After yesterday’s strong moves things seem to have quietened down. Today’s FOMC announcement later is probably playing a big part in keeping things subdued for now. The range in EUR/USD seems to be stuck between 1.3387 and 1.3410. Saw a touch of both these levels in the first 30 minutes.

1 – trade 1 – Coming off a test of the support level at 1.3387, price entered a 5 pip block near the bottom end of the range. I entered an IRB trade on a break of the block. 1.3400 was pierced but TP was not reached.

2 – skip 1 – After a double bottom was put in by 3 and 4 another block formed, this one much narrower. After the resistance shown by 1.3400 on my first trade I was hesitant to enter another IRB. In hindsight this one was probably the better of the two and I should have taken it. The double bottom test of the range support added extra credence to that support level. The block was much more compressed which had the potential to lead to a greater surge out of it. The block was also lower down in the range. While the previous entry at 1 only moved 4 pips before hitting the 00 level, an entry here would have the opportunity to move 7 pips.

5 – trade 2 – Same rationale for this entry as the previous two. The block is nowhere near as nice as the previous two and I had doubts as to whether it was worthy of being valid. After seeing how an entry at 2 would have been successful I decided to just play the percentages and take the trade.

1 – skip 1 – This was a nice RB setup that had built up over the past hour. The reason I didn’t take it was that the market had been in a decidedly bearish mode since yesterday afternoon. I keep forgetting to take into account the increased liquidity that the London session has and how it often dictates things, rather than following. I really should have taken this entry given that.

2 – trade 1 – With the strong break out of the range that I had skipped on at 1, price pulled back from a test of the 50 level. The 5 sideways doji bars were enough for me to put on a DD trade. Since the biggest doji was only two pips tall I debated whether to add an extra pip to my tipping point. In the end I decided not to. Lo and behold and I got taken out on a false break of the doji low. Price then did that most infuriating thing, where on a third attempt it broke through the 50 level. My TP would have easily been hit if I hadn’t been shaken out.

3 – trade 2 – Undeterred I settled back to see if the bulls were out in force. It seems like they were. After breaking through the 50 level decisively, the most the bears could conjure was an extended (8 candle!) block that was one pip high. This seemed like a prime BB continuation play. I entered on the first break above the block and price rocketed up to hit my TP.

5 – trade 3 – The move at 4 was a classic first break continuation of the trend. There wasn’t enough pullback for me to want to take it at the time. Instead I waited for a more pronounced pullback which soon followed. After that FB I thought it would be better to wait for a higher probability SB. Technically, the SB happened at 5. In hindsight, while that was technically the SB, 6 is where the actual tradeable SB took place. I took the entry at 5 when I should have probably waited for a better formed second pullback to take the SB from. I had to close this trade out for a 6.2 pip loss and wasn’t alert enough to take the immediate long that was the proper SB entry point.

7 – trade 4 – Instead I saw a block form and started to wait for another opportunity to go long. This happened at 7. There was a push to a new high but it didn’t make it to my TP before price pulled back below the tipping point that I had moved up to the double bottom at 1.3387.

While I had checked the Forex Factory calender at the beginning of the session to see what data releases where going to be released before 5:00 EDT, I failed to take note that the German ZEW Economic Sentiment was to be released at 5:00 EDT. While I was taking screengrabs of my charts I noticed that Oanda’s spread had gone to 15 pips. I quickly latched onto the fact that I’d missed noting a big data point. As the spread settled down I saw a chance to go long. I decided not to take it since I hadn’t been vigilant enough to notice that there could be a good trade setup beyond the 5:00 EDT end point that I normally stop at each day. I didn’t want to potentially reward myself for being lazy.

1 – skip 1 – The way I drew my range here, with the top being at 1.3328, meant that there wasn’t enough pre-breakout tension for me to consider entering a RB. There’s a strong case for making the top of the range one pip lower at 1.3327, since there were many more touches at that level. Given the false break out south, I probably should have gone with the slightly more aggressive level and taken the long entry.

2 – skip 2 – Again, not enough pre-breakout tension for me see this as a valid BB. I wanted to see a strong build-up if price was going to attempt to breach the 50 level on its way to any TP level.

3 – trade 1 – I was ideally looking for a long entry to develop off the top of this block. As price ground lower I started to consider the possibility of a countertrend entry south, especially given the double top near the 50 level that had just formed. My chosen block is pretty ragged, with no clear cut bounce from the bottom of the block to the top and back down again. In the end, price did push out the bottom but there was no momentum and I covered on a break above the top of the block.

I think this entry was fair at best. A useful question to ask myself I realised while analysing this trade is: ‘If I had taken 1, the first skip today, would I have been happy to risk giving back some of those pips given the quality of this signal.’ The answer is no. The setup just isn’t strong enough; the block isn’t defined enough. I should have skipped.

I know that every trade stands alone. Probability rules. The fact that I’ve put on a trade already, or whether it was a winner or loser, has no impact on the chance that a follow-up entry will be a winner or not. Each trade is truly independent. I know that; but still thinking about it in this way seems to help clarify the validity (or lack of in this case) of a signal. Whether the same would be true in real time I don’t know yet. We’ll see if I think about it in that way going forward.

After an extended hiatus from journaling my trades on this blog, I’m back. I had been trading throughout that time; I just didn’t feel that I had anything worthwhile to add. I felt like that unless I achieved some sort of level of consistency that I was just going to be retreading old ground and not offering anything new that I haven’t already documented in the numerous years I’ve had this blog. It just felt that I was going around in circles.

