OKE FOREX: short term trading

Showing posts with label short term trading. Show all posts

Thursday, 17 January 2013

Day trading tips

I enjoy day trading as much as I enjoy swing trading and trend trading. All these three strategies have their advantages and disadvantages. I do not want to concentrate on the latter two trading strategies today. My topic for the post is day trading tips. There are things that you should have in mind before jumping on any day trade. There are other things that you should have in mind when you are on a day trade. I like going over those before I open a trade and also when the trade is actually open. Let me share those tips with you. I hope they will help you to make day trading for a living possible.

Know your set up for a day trade. When you open your charts you should know what you are looking for. Those might be: direction of a trend, support and resistance, supply and demand areas, reversal patterns, candle patterns and etc. You should know a situation that would trigger a trade for you.
Trade only in the direction of a bigger trend. Stop going after those counter trend moves. They do happen quite often, but you will lose more money than you make by chasing those.
Be patient and wait for the best set ups. Most traders lose money, because they take just about any set up that they think is good. They end up overtrading. Any number of trades beyond 3 per day is too much.
Do not trade choppy markets. Wait for tendencies to develop. Then trade in the direction of a trend on a daily basis till market conditions change. There is too much noise in the markets that go sideways. Try not to trade and set more time for analysis when markets enter these �noisy levels� � choppy trading times.
If you miss a trade just let it go. Going into a trader later might be just as bad as overtrading or simply trading a strategy that you do not understand. Let that missed trade go. There will be enough opportunities around if you are patient.
Trade from one support to resistance and from resistance to support by taking profits (at least partial). In day trading reversals are quite common and you should be willing to take small profits as price goes from one level to another. There will be profit taking by big market dogs and you do not want to be left behind.
Take your profits at or before an even number. That�s where big hedge funds take their profits. You might get out 10 or 5 pips before the area just to be sure you are not left behind when prices reverse.
Always have stops and let them always be smaller than your profit targets. That is the only way you can be successful in the long run.
Use limit orders for both your stops and profit targets. It helps you to stay disciplined and follow your plan and to be proactive, not reactive. You can exit market manually if you see that something goes not in the way you have planned, predicted or imagined.
If you had a bad trade, do not try to reenter market immediately. Do analysis before making a decision. Maybe market conditions changed and you should refrain from trading. If they haven�t you can enter another trade. Just do not rush!
If you day trade with a few orders take profits with the first one as soon as there is any and move stops with other trades by placing them below (above if you are selling) 1 or 4 hour lows (highs if you are selling).
If you want to leave your trades through the night put stops further from the price. You do not want to be stopped out during Asian sessions when profits are often taken and price moves against you. Leave room for these Asian session swings and wait for opportunities during London session.
Do not worry about a bad day. Better concentrate on your weekly and monthly results. Smile your losses off.
Do not trade when you are tired or under emotional stress. It is also wise not to trade for a few days if you have a losing streak. Do more analysis and less trading during these bad days. Trading psychology, not only a good strategy is one of the keys to success.
Write a journal analyzing your mistakes, winners, losers and predictions. A journal will help you to find out weaknesses of your system and trading style. It will help you to understand flaws of your character and perfect those.
Analyze your trades at the end of the day and prepare for next day making intelligent predictions as to where this or that security can move. Try to see if those perfect set ups for your strategy are coming or not.
Trade constantly even amounts of lots, amounts of securities till you double your account. Then you can change the number. The same about stop losses. You should start risking no more than 2 percent of your deposit and slowly move to 3-5 percent.
Identify direction of a security by looking at daily charts and implement your trades on hourly charts.
Find out what an average range of a security is and try to figure out the best place to enter your trade. If gbp/jpy range is a little bit over 100 pips and the pair has moved 80 pips it may not be wise to jump on a trade in the direction of the daily micro trend.
Use filters and confirmations on your trades. These may be higher time frames or technical patterns or any other things that gives your trade a higher probability to succeed.
Do not use breakout trading strategy too much. Prices are often overbought or oversold when breakout point is reach. This is particularly true about day trading.
If you are trading profitably cash out some money regularly. You want to enjoy your earnings by spending them not just looking at them in electronical form.

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Ok, enough of these rules. If I get any more ideas I will expand the post. Hope it was useful and you will be able to apply the knowledge in your day trades. It takes time to learn day trading. So be patient.

Ok. I hope you benefited from the post. If you liked the post I would also be happy if you gave a plus on Google+, tweeted, liked it on Facebook and other social platforms. Have a nice day. See you soon.

Vytas.

Disclaimer

Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog http://trend0.blogspot.com/ is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.

Thursday, 12 July 2012

Swing trading for dummies

I have already written a post on the subject and talked about this kind of trading strategy in many of my posts, but I still want to deal with it in this article. Swing trading is type of trading system when a trader keeps his position open from one day to a few weeks. Much depends on the momentum that a security gains from some piece of news or any other fundamental as well as technical factor(s). A lot of day traders ultimately become swing traders as they get disappointed with trading short term trading strategies such as scalping or similar ones.

The key difference from any other day trading style is that a trader who uses swing trading system relies more on long term charts such as: daily, 8 hour, 4 hour and less often on 1 hour, 30 minutes or 15 minute charts. This, as you may understand allows him to avoid various �daily market noises� that are bountiful and concentrate on a bigger picture. If you only look at what happens on this particular day you will never know what caused this or that big move in the market. Maybe some bank unloaded its� huge position or some crazy piece of news caused traders to buy or sell some particular securities.

In swing trading you want to catch a bigger move and capitalize on it as much as possible. It is very similar to trend trading and in some cases these terms absolutely coincide. However, trend trading refers to bigger moves than market swings and usually last longer. Some traders tend to call any tendency short or long term that is in the market to be a trend. They might be right to some extent, but then we should definitely distinguish between mega and micro trends, because trend traders would follow the former ones and day traders the latter ones.

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Range tradingcan also involve various swing trading strategies. It is a broader concept as market swings usually happen within a certain market range. The best way to trade those is to enter a long trade at the bottom of the range and go with the full swing till the top of the range where you close your long order and reverse by taking a short order which you (possibly) keep till the bottom of the range. Of course, market never forms perfect swings, but I hope you understand what I mean.

Hope the post was useful.

Friday, 10 February 2012

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.