Slow Trader

Tag: 4-hour chart

  • Do it (trade) like a casino

    I day trade the currency pairing GBP/JPY with 5-minute bars as the primary chart. My edge for these trades includes: the recognition of context, or where the chart is in regard to a trend or a trading range; my strict minimum trade requirements (as I’m a retail trader I have to pay and, therefore, consider the spread); and, finally, my Green Line Entry Measure (GLEM).

    Each of these points are contained within a strategy that I’ve proven through ‘live’ trading and rely upon to provide consistency over time for all of my trades; a strategy – because of the nature of the game – that is always open for amendment. A strategy that makes us more like a casino; the management of the casino rather than the gambler.

    A casino – after taking into consideration all the big winners, the big losers and everyone in between – will consistently take 4.5% in profit from all takings, over time. That is because they too (the casino) are working to a tried and tested strategy. My volume is, of course, nothing like a casino, so I need to take trades that are 60% probability or better. If less than 60%, on the rare occasion that I select low probability trades, I need to have a consistent reward/risk that makes the trade worthwhile.

    Moreover, I also trade the Slow Trader Fund in several currency pairings, the commodities of gold and oil and Nick’s top FTSE 350 companies. These are all traded with the 4-hour bars as the primary chart. I’ve chosen 4-hours as this provides multiple trading opportunities a week. Moreover, with my day trading my charts need to be linked to my broker as I require an accuracy here of 0.1 of a pip. These charts (British broker) do not provide the important New York close bars which would be required if I were to select entries from daily bars. Hence, another reason for 4-hour instead of daily bars.

    With regard to Nick’s top FTSE 350 companies, please do not miss read me here, they are, for investors, a long-term consideration. They came to the fore because of their strong fundamentals and ‘value’. Because of their strength, fundamentally, these companies could ‘weather’ a market turn down (or two) better than many. I have placed them in the 4-hour trade cycle but: with my context, probability and price action strategy, it could almost be any ten companies.

    As an aside, the best index for technical judgment of the longer-term market cycle, I consider, is the weekly or even monthly bars of the S&P 500 index. Yes, even for companies within the FTSE 350. Movement on the S&P is generally followed by the FTSE. I’ll provide a S&P synopsis soon.

    To finish, we have detail on short-term trading (my day-trading and 4-hour chart work) and information on the very long-term investment considerations (Nick’s top ten). However, we do not have information on the mid-term investment/trading opportunities. This is not my area.

    Steve, however, has a great track record in this regard, and one that is just getting better and better. A key member in a ‘high energy’ company, Steve is responsible for a budget that annually goes into the multiple millions. Therefore, not a full-time analyst but someone who has put his working skills to good use in selecting mid-term investments. From many examples is his purchase of Sky PLC in early December, and before Sky made a 25% positive jump.

    I will ask Steve, if he’d make a contribution to this blog and share with us his mid-term ideas and thoughts. I hope he will agree.

  • Which chart should we use?

    We talk about charts, but what’s the difference between say a 5-minute and a 4-hour chart?

    One of the charts below is a 5-minute and the other a 4-hour chart. Which is which?

    snip20170121_1

    snip20170121_2

    The top chart is the 5-minute and the bottom the 4-hour, I think?

    The point is, charts are like the very large, the universe, and the very small, the atomic level, where there are (apparently) as many details in each.

    Each chart that we use is made up from these fellas. The candlestick.

    snip20170121_5

    We use candlesticks, but there are several ways to show price. On a 5-minute chart the time between the open to the close of the bar is, of course, 5 minutes.

    Different bar colours show a rising or a falling bar. We’ve gone for the colours above as it seems less straining on the eye.

    Many starting out choose lower timeframe charts. Five minutes or less. Lower time frame charts are seen by traders as quick reward for little risk – a protective stop can be placed only a few pips away. When their account decreases (which invariably it does) they then consider only risk. Both techniques are wrong.

    The problem with starting out on the lower time frame chart is that we are competing with ‘grand masters’ with only a few seconds to make a decision.

    The one-minute chart is where most traders are foolishly drawn. In comparison the 5-minute chart seems positively pedestrian. Except that the 5-minute candlestick above often closes with a very different form in the final seconds of its life. Not easy.

    On the other hand, higher time frame charts are not as concerned by the regular pitches in the market due to short-term news and give us time to consider: the all important context (all the bars to the left), possible set-ups and – what the shape of the closing bar is telling us – the price action.