Tag: trading

Let’s quickly review my trading style.

October and November markets were slow months, to say the least. The S&P 500, for example, was in negative territory for most of this period, struggling to hold above the 50-day moving average. Not ideal when I trade long only, by choice. That said, things have changed for the better recently, with a hesitant yet rising market. Let’s see how that manifests as we go into the New Year.

Turning a small account into a big one within a reasonable timeframe has required a slightly modified approach. At the same time, we don’t want to risk the account unnecessarily or wildly. No point in putting in all the time and effort only to experience, at some point, a damaging drawdown. Therefore, what and how I trade matters.

With a larger account, I’d trade stocks in the $3- $30 range. I would also, where I could, add to a trade as and when it arose. That is very different when the account is small. Small is relative, in this instance under £10,000, and probably anything up to $25,000, depending on market conditions. Thereafter, I’d have the flexibility to play across a broader range of stock prices.

While the account is in the small range, I’m ideally looking for appropriate stock trades in the $1.5-$4 range. Why? Well, with a small account, I’m pretty much limited to a single trade per day. That brings its own challenge. Patiently waiting for the trade of the day, but not hesitating when it arrives, even if that is in the first few minutes of my day—rare, but it does happen.

The small account needs to grow, ideally, at 10% per day. If I take, say, 100 shares of a $20 stock, I’d need to be confident of a whole two-dollar increase in share price to achieve my daily goal. Not factoring in the spread and trading costs. With a $2 stock, however, in which I purchase 1,000 shares, I need that stock to rise by only 20 cents.

A small account only gives me one throw of the dice per day, so where I can, I will weigh it to our advantage. That is fine in theory, but in practice, I have recently taken higher-priced stocks as other opportunities were not happening.

The level 2 platform is essential for me, even with ‘tape’ spoofing and so-called icebergs. Not so much in the lower-priced division, but they are still prevalent. Level 2 is only one trading mechanism; for me, it harmonises with charts and fundamentals. In charts, I removed the bars for a while, showing only indicators, so I forced myself to balance the chart information with the level 2. That helped, and I will do it again from time to time where my personal recalibration is needed.

Let’s quickly review my trading style. It is a very short-term reaction to potential bullish movements in specific stocks. Specifically, what are known as low-float stocks? Those are stocks that, in most cases, have less than 10 million shares (the float) available and have a relative trading volume significantly above the available float.

I first screen potential stock candidates on the Trade Ideas AI platform by volume per minute. Thanks to ‘Bullish Bob’ for his help with programming Trade Ideas the way I like it.

Once a stock pops up on the scanner, I also like to see positive, relevant, and timely news associated with it. If the stock is associated with the pharmaceutical industry, crypto (when crypto is positive) or AI, so much the better. Of course, where the stock is based is a factor too.

A glance at my level 2 shows how active or inactive the stock is, along with factors like the spread and trading depth.

At this point, I study my bar charts. Firstly, the daily price relative to the daily 50- and 200-day simple moving averages. Not the most advanced technical indicator, but remarkably accurate at identifying resistance levels. Next, the 5-minute and 1-minute charts provide context and resistance levels, along with potential short-squeeze price levels. (They can sometimes be the 15-minute and 2-minute). Volume, particularly on the 1- or 2-minute chart, provides me with a green (good to trade) or red (don’t trade) flag.

Setups, however, are from the intraday chart, either the 15 or 10-second chart. I favour the 15-second at the moment, but that can change with volatility. I cannot stress the need for a credible setup enough.

As I am, for the most part, a momentum trader, I usually buy via hotkeys at the offer price and, conversely, sell at the bid price.

After that, it’s over to level 2. Watching the number of bids and offers coming in, the movement, if any, in the spread, the bid and offer (or ask) price and how it is reacting to certain price levels, combined with the rapid, or otherwise, movement of the time and sales.

All tells a story that allows us to fleetingly look into a possible future scenario with level 2 and judge the reaction to, and what is happening right now, through time and sales.

Side note. A couple of months ago, I moved the blog’s domain to WordPress. In the process, I lost over 660 posts. Retrieval via the Wayback Machine (web.archive.org) is possible, but it requires extensive copying, pasting, and reformatting.

December 14, 2025
Trade without ego

Eckhart Tolle’s excellent book ‘a new earth’ explains ego beautifully. His spoken version – where Eckhart is also the narrator – is the best.

