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:
- DD: double doji
- FB: first break
- SB: second break
- BB: block break
- RB: range break
- IRB: range break
- 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.