Hello all of you, I am from Bunbury Western Australia, short story, I paid $9000 to be trained in forex in 2011
trained for 5 months where I had many purple patches, went live and lost $10K in next 5 months.
I am using this site to re-learn/refresh, previously I did not find that ‘trading zone’, I am aware of the mental
aspect of trading, and intend to practise/demo for some months, is there any positive support out there, or
is day trading a myth.
thanks to people who read my thread, cheers
Better luck this time hopefully petermac.
Daytrading’s the toughest form of the game. I have to believe the stats that say 90% lose - I wonder if its actually higher.
I have never found a comfortable place in which I can daytrade so never made good money doing it. I trade on the daily charts - forex and stocks - trading long in uptrends and short in downtrends. With a rational money management approach its actually hard to lose money at this.
There is no simple yes/no answer to your question. There are many issues that need to be addressed and resolved before finding the right personal trading comfort zone.
In my opinion, one major issue, that is not so often highlighted here, is whether one is trading for regular income or for capital growth.
If one is after an income source then the next question is whether it is to form 100% of your income or just an added bonus that one can still continue living without.
Relying 100% on income from FX trading is exceptionally risky and presents additional considerations and pressures beyond those directly related to actual trading. The most obvious pressure is the inevitable need to perform, month after month. If one has considerable financial commitments, family, and a high living standard expectation, then this is going to increase this pressure enormously. It also requires a considerable capital back-up to cover inevitable losing periods (which has to then be replenished from future trading results on top of drawn income). But the main point here is that it almost demands a short-term trading approach in order to actually realise sufficient drawable funds on a sufficiently regular basis. A long term trade may well produce a good result eventually but if it does ultimately collapse then a lot of time will have passed without any income.
On the other hand, when the objective is capital growth and/or additional income then one has greater flexibility in choosing markets, timeframes, position size, timing, etc. Whether one’s account grows and at what rate is a very different scenario to being reliant on continual drawings in order to live.
There will be traders who live from day-trading who do not wish to leave any trades overnight. There are others who will swear that one can only make serious money from long-term positioning. Every approach has its own pros and cons.
I agree with Tommor that daytrading can be very demanding and intense and requires a lot of screen time. Inevitably stops and targets are close to the current price and can create a more emotive trading environment than a trade intended to last days or weeks. I usually watch my short trades from start to finish and that can be very intense. On the other hand, I will place a much bigger position on a short term trade than I would ever dare to leave open on any longer term trades.
Longer term trades are well-suited, even inevitable, for those with day jobs or other commitments. Perhaps, in general, these also work better for those aiming at capital growth. There is less stress arising from short-term price movements and a bigger gain when they are right. On the other hand, the positions are probably smaller (but better allow for scaling in and out), can be frustrating when it moves into profit and then collapses back to zero during a ranging market, and are very susceptible to spikes from data releases and statements from Central Banks, etc.
So I don’t think profitable day trading is a myth (at least I and some others here are plodding along quite happily with it) nor is profitable long-term trading a myth either. The question is really what suits the trader, their character, their circumstances and their objectives.
Just some thoughts.
Thanks Mannx & Tommor,
Fantastic feedback/opinion, my intention is to supplement income, will have to investigate overnight costs on trades, was previously with FXCM, will train for another 5 to 6 months also using Demo, my theory is to be profitable over time one requires 50% plus correct trades??? thanks guys, 3.30pm here @ 32c.
Whilst the idea of achieving 50%+ wins might sound attractive, it is not actually the right yardstick to measure your profitability, at least not on its own. Your risk/reward ratio of your trades will have a greater impact on your overall profitability alongside your percentage wins.
For example, if your trade method works on a 1:1 profit/loss ratio then you will indeed require more than 50% of your trades to win in order to net profit from them. And a day trader will most likely use ratios of 1:1 or 1:1.5 simply because short term trades on, say, 5m or 15m do not often provide much more before reversing.
But a longer term trader may well look for 1:2 up to maybe 1:5 ratios, which means that their winning trades can indeed be less than 50% and still be in profit.