To trade without ego is a necessary but difficult goal; to do so, of course, is to trade without emotion. Loss is part of the trading game and the successful, professional trader manages loss with the same detachment as she manages wins. Without emotion.

Don’t get me wrong, the unexpected ‘grand’ win will come along, so allow ourselves a small celebration. However, the professional trader manages each trade with a (egoless) positive traders equation in mind, an approach that will never have the need for commiseration.

To achieve a positive traders equation – an equation that includes risk, reward and, the often forgotten about, probability – is everything. Fear, greed and overconfidence are all parts of the ego. And, ego messes up our ability to recognise probability.

However, with understanding, determination and practise, as in all our endeavours, we can largely eliminate many of the damaging characteristics of the ego. To do so, certainly in trading, we need to train ourselves to be aware of these emotions and manage them correctly. Eckhart says that to manage ego we simply need to be aware of it and be in the present – that is, be in the now.

Taking a trade, for example, based on making up ‘lost ground’ is trading based on the past; or more accurately, based on the ego. It doesn’t work!

November 24, 2015
Weekly Diary – Slow Trader Fund 21st November 2015

What makes an outstanding tennis player, card player, chess player…? Its many things but removing ego and emotion are high on the list. I was lucky to watch some of the World Tennis Finals live at the O2, London, this week and the very best (Federe, Djokovic, Nadal) limit their emotional highs and lows when playing. Trading is no different. I have to leave emotion and ego out of it. When I analyse my errors this week all but one are due to emotion. The emotion of over confidence, usually after I’ve had a good win.

One way to limit emotion is knowledge. Real understanding of how to read the market through price action. I trade for several hours per day but back test trades each day for a similar period.

Here is a blown out chart of this week on the EUR USD 5 minute chart:

As we can see from above, each day provides many opportunities for success if we’re reading the chart correctly – or losses if we’re not. If we’re patient, balanced, calm, focused, not distracted and we really know what we’re doing then there is a chance of winning. But bring emotion into it and it can all go wrong very quickly. Sure that happens to the best of us from time to time. If it does, walk away. Go and watch tennis. Actually that was not the reason I went to the O2, I go most years. But trading the next day, or indeed after any short break, I need to start back slowly. Sit back, take a long look first before trading. The edge is a precious and small thing, it needs protecting.

Why is trading difficult? Because there is so much money involved it attracts the very brightest. And, as with chess or all the games mentioned above, we are always matching up against someone. When we take a trade there is always someone (or more than likely some sophisticated computer algorithm) that is taking the opposite trade. That is how it works. Therefore to win we need an edge that is preferably unemotional.

November 20, 2015
Investing or Trading?

Investing first:

Investing is buying into something that appreciates. In stocks and shares, any price increase after about a year is 100% because of the fundamentals: the strength of the books, the management, the continued saleability of the underlying product….to mention a few.

Most of us have investments in pensions or managed funds.

Over a bunch of years the market goes up about 9% on average. However, somewhere between 7 to 15 years the market crashes. Timing is everything.

Moreover, most pension and managed funds don’t beat the market, actually an astonishing 95% of them; on top of that, they charge several percent annually to do so.

If we need our invested funds, 15 years before would be best, move it into something that is not market based, at least not ‘fundamentally’ based.

Now for trading:

Trading is generally over a shorter time frame and is mostly technical based: that is, the reaction of price when price reaches a support or resistance. In its simplest form, it is one person’s opinion (or computers) against another.

And, as a computer does not have an opinion – it is of course emotionless – that presents the biggest obvious challenge to most human traders.

Some 75% of trades are institutional based (the big money). The remainder is made up from other entities such as high frequency trading (HFT) systems, large hedge funds and the like. Smaller (professional) organisations and home traders represent less than 5% of the market.

To be clear, when the (small) professional trader or home trader trades she is up against the institutions – computers mainly – so she better know her unemotional stuff.

That is probably why few home based traders, particularly lower timeframe traders like day traders, make it. Cheery, eh.

The one factor more than any responsible for successful trading is – no it’s not luck – is trade management, boring as that sounds. Good trade management always provides a positive traders equation of: risk, reward and probability.

Without a clear calculation of each of these (and probability is often the one that is missed) then we are not trading but doing something else…gambling, maybe.

October 1, 2015