‘amount per trade’

Amount per trade and consistency define the top 1% of traders.

Our aim

From our last report, we had some trades go against us for a time. We managed that occasion to an eventual near breakeven. However, it was an uncomfortable period of trading.

Our principal aim is to protect the fund. (Which seems a contradiction if a detrimental trade is allowed to build).

In defence, we got very good at scaling-in and turning a negative situation into a profitable or neutral outcome.

Reward to risk

However, a disproportionately magnified stop distance to a planned target, will, from time to time, result in a loss that is more significant than our usual win.

Psychologically this is hard to take. We can find ourselves moving our stops to accommodate the possibility of one more scale-in to save the day. Works sometimes but is a recipe for a shocker.

From taking a breakeven after a two-week hold and management of a detrimental trade has been a good thing because going forward we have reaffirmed our trading rules.

We now trade a planned reward to risk of not less than one to one. No exceptions.

We do not have the flexibility to scale-into a detrimental trade, but actually, that is a good thing. Moreover, as a result, we expect to take smaller (controlled) losses which is acceptable.

After our experience that concluded soon after my last report, we’ve traded small as we build confidence and consolidate our revised approach.

5-levels of ‘amount per trade.’

We have 5-levels of ‘amounts per trade’. We trade the lowest amount when our approach changes and until we can prove profitability. Also, our trade amount increases to the next level after a string of three successful trades. It reduces, however, one level with any failed trade. With three failed trades in a row, we reduce back to the lowest setting and start the build process again.

This method is in contradiction to nearly every beginner; they, generally, increase trade amount after a loss and reduce after a win.

How many traders win?

There are no definitive figures on how many are profitable at trading. But from everything that we have read, it seems to be in the region of 20%. That is not the full story, however. The 20% contain vast differences regarding profitability.

Tennis provides a useful comparison. Consider the world tennis rankings. Those within the top 200 (the 20%) are net winners. In other words, they win a bit they lose a bit, and with expenses, it is difficult to make a living. The top 100 (the 10%) are more consistent winners and consequently win more significant amounts. But it is in the top 10 of players (the 1%) where we find big rewards.

To stretch this analogy one last time, where do we stand in the rankings? Entering the top 100 with a goal of reaching the top-ten within two years. Which, in trading reality, is nothing more complicated than systematically building the higher levels of ‘amount per trade’ for extended periods.


Light trading only expected in August. A family wedding then, as others are on holiday,  two dogs to look after and probably more involved than usual in the family business until the end of the month.

Return relative to risk

Below we have our previous 30 days of trading results.

They look similar to the last report regarding gain and percentage win. But in reality, are very different.

Such summaries provide useful figures but often not the important ones. It is nice to know the overall gain. After all, that is our purpose. However, I would like to know how we achieved that gain, or more accurately ‘what was our return relative to risk’?

The amount of leverage we can use is about to change significantly with the European regulation on margin to be introduced at the end of next week.

I have tended to trade on margin rather than on a firm stop. That is, if a trade went against me I would often hold and look for a suitable scale-in point to provide a break-even opportunity or, quite often, a profit.

All well and good until we are caught out with a massive move against us. That happened to us this period on not one but three currency pairings simultaneously.

Our return relative to risk was poor this period. And that has to change. Not only are such trades overly difficult to manage they are likely to create an excessive loss. In any case, the new regulation and change in margin will make such a strategy untenable.

Setting hard stops that provide a planned reward to risk of not less than one to one will offer more (albeit smaller and controlled) losses but also free us early to reenter with a new trade; rather than sometimes being locked into a scaled-in extended detrimental equity trade.

Stats for the last 30 days of trading.
The stats often don’t tell the whole story.

Slow Trader Fund update

 An increase in Slow Trader Fund profits and new investment added. See table below.

Day trading:

  • A day traded fund in Forex is deemed as risky by most. To trade this way attracts the boom and bust people. Hence the planned European increase in the margin that we have discussed.
  • Day traders that are not boom and bust have to accept an extended skill learning period, which few are prepared to do.

Day trade amount:

  • Over time we plan to trade the Slow Trader Fund at a risk that is 1/50th of the fund per trade. (throughout our skill development period we have bet at about 1/100th). We take several trades per session.
  • For example, take a Forex day trade with a £50,000 funded account. Such a statement would attract a deal of £500 risk with the option of a second entry also of £500 making £1000 risk  (1/50th) per concurrent trade.

