first, i disagree that “trading xxxx style requires more capital that trading yyyy style”. no matter what you trade and how long you keep your trade, you have to adjust your position size accordingly. the shorter your expected trade duration the larger the position you can take given the same balance. you shouldn’t be looking to earn PIPS, you should be looking to earn PERCENT INCREASE IN EQUITY. on short term, you need to make that happen with 20-50 pips so each pip has to be worth X. on long term, you need to make that same gain happen with 100-300 pips, so each pip has to be worth Y (which is less than X).
having said all that - pick the style that matches your own personality. if you’re an impatient mofo, swings are gonna drive you bonkers. if you’re very analytical, scalping / momentum is gonna freak you out.
personally, i’m more in the scalp / momentum / day trade camp. my trades last anywhere from a few minutes up to 3hrs (that’s a loooong trade for me). typically my “personality comfort zone” is between 5min and 30min. yours might be 5~30 DAYS.
I totally agree with everything you said, but disagree whole heartedly with your disagreement!!!
Isn’t Forex wonderful,that 2 people can share the exact same thought on one thing but see it in a
totally different way!
As I said earlier I think the difference is the emotional one, not the technical one with a small starting
balance (as a position trader) I myself don’t trade position, but gave it ago with a small balance when i was just starting out
Trading.
We need to agree to disagree or this may go on for some time!
:57: Great insight, Tony.
Scalping can be amazing and provides instant results, but my stats tell me it is not working for me.
Trading the news works better for scalping.
Planned trades take more time and offer more insights in the long run.
I sort of compromise and Swing trade. Day trading is fast action and exciting, for me though personally I tend to overtrade. Most times when day trading, you have this expectation that you have to get in at least 1 trade so you end up making a trade that should have never happened.
Sticking to the theme of the thread, if I had to choose just 1 of the 2, I’d go with position trade. I just have more time to plan my entry, to do a more complete analysis. Chances are that reading the trend is also easier on a monthly chart. Unlike shorter time frames, when a pair is consolidating which is where you get killed on trades, on Daily, weekly and monthly charts, when a pair is consolidating, it’s pretty clear to see, less guess work.
I’ll just adjust the position, size down for the big stops, not a big deal.
You just explained exactly why position trading trading requires more capital when you said: “the shorter your expected trade duration the larger the position you can take…”
The opposite is also true. The longer your expected trade duration the smaller the position you can take. In reality, currencies do not move in price a great deal against each other, anywhere from a fraction of a percent to just a handful of percentage points (and that is usually over the course of a year!). You need incredible amounts of capital to take advantage of these moves which is why incredibly high leverage is available in Forex.
If you attempt position trading with $100 and use no leverage then after a year you may earn a return on investment of a few percent. Again, the value of currencies move against each other everyday but only a tiny fraction of a percent. If you position trade $100 with max leverage then you are pushing (in the US) 50 times that amount. One down bar on the weekly chart and your account is blown because you have amplified any down moves against you by the same magnitude of 50. If your stops are tight enough to prevent blowing your account then you are underfunded to position trade because the many stops will chew the account up to pieces.
If you have limited capital then you need a smaller time frame to trade Forex (because a trader can withstand multiple 10 pip stops on high leverage in small times frames whereas one or two multi-hundred pip stops are account killers on high time frames because of that very same leverage) or you need another trading vehicle altogether (position trading micro-caps, for example, if you are dead-set on position trading with limited capital). You get maximum bang for your buck that way.
You also said: “pick the style that matches your own personality.” In general terms I agree but that is just a bit over-simplistic. You need to match your trading capital, style of trading and goals to not only the correct time frame but also the correct the market. Forex is the wrong market for position trading on limited capital.
Trading capital also falls under an unrelated adage that everyone has heard before: size matters.
Day trading the H1 charts here…so I’m hardly ever in trades for more than 24hrs at a time. Sometimes if I feel a trend might continue I leave a quarter of my position on an let it run.
It is all relative. A tight stop on a 5 minute chart may only be a handful of pips. A tight stop on a daily, depending on your trading strategy, may be 50-100 pips. Position trading is looking at 3 months to a year or more. A tight stop is hundreds of pips, at the minimum.