When assessing your trading method it is important to consider both these ratios - and then when trading, keep a strict journal how these are actually working out in practice. Trading never runs smoothly, so it will take a period of time to really get a clear picture of how your trading plan is actually working out - although I guess it is fair to say that one soon gets a gut feeling that something is wrong if the price often falls short of the targets, or if the stop often gets hit followed by a reversal back in the right drection.
Edited to add:
I suggest you do not take the risk/reward ratio too strictly when working out your levels. It is only a benchmark ratio. Your targets and stops should be placed at levels that are rational to your method’s objectives. E.g. the stop should be at a level that, if hit, means the rationale for having taken the trade is negated. Once your levels have been decided you can then check their R:R ratio and, if it’s too tight for comfort or doesn’t fit your criteria, then you simply don’t enter that trade.
You’ve been given excellent advice above, Petermac.
This last point of Manxx’s is particularly important to appreciate. The mistakes to avoid, in this context are …
(i) having a too-fixed perception of what proportion of trades you need to win (for example, if 15-pip targets and 9-pip stop-losses, net of dealing costs, turned out to be appropriate to your method and time-frame, then you’d need only a 37.5% win-rate to break even: anything above that would be profitable), and …
(ii) working out your targets and stop-losses from what you’re aiming at in terms of net expectancy: you need to do this the other way round, working out your targets and stop-losses [I]from the method itself[/I], choosing what’s right for that method (and time-frame and volatility) - don’t try to apply the “needed target/SL parameters” [B]to[/B] the method: that’s putting the cart before the horse.
Thanks, Lexy, for the above, 
I guess what we are talking about is for some traders the blessing of, and for others, the curse of, discretionary trading methods. Methods such as the “three ducks” identify a specific trading set-up but leave the individual trader to select their own preferred entries and exits.
The alternative is a mechanical system that pre-defines all aspects of the trade, leaving the trader only to do the actual inputs or rely on an EA to do it.
With discretionary trading methods, once one has traded a particular approach long enough, I think it is fair to say that the trader can quite intuitively set these stoploss/target levels at the appropriate ratios. This is beneficial in that it allows the trader to concentrate on perhaps an even more important aspect: assessing the [I]quality [/I]of the trade set-up.
With many methods there are certain set-ups that are more likely to produce a win than others. For example, a strong support level on a short term chart coinciding with one on a Daily chart, or signals generated during active markets compared with quiet times, or short-term MA’s crossing away from a long-term MA instead of towards it, or moves in line with the trend direction instead of against it, and so on.
Personally, I find this critical assessment of the [I]quality [/I]of the set-up extremely important in selecting which trades to take and which to pass on… and is a feature that is not actually so often talked about.
Hi Peter,
Mannx and Lexys are spot on in pointing out that a 50% plus win rate is not essential. I would go as far as to say that trying to force a 50% plus win rate might even be detrimental because it may cause you to keep losing trades open longer than you would otherwise in the misguided hope of them eventually turning back into winners. This approach often leads to big losing trades and small winning trades that can’t offset your losers.
Rather than focusing on a 50% plus win rate, you may be better off trying to focus on your risk-reward ratio. Specifically, you should seek at least as much reward (based on where you set your take profit order) as you are willing to risk on the downside (based on where you set your stop loss). At least, that is what FXCM’s own studies into trader profitability have shown:
[B]"We use our data on our top 15 currency pairs to determine which trader accounts closed their Average Gain at least as large as their Average Loss—or a minimum Reward:Risk of 1:1. Were traders ultimately profitable if they stuck to this rule? Past performance is not indicative of future results, but the results certainly support it.
Our data shows that 53 percent of all accounts which operated on at least a 1:1 Reward to Risk ratio turned a net-profit in our 12-month sample period. Those under 1:1? A mere 17 percent.
[U]Traders who adhered to this rule were 3 times more likely[/U] to turn a profit over the course of these 12 months—a substantial difference."[/B]
[I]Data source: Derived from FXCM Inc. accounts excluding Eligible Contract Participants, Clearing Accounts, Hong Kong, and Japan subsidiaries from 3/1/2014 to 3/31/2015 across 15 most traded currency pairs.[/I]