How we’re doing:

  • We take statistics of ‘how we’re doing’ from batches of 20 trades. We accept a loss rate of 4 to 6 trades out of 20 – therefore a 70% to 80% win ratio. Anything less requires a review of tactics. A 50% loss rate would necessitate a review of the underlying strategy. (More recently, several weeks, we’ve achieved a 77% win ratio.)

Commodity trading:

  • We are also looking at reintroducing longer-term commodity trades to the Slow Trader fund. Both Forex day trading and longer term commodity trading use the same strategy with the addition that the commodity trades would only be in agreement with the COT report.

 Slow Trader Fund withdrawals:

  • As we primarily day trade, funds can be withdrawn at minimum notice. Withdrawals of your full lot amounts (e.g. JB2) would be preferential.

Trade timetable:

  • We aim to trade the fund for 200 days annually. Manageable, but we don’t trade weekends, some of the USA or UK national holidays, times of significant news due to unpredictability and most Friday afternoons.

The last four lots are new money as of 1st March 2018.

New funds to trade

All traders look for an edge, an ideal way to enter, manage and exit a trade. New funds.

It is crucial that a chosen edge suits us individually too.

The time-critical stress of the day traders world is probably not for everyone. Nor, for others, the weeks or months of being out of the money, as in the longer time frame deals.

However, if we have the time, the knowledge and the inclination we might be comfortable trading in both disciplines.

More than this, one helps to condition the other. In day trading we have learnt the art of the identification of a likely trade. In longer-term trades, we appreciate the need for trade management and a requirement to ignore emotion and the uncanny ability to hit targets when we are not necessarily observing the trade moment to moment.

A big supporter of the commitments of Traders (COT) report, not everyone is as it is infrequent in its signals and notoriously broad in its message. However, with longer bets, as a ‘conditional’ trader, the COT provides arguably the only edge that is not in itself related directly from the price.

Day trading has provided us with skills that can be coupled very well with the longer term charts and this, in conjunction with the COT, offers an exciting way forward.

With additional funds coming in to trade, we looked at what would complement our day trades but not emotionally or otherwise interfere.

Significant commodities and a selection of currencies traded from weekly charts in unison with the COT is our chosen direction.

Slow Trader Fund

Our Slow Trader fund has sat on the fence for a few months waiting for me. Not being a boom and bust trader, I have traded small while developing our ‘probability trading’ technique.

A trader needs to achieve a level of profitability through consistency before increasing trade size. The technique provides that, now it is up to me.

It may seem a bit odd that I’ve moved away from trading a market, US stocks, which has increased this year as an index 20 percent or so. The UK shares not so much at 6 or 8 percent as an index.

To day-trade profitably I need to give it (day trading) all my attention. Having trades open in other areas and time frames were a distraction for me.

Why have I chosen day trading despite the many stories that tell us not to trade this way? Bizarrely, it is ‘control’. As a probability trader, we accept that we are day trading a market that is random. In other words, we recognise that anything can happen.

If we except that anything can happen, then we accept the risk. We agree that the market is only about a price that can go either up or down. In ‘probability trading’ we also recognise the heard effect; where specific things happen that can give an observant trader an edge.

Despite the simplicity described, it has taken me a couple of years to combine price action trading and money management, specific entry and exit techniques, and group it all, test it exhaustively and call it probability trading.

Fund contributors that think the share market, and particularly the US stock market, are to continue climbing throughout 2018 ought to withdraw their funds from Slow Trader and head that way.

After all, that is the market, with you, that Slow Trader initially entered.

If you stay in the Slow Trader fund, and to do so you don’t need to do anything else, you become part of a probability day-trader fund. Our advantage: we are not concerned about a good or a bad year for stocks and shares; we trade a currency pairing in the short-term, with an edge; with (to quote Mark Douglas) rigid rules and flexible expectations.

We have developed a day trading strategy that allows us to take money consistently – day in, day out.  We scale-up though when we’re ready.

Slow Trader Fund Update

I was keen on a 30% increase in the fund this year, and I still think we will do this. That sort of growth for a common fund is perfect, if done consistently it can be outstanding, but I’m after achieving a lot more. I also want control of risk.

When I trade longer-term charts, I do very well for a while then get hit unexpectedly. It is this uncertainty that prevents me from investing in the traditional sense.

My passion is day trading; this has come about only over the last three years or so. Previously I used a similar trading strategy but with different time frames. Traded from the daily or 4-hour charts, a trade was, therefore, held for several days or weeks. And I would concurrently day-trade a small amount of personal money.