The risk is calculated on the number of pips between entry and stop loss using a set percentage (2% for example). On a small timeframe you have, comparatively, only a few pips so your position size can be greater when risking a set percentage. On a large timeframe you have much wider stops and therefore more at risk if risk is calculated using the same set percentage so the position size is smaller.
A generally accepted position size calculation is: R/P=S
R=Risk Capital Percentage (2% of capital you are willing to risk on a trade, for example)
P= Pip dollar estimate (Standard lot 1 pip =$10, Mini 1 pip = $1, micro 1 pip =.10).
S= Size of position to trade
It all depends on yourself. If you force yourself to trade in a way you’re not comfortable with you won’t succeed.
If you prefer to get in and out and not linger around in the market then you should go for day trading. It’s a more interactive and potentially stressful time where you’d have to keep an eye on the charts regularly through the course of the trade.
If you don’t mind staying in trades over days to months then you would go position trading. Generally these are less stressful as you have time to analyse your place in the market and act on it. You wouldn’t need to constantly look at the charts every minute but at least once a day. If you’re going to lose sleep worrying about leaving positions open overnight though then you might need to reconsider. One other thing to consider for position traders is rollover/interest differentials - these can add up over time.
For myself I’m a position trader (for now). Currently I have 27 open positions running and usually have between 10-30 positions runnning at all times. Rollover is hitting me for around 0.2-0.3% of total capital per day so I have to overcome that cost each day to run a profit.
Hi TonyIommich, I read ur opinion and got in stuck because I want to be a scalper as I am and thinking to be a full time trader as I’ve just lost my job. after one month forex demo trading I placed my trade in real ac on Aug 17th 2012 and till now I have placed the total orders 159 orders (if I have lost my job at the first when i lost my job the numbers of orders might be goes in five figures) and out of 159 orders only 29 orders was in minus, rest I managed to close in positive points. And yeah The amount I STARTED WITH WAS ONLY $100.00 I’ve almost same amount in my ac (I did some foolish task in my initially trade such as i clicked on close order instead of clicking on change order to set stop loss and i lost $19.00 and $25 once as i have not enough money to hold the loss). I am hopping to get $200 and $100 i have already and will do trading
AND PLS ADVISE ME THE BEST BROKER WHO TAKE SMALL COMMISSION CURRENTLY I PAY TOO HIGH :mad: I THINK
First off, if you lost your job and you want to make a living trading full time, unless you have been at this game for several years, have enough risk capital (at least $50,000 you are willing to risk), and have a track record, I think its a recipe for disaster. Even if you’re doing well at the moment with a short term strategy, markets change and your hot streak can turn cold.
My advice, find some part time work, and find time to watch and trade the markets during the day time. Develop a solid methodology. If you like scalping, check out Bob Volman’s book Forex Price Action Scalping - that should give you plenty of ideas (you can use a 30 second chart instead of paying for the 70 tick, it does almost as well imho). Take exhaustive notes of your trading day, share your trades with others, etc. Read some Brett Steenbarger (he has a blog with lots of free articles) which will give you ideas on how to fine tune your performance and develop as a trader.
Prepare to easily put in several years before you can comfortably do this for a living. I also did extremely well in my first stab at trading. Then I realized life is not so simple. Some people have been lucky, e.g. they started trading when the market was ripping and roaring (e.g. 2008 financial crisis) and were able to do very well in a short amount of time (usually by leveraging like crazy). But once volatility and volume leave the market you end up with a totally different ball game, and more often than not that is how the market is. Take this August, for example. Very tough market to trade from both a technical and fundamental level. Fundamentals in my view should have seen the Euro break 1.20. Yet it got bid and chopped its way up to 1.31 despite the fact that a Greek exit was pretty much Wall St consensus. That’s markets for you.
I often like to read this post from this forum for inspiration: 301 Moved Permanently - an example of a guy who made it (you can tell because he never used this to become some guru, just made 2 posts and moved on).
As for brokers, if you are scalping you have to find someone with low commissions. I like Oanda because it lets me review my trades easily after I take them. They do EURUSD for about 1 pip. Some offer even less if you look carefully.