For the year and a bit that I was offline I pretty much stuck to the longer term swing trading approach that seemed to be the thing that worked best for me. Sort of a hybrid of the BWILC and millipede methods. Lots of focus on fundamentals, trying to get small bites out of moves in the direction of the longer term, large stop losses. When things are going well it all seems great, but as I know all too well from past experience, if you get caught with multiple positions going against you with a trend change well under way, it is far from pleasant. While I was a lot more vigilant in making sure that I wouldn’t blow up, the big losses (10-15%) were still frustrating and gut wrenching enough to again doubt if this was really for me. Even though I’d seemingly tried every other way and this was all that I felt was left; nothing else seemed to mesh as well with my personality.

I took a two month break starting in February 2013 to recharge and ponder my options.

During my blogging hiatus I’d also pretty much stopped reading any trading books. At the time I was about two thirds of the two way through Al Brooks first of three new books on price action, Trading Price Action Trends, as well as half way through The Daily Trading Coach by Brett Steenbarger. I never got around to finishing either, and I even had the next two Al Brooks books sitting on my bookshelf berating me for my lack of drive.

Even though I wasn’t reading anything I’d still occasionally browse Amazon for new trading books. About the only one that I seemed to gravitate towards at all was Forex Price Action Scalping by Bob Volman. From the reviews given it seemed to be a more practical application of trading price action. It was focused on the forex market, perfect. It dealt with short time frames and thus scalping. Oh dear. I’d tried scalping in the past. I learnt a ton from scalping. The compressed time frame means that you see a lot more chart patterns and have to make a ton more decisions. I liked that you focused on trading exclusively during the time slot you put aside for trading; it didn’t take over the rest of your day, you didn’t have to keep checking the charts at all hours. There were a lot of positives, but the main negative was that I didn’t seem to be consistently profitable. I wasn’t making any money. So I moved on.

I must have looked at the reviews for Volman’s book a dozen times over a ten month period before deciding that I’d better find out if there was anything in for me that might work. In the end I caved and just bought it.

If nothing else, reading it gave me some motivation back. With most trading books as you read through it you’ll find parts that you agree with and others that you know you’ll never follow as that just isn’t you. As I read Forex Price Action Scalping I found myself agreeing with pretty much everything that Volman had to say. From liking his setups and the rationale he has for taking them, his views on trading psychology, money management, stop losses, reading overall market pressure, probability, etc.

In the end I’ve pretty much jumped in with two feet and am focusing exclusively on scalping the EUR/USD.

There are cliffnotes on the book available here and you can read an excerpt from the book here.

Bob Volman recommends only trading off charts that use price to 4 decimal places; he feels that the extra fifth decimal place makes chart reading cumbersome and those pipettes are going to be highly broker specific. As can be seen from my recent journal entries, I’m using prorealtime.com charts. They’re the first on-going trading expense that I’ve incurred in a long time but I’m willing to pay a monthly fee for a trading tool if it gets me results in the long term. I trade off a 70 tick chart, which is relatively close to a 30 second chart, but the tick chart comes into its own when the market is moving either faster or slower than normal.

Take profit is always set at 10 pips, with a disaster stop loss also set at 10 pips. If a trade is going against me, it will often be closed out well before the 10 pip stop loss level is breached. On my chart notes I’ll probably be using various abbreviations for the signal type that led to the entry. These are:

1. DD: double doji
2. FB: first break
3. SB: second break
4. BB: block break
5. RB: range break
6. IRB: range break
7. ARB: advanced range break

One thing that I was not aware of when I ordered this book, but which I think is an incredible ongoing resource, is that Bob Volman provides annotated charts for the previous weeks action in EUR/USD. This means that at the end of every week I can compare the trading decisions I made and which I annotate on the charts here with the decisions and trades that Bob Volman has taken. Am I seeing the right things? Am I over or under trading? While this method is purely discretionary there are enough rules that the trades that most traders take should be done at pretty similar times and places. Being able to compare against the actions of the author himself has been fantastic. His charts can be found in this Dropbox and get updated every weekend.

In my previous scalping endeavors, I went with trading the 6:00 EDT hour. I’d get up early and trade before getting on with the rest of my day. The 6:00 EDT hour coincides with 11:00 GMT and you could often see a drop off in market activity as London and the rest of Europe headed out for lunch. If I was going to scalp I felt that I really had to do it during the most active time of the day: the London open.

Unfortunately, that’s 3:00 EDT. Three o’clock in the morning from where I live on the East Coast of the United States. Not the most ideal time. But if I was going to make scalping work then I was going to have to figure out a way that trading in the middle of the night was possible. I decided to try something that I’d read about in a few articles earlier this year. I’ll give more details on this in a follow up post (as this one is already long enough). The first week was rough but I made it through the first month (usually the minimum time that you have to do something consistently before you have any hope of it becoming a habit).

That’s pretty much the state of play right now. I’m sticking to my new routine, looking to get some consistency demo trading this method before I venture moving to a real account.

1 – trade 1 – Nice little block break right up against the 50 level. Trend since the close of yesterday’s US session had been decidedly down.

2 – skip 1 – Countertrend signal. I didn’t see enough space to get a good 10 pips given the previous pauses around the 1.3340 level so I skipped.

I saw 1.3340 offering nice resistance at 3. I was then on the lookout for a support level to develop around 1.3335 that I could hopefully short from. Alas, no real support level appeared and price bludgeoned its way down again.