This has changed in that I’m shy of holding money over longer periods in a trade. I’m much more comfortable watching a trade, and be in and out again several times in the day, and never holding overnight.

The reason that I’m now doing this is that I like to be in control. Particularly with other people’s money. To say that I’m day-trading, rather than using a sensible medium-term investment strategy, because of my consideration to risk, is barmy to traditional investors. They’ve always understood that day-trading is risky.

They are correct, ordinarily. But it’s like fishing with a rod and line from a boat or free diving with a spear gun. We are not going to survive the first dive if we jump in and are expected to hold our breath for several minutes. We’d be better off and more prosperous fishing from the boat. But to the conditioned, free diver the ability to catch fish is far more precise and consistent.

Cynics would say ‘get a net’. But when the so-called ‘medium risk’ investors with a net hit a storm, they can lose the lot. So when they think they’re a medium risk, they are not.

The day-trader will trade small and often. In contrast, for the medium-term trader, the exposure is usually more extensive and over fewer trades. Rewards from day-trading can be exceptional. But it takes time to learn. Like many things, I think worth the wait.

However, I appreciate that investors may have other ideas. As I’m moving the fund to 100% day-trading the funds are available for transfer at no notice. Well, one day’s notice.

To a certain extent, I trade at an amount proportional to the fund. That is the intention. But my competency is the principal measure. For all of this year, I’ve traded small. However, the trade amount, when it moves, will increase substantially.

For instance, risk per trade has recently moved from a few pounds to £150 per trade, and will very soon be £300 per trade. The next step after that is to £600 per trade, where it will stay for some considerable time. I will take half a dozen or more trades per day. Moreover, I will trade twice within the same risk where appropriate.

If we’ve mastered the day-trade, then the potential is clear.

A chart mix

My mother missed her step coming off the pavement and fell and broke her hip. She is doing remarkably well, and I look forward next week to getting back to my trading, I’m a couple of weeks behind.

Trading GBP/JPY on the 5-minute charts works well for me. I like the size of this market, and on many days GBP/JPY can be wholly defined. Anyone familiar with EUR/USD or even GBP/USD will find GBP/JPY quite lively.

Many that trade ‘major’ pairings will not consider the spread, a mistake I think. But, not a big one when they trade from 15-minute charts or higher. GBP/JPY however, on a lower time frame, teaches us the necessity to consider the spread. To do otherwise, and be consistently profitable, is more difficult.

To make the best of both possibilities I’m happy with my results of concurrently trading GBP/JPY on the 5 minutes chart (as the priority chart) with a watch on USD/CAD, Gold and EUR/USD – each of which are on the 15-minute chart. I tried many possibilities, but these choices give me an excellent opportunity, diversity, liquidity and a spread value that I prefer.

For example, GBP/JPY does not work with GBP/USD as both react almost in unison. Moreover, oil is often a mirror image of USD/CAD: so to trade one would have too much influence on the other. I do find that Gold and EUR/USD often have similar movements and on such days I consider a swap to AUD/USD or (and I’m in the early stages of this) the US 500 SPTRD.

Other FX pairings, and particularly exotics, are not considerations for me. Primarily due to spread but also we are dealing with randomness and probability, and we don’t need significant uncertainty too. As already mentioned, I’ve looked carefully at the US 500 SPTRD, and this is a possibility on the 15-minute chart with good liquidity once the US market has opened.

To trade the fund on the 4-hour charts is not possible (for me anyway) with already four intraday charts to manage. If my results are what I know they can be (and so far so good) over the next few weeks I will consider how to join the slow trader fund within this – more intensive – methodology.

Slow Trader fund to a corporate CFD trust account?

Going forward a few words regarding our ‘Slow Trader’ fund.

As our fund grows, I’m looking at its future organisation.

I’m considering moving the fund to a CFD traded corporate trust account, nominated as a hedge fund.

If we were to do this, we still wouldn’t pay stamp duty, but we would pay capital gains tax.

Shares within the company would reflect the share distribution of the fund. Any losses would be tax-deductible.

It’s essential that we retain the ability to hedge (trade long and short), and can trade intra-day in our present selection of forex, commodities and shares, from a platform I’m familiar.

Some technical stuff: A CFD, a derivative, satisfies this requirement. CFDs have a spread on forex and commodities; shares are commission only, no spread. Which is all right for us? Moreover, CFDs are on margin with a provision for guaranteed stop orders.

A private limited company for such a purpose would be relatively easy to manage and report. I will let you know on this and seek everyone’s thoughts after I get further clarification from my accountant.

