I am not knocking day trading but I am trying to figure out what are the advantages in day traidng over holding overnight?
When I started day traidng I tried scalping off 1 min charts…and lsot $15,000 in 2 months.
But as I net longer term, 15 mins then to 30 min then to hourly I noticed my profits got better. So I am thiking of actually going to overnight tradin (daily charts.)
What is the big advantage in day trading over end of day? Is there any? What come sto mind right away is the size of your stops is going to have to be much wider end of day trading and this will reduce the amount of margin you can use. Is that it?
In trading, we want to apply a system with ‘positive expectancy’. The overall return is determined by the number of trades you make and the expectancy value of a trade.
When you make shorter trades, you get more opportunities. In theory, the return on your capital can be much higher in daytrading compared to slow swing or position trading.
100 trades/month with an expectancy of 0,5% per trade makes a lot more money than 5 trades/month with the same expectancy. In theory, one should be able to grow a very small account to millions in a short time by daytrading. But only in theory…
Another aspect why people always want to start with daytrading is their psychological need to ‘do’ something. They think that they have to ‘work’ at the markets in order to make money. To wait for days for the perfect setup, open a position (which only takes a second), waiting again for a long time, and than cashing in (which again only takes a second) is counterintuitive to what we were teached in school (‘money only comes from hard work’…).
The big disadvantage in daytrading is when the markets change slightly (what they constantly do), and the trading system slips into negative expectancy. The higher turnover rate in daytrading then kills the trading account rapidly.
Additionally, signals and trends seem to be more stable for longer timeframes, leading to trading systems which can hold their positive expectancy for much longer times.
These are excellent points and I agree, I also think that a lot of people look at the daily swings moving up and down and think they will capture the moves up and down… I personally don’t know anyone that day trades that gets more than the average daily range for one pair… Where is I now lots of traders that get it all when they are in a pair for the long haul… I feel there is support for your theory as I have come across strategies where as the person teaching has the people start on longer time frames to learn the system then trade it on shorter time frames.
My personal thoughts is to trade both but I believe the need for more capital on longer time frames as the stops need to be greater… This is my goal though to have running positions to just manage and day trade for the excitement and extra money I can make… neither is wrong and alot depends on how you feel about trading. I like to trade it is not just about the money…
you can mange big money day trading or you should be. The larger your account the larger your position size or it should be and you can adjust this every trade if you want… So I don’t see that as a issue…
I swing trade, usually holding for a day up to a week or more because I work full-time in a time zone that doesn’t allow me to watch the markets when they are most active. However, I would daytrade if my circumstances allowed it for the reason that grxlwpf states above - there are more opportunities when you are taking shorter trades. I’d take a 0.5% profit a couple of times per day over a 0.5% profit every week or so any day!
Also, the notion that you have to have a much larger account to trade overnight than you do to daytrade because your stops are wider is false. If you have a broker that allows you to trade in fractional lots, you can precisely scale your position size to match the amount of risk you want to take based on the size of your initial stop. With a broker like Oanda, you can risk the same dollar amount on a trade with a 200 pip stop as a trade with a 20 pip stop, even your account balance is $100.
The stress in daytrading can literally destroy somebody psychologically. You need to be a really special person to do daytrading for a long time. A very experienced trader, who trades privately for a living for more than 10 years now, once told me that ‘somebody who scalps on 1 minute charts is either insane or gets insane in the not-so-long run’. His most important advice was ‘big money comes from big movements which take time to develop’.
And on the shorter time frames, you get into direct competition with the real good guys. Traders at companies with access to astonishing technology, computer real-time analysis systems, expensive information sources, and a lot more things of which small traders can only dream of.
Well I can only speak for myself. Eventually I want to move to trading and holding for the larger moves, but my account just isn’t big enough to wether the drawdown, unless I traded at 1cent a pip. Which, frankly doesn’t do anything for me.
Right now I’m trading at $1.00 a pip and can make (or lose) anywhere from $50-$200 a day, and be done trading within a few hours.
Also, I feel that by day trading I am learning the things I’m trying to apply at an accelerated pace. I look at each successive time frame as a magnification of the last.
For someone who has provided as much insight into newb trading, the mentality in this quote floors me. When I read this, I interpret it to mean: “If I cannot make a quick buck from it right now, then its not worth my time”
Of course, I am not sure how many brokers offer nano lots, but lets just say it was micro at $.10 pip. You would be learning how to trade the larger time frames to catch the nice rides. Still real money on the line, yet not the stress of putting 50-150 larger sized pips on the line to catch a big move. Once you perfected this method, then you could up the stakes. Sure you could demo it as well, but if you are making a that much per day, throw one days worth in a micro account and play around. Real market, less psychology.
