A new traders shower thought

Beginner Questions
1

Hello Everybody. New Trader from Canada. I had a shower thought the other day and I want to know if it was a good one or if I’m completely missing something.

My logic train:

– the main styles of trading are, “trade lots of small trades” or “trade a few big trades”
– the main goal of both of these is “end the day with lots of pips”
– risk management will be similar for both (~1-2% of account value)
– either style will usually tend towards a high Risk/Reward ratios per trade OR
– they will look for high Win/Lose ratio and near 1:1 R/R

then I realized “the effect of each of these styles of trading on the account will be the same, but short term trading will place MORE trades during the same period, thus increasing the account value by more if each plan had similar results”

Basically, why don’t I just look for high probability 10 pip trades, with a high win percentage, and if I set good SL and only ever risk the same percentage of my account per trade, is that not better than looking for 200+ pip trades and having 50 pip stops?

the math how I see it is:
assume i risk 1% of my account per trade. and I have 1:1 R/R for each one, and a 60% WR.

I can make 5 swing trades a week, so i end the week with net 2 winning trades = +2% account balance
I can make 4 day trades a day, or 20 a week, so I net 8 winning trades = 8% account balance

now I know there is the spread for smaller trades, but I trade with that in mind, so 12pip reward to 10pip risk with a 2 pip spread is 1:1 for me. other wise your “1:1” is really much worse, because you lose the spread either way (sneaky brokers).

I just don’t see any benefit to trading longer time frames? If you base all your account management on percentages, (seems like the best way, that way scaling is never a problem) then volume is the way to go.

NOTE: I realize that this would never work for large trading firms as they could never fill that many positions at 2% of their account. but for small day traders (small being anybody with less than 1mill on an account) this should never be a problem thoughts?

NOTE DEUX: I realize this is essentially just me explaining my trading preference, but it looks like math is telling me that this is actually a BETTER way to trade (again, assuming you are GOOD and trade WELL on intraday charts in this style)

Thoughts?

2

The benefits of trading long term is the strength of the signals. A candle on the weekly chart remains the same for seven days, meaning that you have millions of people who will see it regardless of their schedule.

Trading the 1h chart already halves that number, because at least half the traders are sleeping during each individual hour.

Going down to the 5 minutes chart, and missing candles becomes easier. Go to the bathroom and you’ve missed a candle, have a shower and you’ve missed a candle. This means that each individual price action will be seen by less people.

Many say trading is a self-fulfilling prophecy. I agree with that.

A pin bar on the weekly chart on a resistance zone has a much higher chance of causing a bounce, because all the price action traders have been watching that pin bar for seven says. Seven days of analysis, discussing in the forums about it, and taking all the time they want to absolutely make sure they are not making a mistake.

A pin bar on a 5 minutes chart is nothing. You don’t have the time to ask feedback, nor you can take your time to do proper analysis.

The way I see it, the longer the time frame, the closer trading becomes to low risk investing.

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3

This is very insightful!

If I think about it that way, then if you always trade one time frame you end up trading against other people doing the same thing. You learn what the signals and signs of trends are and what is just noise.

Which would also explain why lower time frames always give in to the sway of higher ones, more people the higher you go and majority rules.

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4

You have a math error here –

Your 60% WR will generate:
1 winning swing trade per week (3 winners - 2 losers) = +1% per week.
and 4 winning day trades per week (12 winners - 8 losers) = +4% per week.

But, that error doesn’t alter the logic of your argument.

There are larger questions, however –

(1) Can you make a consistent 1% per week swing trading? and can you make a consistent 4% per week day trading?

As you admit in the last sentence of your post, the day trading success you assume here depends on being able to day trade well. It’s no less true that the swing trading success you assume in your example likewise depends on being able to swing trade well.

Your swing trading scenario implies a 52% gain in your account per year without compounding, or a 67% gain per year with compounding. And that ain’t too shabby.

And your day trading scenario implies a 208% gain per year without compounding, or a 668% gain per year with compounding. And that’s astronomical.

Are you that good?

(2) Assuming you can successfully do both of these trading styles over a period of, say, one month – can you maintain the intense pace of day trading at that level over the long haul, meaning years?