Slow Trader Fund, We’re Ready for Action

Thank you for your patience while I’ve performed a complete overhaul of my short-term trading strategy. Readers will notice the amount of work involved in the ‘how I trade’ page; this has been a great exercise, and one of which I’m confident will be well worth the wait.

A reason for taking so long is that our strategy, I believe, can only indeed be devised under live trading conditions. The way we react to probability trades under live conditions is significantly different to what back-testing states would provide.

To that end, I’ve traded and worked on the strategy these last few months with my own account and traded small. The fund has remained in waiting.

Now I’m at the other end of the strategy development; we will see a gradual build-up to normal fund trade amounts.

My thoughts on how I see the fund going forward from today:

Slow Trader allows investors the opportunity to access a short-term trading fund.

Why an opportunity, and why short-term trading is not possible for most people:

  • Firstly, short-term traded funds are not readily available. Moreover, expert (and hopefully successful) short-term traders charge a lot – up to 50% of profits and substantial participation fees.
  • Secondly,  short-term trading is a difficult skill to master. It takes several years for a trader to graduate from the ‘beginner’ level, through ‘intermediate’, to ‘expert’. And, an expert takes all the capitalised reward. In other words, short-term trading, in contradiction to its name, takes a long time to learn.
  • Finally, learning the short-term trading skill is often, through the beginner and intermediate stages, financially penalising.

From the 4-hour chart the fund trades:

  1. Nick’s qualifying UK shares – long only.
  2. Currency pairings GBP/USD, EUR/USD, AUD/USD, USD/JPY – long and short.
  3. Commodities Gold and Oil – long and short.

For each of these I’m looking for an edge:

  1. Nick’s qualifying UK shares already have the fundamentals. And, although fundamentals usually are not a factor for a trade of less than 9-months duration, we nevertheless have them on our side. The principal trading advantages that I use, however, are probability, context and price action.
  2. In our currency pairings, we again bring probability, context and price action to the fore.
  3. Commodities also use probability, context and price action but are also traded inline with the COT report.

The 4-hour chart is used in preference as this provides at least two trading opportunities per day; this means that trades can be open for several hours to several days.

The page ‘how I trade’ is written with the 5-minute chart in mind but applies equally to the 4-hour chart and is the essence of how I approach probability, context and price action. Nick’s qualifying UK shares are published quarterly through this blog and guidance on the COT will also be given as the COT occasion provides – the COT cycle for each commodity coming round independently a few times a year.

I provide a detailed annual report on the fund and a semi-annual ‘how goes it’ review.

The goals of the fund are:

  1. Not to lose money (and this defines our risk level)
  2. Increase the fund by 30% (as a minimum year on year)
  3. Compound the fund year on year

Fish and chips or a’ la carte?

If our restaurant served fish and chips one week and a’ la carte the next, both sets of customers are going to be disappointed at some point.

As with what we serve at the restaurant (within reason) we have to be clear in what we represent in trading.

Most of our Slow Trader contributors are slightly north of 60. Okay, all except you SA. But you’re close enough for it not to matter.

Therefore, you’re looking for the fund to do something interesting within the 3 to 7 year period. The younger readers, those under 45, can opt for our share ISA idea, a 20 to 30-year investment.

These are the two options. (1) a dynamic fund that uses lower time frame charts; and (2) a long-term ISA investment based mostly on fundamentals.

We like the short-term and the very long-term. We don’t want what 99% of the investment market is using, the medium term investment idea. For the long-term investors, they expect to go through a few market crashes. It’s part of the game. The long-term investors look at this as an opportunity to buy more at lower prices. The Slow Trader is a type of hedge fund that trades both long and short. The fund rides the wave whether it’s going up or down. Everything else in a market crash, the 99% of the investment market, gets stuck in no man’s land with a significantly reduced portfolio.

For the Slow Trader fund, we’ve had some glaring blunders and some moments of brilliance. We’ve benefitted from taking the time to trade the 5-minute charts over the last year, as the lessons from this were vital. However, we’re delighted with the early results from trading 4-hour charts.

We’ve traded shares from the daily charts but were significantly more successful coming back to the 4-hour charts. Therefore, we now trade a selected mix of currency pairings (FX), commodities and FTSE shares using 4-hour charts.

We have three trading opportunities a day 8 am, 12 pm and 4 pm. (8 pm is a consideration for the FX and commodities-the share market is closed at this time-but as the market goes into the night it has little movement). With the 4-hour charts, we can trade many more markets than is possible with a lower timeframe chart, and we are more likely to benefit from an extended trend.