OKE FOREX: intraday trading

Monday, 2 July 2012

Is day trading for a living possible

I know how difficult it is for most people to trade relying on the big picture. They are impatient to wait for opportunities and want to have quick profits trading financial markets. On the one hand, it is possible to make a decent living by day trading securities. On the other hand, it is much easier to trade large market trends and do other businesses. Since a lot of people want to make money fast there are a lot of internet scams connected with that and various materials written on the subject that have one single purpose � make money from you. So, be careful and do not be deceived. There is no easy way of making money day trading. However, we can do the job which is very difficult and still make money. Let us look at some of the things that are necessary for successful day trading.

What does a day trader need to be profitable?

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Firstly, it is a deep understanding of the market.

You cannot just read one article on the subject, open an account and start making money within a week. That is a scam! You might be successful in the beginning, but difficult situations will come and you will lose all your deposit. I know what I am talking about, because this happened to me and I saw it happening to hundreds of newbie day traders. Some say that knowing a lot about a market will only confuse you. Do not worry about that. With time you will be able to select what is essential and what is not and take advantage of that knowledge.

Secondly, you will need to have a good trading system or even a few of those.

You should understand what you are doing, when you are entering the market and exiting it. You should wait for specific set ups before you get in. Don�t even try to rely on your feelings. You will fail! Even an average strategy is better than trying to make fast spontaneous decisions by relying on what you see happening in front of your eyes. Be proactive, not reactive!

Thirdly, do not overtrade.

Overtrading is a �disease� of most newbie traders. They are searching for opportunities every hour. And they find them! And they lose money on those, because you cannot catch all the moves in the market. Wait for what you know really works. This may mean that you will make only one or two trades per day, but do not worry about that. Your account balance will definitely be better at the end of the month.

Fourthly, be disciplined.

Stick to what you know works and do not improvise. You do not want to make your trading a dramatic and stressful experience. You want as little stress as possible and discipline will help you to achieve that.

Fifthly, analyze your trades after the day is over.

See your progress. Check if you were able to follow your plan. Try to be as objective and critical towards yourself as possible. If you see a trend of deteriorating from your trading plan and strategy it would be good to stop trading for a few days, re-think your activities and go back to strict discipline.

Sixthly, invest in your financial education.

You need to improve and possibly expand your knowledge so that you can make better day trades and fewer mistakes. It will mean more reading books and articles from people in your field, maybe attending some seminars or workshops. This will probably help you to modify your strategy and make it even better.

Hope the steps were useful.

Long term or intraday trading

Today I just want to give a few of my thoughts on long term or intraday trading. I do not want to put this question �To be or not to be� by trying to say which method is good and which one is bad. However, I can also say that I have my preferences and therefore I can be subjective in my reasoning. Now, if you expect to come to financial markets and make quick money I can tell you that you will get disappointed very fast. It is statistics. Most people get burned in Forex, stocks and commodities. There is countless number of reasons why this happens, but one thing that you have to be sure of is that gambling and trading are absolutely different concepts and should not be associated.

From my own practice I see that one should learn to see the big picture first and only then develop some intraday trading strategies. If you do your own analysis you will find out that most newbie traders are interested in short term trading strategies. This as you may understand is connected with fast profits that those traders expect to get.

As I said, I do not mean to say that long term trading is better than short term trading, but trading is a skill that has to be learned, which takes time to do. If you expect to be successful in intraday trading you have to be very sharp and have a lot of filters to filter out false daily signals that abound in the markets. I know that dealers with their optimistic messages about trading lure a lot of people to start trading. The former definitely make money, the latter surely lose it.

Advantages of long term trading over intraday trading:

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More time to make decisions

If you are a long term trader you have much more time to make decisions. A short term trader will often have to make spontaneous decisions. Most successful investors and speculators will tell you that you have to be anticipating rather than reactionary. You often do not have enough time to make logical decisions if a market is moving very fast and you have to decide whether to get out of the market or to stay in it. When you are there for a long run you know where you expect to take your profits and how much you can afford to lose. Long term traders usually can handle much bigger market moves against them, because they are not overleveraged.

You might lose big picture intraday trading

Since intraday traders do not see big picture they easily become over focused on what is happening now. They might be stuck with a few pairs without being aware of what is going on with the rest of the market. Long term traders do not need to stay glued to their computer screens, but can check how markets (and their trades) are doing only once a day, or even once a week during the weekend.

In Forex long term trading gives you opportunity to make interest

If we talk about Forex, long term traders can take advantage of trading carry trades, which is not possible for short term traders. If you did careful analysis of aud/jpy (ten years) you will notice that having sound risk management system you could have traded multiple times and made good money both by collecting interest and going in the direction of a trend.

Psychological stress is usually an inseparable part of intraday trading

Psychological stress is another thing that one usually experiences in day trading. You have to constantly check your position, which may cause you to break your discipline and modify your trading strategy. Plan your trades and trade your plan should be a motto of any trader. That is very difficult if you are under constant stress. This can also kill any joy in trading and make the experience detestable. Most traders either burn their accounts very fast or become emotionally exhausted and lose any motivation to continue trading.

I hope you can see now that I prefer long term to intraday trading. For me, the reasons are obvious and I tried to share those with you in the post. I will repeat myself by saying that I am not against day trading. You should know that from my previous posts. However, I think that consistent money is much easier made having a long term picture and not by concentrating on short term strategies.

Good luck in your trading.

Monday, 2 July 2012

Is day trading for a living possible

Friday, 10 February 2012

Long term or intraday trading