Avoiding burn-out, and having a life away from the computer screen, might be two significant benefits.

And maybe you have skewed the numbers a bit, in order to justify your trading preference. Specifically, where did you get these numbers: 5 swing trades per week, and 20 day trades per week? Are those numbers assumed? Or are they based on your actual experience?

Food for thought.

5

Trading short-term its very difficult to pyramid as a trend moves continuously in your direction. Taken to the extreme, if price moves from 0 to infinity, the only factor that would cap your profit would be a self-imposed holding time limit or a self-imposed profit limit. Intra-day trading in the way you describe imposes both of these.

Of course, its possible to ride the same long-term trend for intervals of several hours, exiting each evening. Except that this isn’t what swing traders do - they ride each intra-day trend within a long-term trend, going both long and short in a bull market.

Its a good subject for a practical experiment but I’d bet you make by far the most money riding short-term sections of the long-term trend. So you end up with at best an equal gross profit but far larger total transaction costs. Plus the cost of infinitely more screen-time.

6

I think, you are on the right way! Now, just need to practice more & more in demo, try to make here a profitable system!

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7

practice more and more in demo of course is a difficult , because there is no real money in here and for that reason we lost motivation after passing some time.

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8

but demo is the master place for practicing , before using any trading strategy in real account i always use demo to see the performance how it works. this approach always help me to avoid unfortunate losses when trading in live.

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9

Those numbers were based on my experience but I did round them for quick math (which evidently did not help).

My dilemma is that as a part time trader, my time is limited, for the past 6 months I have spent 1-2 hours per evening and 5-10 hours each weekend learning, trading, back-testing, in an effort to find my “groove” in the markets.
What I’ve found is the two scenarios I presented. I am good at the 5 min charts, going for 10-15 pip moves, and can do this about 3 times a week per pair that I’m trading. Since these are such short candles it is tough to manage more than a few pairs at a time so that is roughly my limit.

I am also good at identifying short moves on the Daily charts, and with this style you can monitor basically all major pairs and crosses, as you are only entering at the end of the day and leaving your trades open at night. However this style of course doesn’t present many trades per week.

I know myself enough to know that long term I’ll do better if I pick a style and really attempt to master it. That is what I am really trying to decide.

I am tending towards the daily time frame simply for the lifestyle realities. I’m definitely realistic in my expectations with my forex journey, I’ve been into this for almost 2 years now, but only serious these last 6 months as stated. I think realistically at the pace I am at and the amount I can save for capital per month, I will be able to quit my job in 5 years. And with that perspective I think a longer time frame, more time investigating trades thoroughly and less time watching bars is probably the best way to do this long term.

My social life has literally vanished in the last 6 months lol, I know some people feel me. Oh well, you learn who really wants to spend time around you anyways.

Thanks for all your input everybody, really appreciate talking to other people in the same mindset!

10

Take a look at the 3 Ducks or Ribbon systems on here. They are simple to set up and wont eat into your time

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11

May I know more info about this trading system from you?

12

Use the search box top right. Best to read the first few pages of each thread before you try them

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13

It doesn’t matter how many trades you take per day. It’s all about winning ratio. If your winning ratio is good, it’s ok to open many trades per day. Trading is all about what suits you, what you understand the most. Something doesn’t work for someone doesn’t mean it won’t work for you. But the fact is whatever you do, be disciplined and organized.

14

It’s difficult, which traders are in hurry. But till now demo is the best way to learn.

15

Okay, I’ll. Thank you for suggestion.

16

if you don’t mind , can you make sure what knowledge and experience you have gathered from demo ? it works really when trading in a real account.

17

I practiced the Price Action strategy & same insurrections in my live account! By the way, before my live trading I have 2 months cent account experiences.

18

what you think price action ? its easy than others strategy and appropriate for newcomers ?

19

It’s more difficult than other strategies, and that’s why it’s appropriate for newcomers.

The easy strategies are all the ones that don’t work. They offer the possibility of “copying something”, usually a combination of indicators, and that’s very easy. Price action strategies require education, not copying. That’s why they’re more difficult and better.

This is one of the reasons 95% of people fail: they want something “easy”.

3 Likes
20

different thinking completely but great logic why most of the trades especially the beginners fail from here. Thanks