I wonder if it’ll be a relatively light session tomorrow in London after the six inches of snow they got today?

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As detailed in my post from 11 days ago, the first two weeks were a bit rocky. A couple of mixed trades had me sitting at -4% (which was perfectly acceptable given the probabilistic nature of trading), and then I fouled up and turned what could have been a great day of trading into an additional -6% due to an itchy trigger finger. After 10 trades I was sitting at -10%; it was time to take a deep breath and focus.

Something obviously clicked (or my luck went from terrible to great), as the ten trades that followed resulted in 8 wins and two break-evens.

The scores on the doors for January is a 6.497% gain for the month.

Two of the trades in the review gallery below were from January, the other two were in February.

Let’s see if I can stick to my guns and not cock things up with any silly mistakes this month.

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The three main ingredients that make up the way I’m trading this approach are: Al Brook’s price action setups, the experience gleening from my scalping attempts and some ideas from Jennifer’s year end report (she blogs on Rob Booker’s Piptoring site).

The bare bones of the approach I’m testing is to look for price action setups on 4h charts. I knew this would require looking at multiple currency pairs but since I had no real preference for which ones to look at I just went with the same list that Jennifer uses to start with: EUR/USD, GBP/USD, USD/CHF, AUD/USD. USD/CAD, NZD/JPY, GBP/CAD and CAD/CHF.

Since I also want to be in and out of the market relatively quickly, I’m shooting for 40 pips as a profit target, with a maximum/disaster stop loss of 80 pips; although anything beyond 40 pips in the red has me looking to pull the plug if I’m watching the trade in real time. I’m using gearing of around 5:1, which results in a 2% gain for a full 40 pip win and a maximum loss of 4% if my 80 pip stop loss is hit.

I’m also plowing my way through Al Brook’s new three part series of books on price action. While I’m only about 150 pages into the first book in the series (after about 4 weeks of intermittent reading), I feel the quality of these books is going to be priceless. If you got value out of his earlier book, Reading Price Charts Bar by Bar, then I would heartily recommend that you pick these up too. The writing is clearer and not quite as densely packed with information. What hasn’t changed is the amount of time you’ll spend pouring over the charts digesting every piece of price action information that Al is able to glean from a chart. And there are a lot of charts.

My first trade with this method was on January 6. Progress to date has been a little bit rockier that I would like. My first six trades over the first week had me at -3.3%. I then turned what could have been a 6% gain on January 12 into a 6.3% loss by getting impulsive and jumping into two trades on the spur of the moment. That bugbear still bits me in the ass sometimes.

Staring at a 10% loss for my first two weeks of effort I got laser focused and managed to churn out 4 good wins last week. Which has me standing with a -1.8% loss overall for the month. I was reminded of Don Miller saying how he always seems to trade best when getting himself out of a sizable drawdown. Not wanting to see that drawdown get any bigger certainly had me crush any impulsive notions and focus on only taking trades that made total sense to me.

I thought it would be useful to record my pen and paper notes so I’ve scanned them in and put them into an image gallery below.

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