Managing Risk With Currency Pair Selection

Trading Discussion Risk Management Practices
21

My issue with trading higher time frames isn’t the amount of time one has to invest. I am currently unemployed and am treating trading like a full-time job at the moment (even though I’m only trading on a demo account.) When I was trading 1H and 4H setups, I was reading news for hours a day, getting a good idea of the fundamentals behind both economies that I was trading AND doing a lot of technical analysis on the charts as well, on top of studying patterns, triangles, wedges, etc. in much more depth.

Despite this, I still had a breakeven month trading with below 50% accuracy. I am not attracted to scalping because I don’t have the time/energy/motivation to read news, determine longer-term trends, am a “gambler” and need instant gratification, etc., I am attracted to it because (based on the limit statistics that I have), I am more profitable trading price action on 5M charts using moving averages than I am when I trade 1H/4H/1D setups using trendines, Fib retracements, and a mess of other technical indicators.

It has nothing to do with time or effort. In fact, trading 1H/4H/1D setups actually took less sitting in front of the computer actively trading and more time reading news, whereas when I’m trading the 5M charts, I’m staring at them for hours at a time.

Just my experiences so far after two months of trading “full-time” (meaning I do it all day, every day 5-6 days a week) and a few months before that of reading/studying. Maybe I’ll do another few months of scalping on a demo account and come to the conclusion that it’s not profitable wither, and give trading the 1H/4H/1D charts a try again with a slightly-tweaked strategy. We’ll see what happens.

22

Some very very disciplined traders can make money scalping but its rare and these guys are very good. Usually it ends up with rafts of small wins then 1 or 2 large ones and its a wipe-out.

The time input required is phenomenal, and the desire/pressure to a) trade and b) make a profit every day often leads to undisciplined unplanned trades, over-trading, revenge trading and too much application of fear/greed. The brokers know you can’t beat them - pretty much why they’re very keen on signing up new day-traders.

23

Trading should not be thought of as a job, but you do have to consider it like a business venture. Being time-rich is a very bad plank to support the decision to day-trade.

Forget what you know about work in order to trade better. What we know about work is the guys who know most or work the longest hours get the most money. This won’t do if you’re trading.

5M candles are basically just noise, so you’re trading off random momentum or random reversals. Better to not look at the screen, toss a coin at breakfast-time and put in a long or short according to what the coin tells you, saves a lot of time.

24

Would you say this is the case with day trading stocks as well? Or just Forex?

25

I try to never take a trade below 1.5:1 P:L, so I could still probably profit with a 40% win rate in theory. My original goal with the strategy I’m working with is to be 50% accurate at 1:1 so worst case scenario, I would break even.