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.

If you are ready to trade Forex, futures, indexes and stocks I recommend Etoro.
http://www.etoro.com/A41516_TClick.aspx

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.

Wednesday, 21 September 2011

Forex factory

I decided to call this post Forex factory. I got the idea from the famous Forex forum under the same name. It sounds cool and shows exactly what it takes to become a successful Forex trader. You have to undergo a series of processes in the same manner as some product undergoes various stages in a factory until it goes for sale. Those who have attempted to trade stocks, commodities or Forex know that it is not easy to be a profitable trader. Most traders get burnt within two months of their trading. Most of them decide to leave trading and make money or realize themselves in some other way. I remember myself and my first steps in Foreign Exchange market. I repeated the statistics and lost my initial deposit it 2 months. I almost left the thing, but after a few months having seen some repetitive technical structures in the market I decided to study the thing more carefully. After some time I was able to come back to the market by trading trends and swings with a friend of mine and this time we managed to make money, not to lose it. In the post I want to share some of the things that I believe are necessary to become a successful forex trader. I guess that for those who are not new these processes in �Forex factory� will not be new, but for some it will be, so let me start.

Forex factory rule number 1 � understand the basics of the market

Anybody who wants to be a successful Forex trader should understand the fundamental part of Forex. One should know how this market operates, what causes prices to change, have understanding on what kind of orders exist and which type of orders are best at various conditions market can be in, the biggest size of position that one can take without risking to lose too much, best times for trading, closing and leaving open positions and a few more things. I remember my friend opening a real Forex account with one of European Forex brokers. At one time he had usd/jpy pair open and wanted to close it. However, the platform he was using was rather complicated. So, instead of closing the order, he opened another one. My friend did not know how to close his position. Finally he had to phone company�s help desk and after some twenty minutes of talk his order was finally closed. I believe he was lucky that the thing did not happen during some news release. Having one standard lot open with 2 thousand bucks in the deposit and not knowing how to close it could be a fatal mistake at the time when news comes out. So, you can blow off your account just because you do not understand a few basic things about Forex trading.

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!

http://www.etoro.com/A41516_TClick.aspx

Forex factory rule number 2 � have a thoroughly tested and profitable trading system

If you want to be a successful Forex trader you must develop or simply get a tested and reliable trading system that could be used long term. I am sure that with time you will be able to develop and use as many trading strategies as you want, but when you start you should master one. I would really advise you to try the system for at least two months and if that is possible try to backtest its� performance for twelve or twenty four months. If the system is not profitable within that period of time, do not deceive yourself that it will be successful. Just drop it and search for another one. If it is profitable just go ahead and use it trading in small lots until you feel comfortable.

Forex fatory rule number 3 � develop a trading plan

Ask any trader who has been in the market for five or more years and is able to trade profitably and he/she will tell you a well developed trading plan is a must. A plan can remind you about the direction that you take, goals you want to achieve and the way you are going to trade. It must include: frequency of your trades, rules about entering and exiting the market, what market conditions should be present in order for you to execute a trade. It should also remind you how you are going to solve complicated situations in trading; let�s say when the market starts going against you. It must also remind you how you should behave when you have a few bad trades one after another and maybe even a few good trades one after another.

Forex factory rule number 4 � stick to your plan

After developing your plan you should stick to it and follow it with strict discipline. Other things will not work long term if you do not follow the plan that you have made or you make too many exceptions to it. Your trading strategy could be the best in the world, you can have a terrific plan and excellent understanding of fundamentals, but if you do not follow those and start making spontaneous trading decisions you will surely burn your account. Succesful trading does not start with improvisation. It might come later, but if you improvise all the time you will probably become a gambler, not a trader (and a bad one too!). Simply follow your plan blindly and only when you see that something repetitively does not work, then you make adjustments to your plan. Just do not make those adjustments every day for your trading plan will have too many points, which will become too difficult to follow. So, have a plan and keep to it.

Forex factory rule number 5 � learn to control your risk

If you want to stay long in Forex market and finally become a profitable trader, you should also have a risk management system. You should have it outlined in your trading plan, but as it is very important I decided to mention it as a separate point. Your deposit is the tool you work with to make more money. You cannot trade without money. Before you can make money, you should learn how to protect the amount that you have. Read any article on risk management (in trading) and you will always find that the rule of not risking more than two percent of your capital on any given trade. I would say that you should not risk more than one percent when you are starting. As the time goes one you will be able to increase the percentage. In the meantime, learn to manage your risk.

If you want to see and experience what real investing in financial markets such as Forex, stocks and commodities is all about I recommend trying innovative social investment platform of Etoro. Initial deposits are as low as a few hundred bucks. The best dealer I have heard of so far!
http://www.etoro.com/A41516_TClick.aspx

I hope the article was useful. It cannot reflect all the necessary things that one should know as a Forex trader, but I believe it conveys the most important things. You should stick to the points till they become your second nature and the process of trading becomes automated. With time you will develop your own trading style and strategies, but before profits come you will have to undergo a painful learning process. Good luck in staying in Forex factory and becoming a profitable Forex trader.

See also:

Original Forex factory forum
RSI
MACD
Swing trading

Disclaimer

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