I am not trying to be argumentative with you, I am just a little disappointed, thats all.
I can and have traded at .10 cents a pip. Basically what I’m doing is day trading my account up larger, until it is large enough to be useful for larger time frames and able to wether the drawdowns, but still have a return that isn’t laughably insignificant. I’m inscreasingly compounding my account as I can. The drawdown for larger time frames can be hundreds of pips even if you are right about the eventual move. My account simply can’t sustain that drawdown at the amount I want to trade per pip. Besides, I have all morning and day to trade. So, I have plenty of time. I can get up a 5 A.M. and wait for just the right day trade or find a short term trend.
I may just keep day trading. The larger time frames, daily and weekly, look very attractive, but until I have more experience and a better ability to read the longer time frames I’m not willing to devote all my trades to them. For now I’m just watching them and learning and doing, “what if trades,” in my head.
At this stage day trading my account and compounding it will grow it faster than trading a very small amount over daily and weekly time frames and then compounding.
Yes, you interperted that correctly. 1cent a pip is simply not worth my time. Even if I caught 1000 pips it would still only be 10 dollars. My first micro account has the deul purpose of not only getting me trading experience but also making me some money. If the risk it too small, then to my thought process and psychology it’s little better than demo trading with play money. I’m learning to engage and deal with the bad head gnomes everyone has as much as I’m learning to trade. My head gnomes don’t come around unless their is a decent amount of risk.
I feel day trading when starting teaches quicker than doing one or two trades a week. You get in the fight and get banged up more. Like most people I learn best from painful lessons.
DAYTRADING, or as i imagine you to mean, scalping all the moves possible within a trend, is a way, if one has the EXPERIENCE and ability, to earn FAR more than a “buy and hold for a day” trader, BECAUSE of the numerous ups and downs that can be capitalized on.
trading leaves many “niches” open, and that is simply ONE of them — one can trade ALL the timeframes, as i do, including overnite trades while i sleep, having read the trend and set my tp point, or working the 30 second chart or ANYTHING in between !
a good “scalper” though, will beat the pants off a buy and holder as far as pip count is concerned simply because they are trading the very drawdowns the swing trader goes through — the upside moves and the downside moves !
BUT longer timeframes are usually recomended for newbs, simply because most systems are designed to identify the longer moves through some type of cross or indicator movements or combinations.
enjoy and trade well
mp
[I][B]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !
As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !![/B][/I]
[B]please understand that “scalping” is a VERY viable form of trading for those who KNOW how to do it, but it is NOT the end all and be all of trading, as there are multiple ways to get to the pot of gold at the end of the rainbow — concentrate on the one that you find comfortable and scare the living ---- out of the leprichaun guarding it ![/B]
[B]
enjoy and trade well
I trade the hourly candles and use everything below it as a filter for the best entry on the retrace. I try to find short term trends and just draw a channel around them and wait for the retrace.
lemme see if i understand ---- do you trade the original direction of the H1 (morning) and then take the reversal trade also (afternoon), then the evening reversal heading into the overnite market ?
You are exactly like I am. I know I am relatively new (about a year) to Forex for the most part but for my mentality and account size day trading or scalping is just much more my style. I also agree that .10 a pip really isn’t worth my time. At least at $1 pips I can really start to compete with a normal job even though my normal job pays decently.
I’m hoping to grow my account enough so that I can take more long term and therefore “safer” trades while still being able to do a little day trading as well.
No, I just look for a trend that is already established and get in at a good retrace. If I can’t find a trend I either don’t trade or carefully scalp where I think it might take off and quickly set SL to breakeven and trail it to profit.
I don’t usually trade past 11:00 as I’m usually pretty tired of watching the screen by then.
Is what you descibed a good thing to do? I’m still learning myself and always looking for things to make my trading better. Right now I’m just doing what I know works for me.
well, “good” is a “maybe” term — the H1 trend is formed early and usually you can pick it out, as you say, but getting into the H1 early also presents you with certain retraces and drawdowns. Since you stop around 11am, i would think you miss a few of the days retraces, and those retraces can be played as very profitable SHORTS, assuming the trend is LONG.
the H1 and H4 do not usually reverse back to their morning direction until late at nite, which is the trade i take for what i call the “overnite trade”, which is getting on the trend of either of those timeframes and then setting a tp point and going to sleep — wake up in the morning and the pips are dancing around my desk, offering me steak and eggs and mocha creme cappachino with a cherry on top !
when they DONT come in, its because theyre waiting on news, and when the news is released, dont you know that tp set last night becomes a reality this morning !
so by playing the retraces, one is simply adding more profit so YOU have to decide whether thats a GOOD thing or not !