Trading Currency Blog

Sacha Tarkovsky asked:


Day trading systems are everywhere, but it is impossible to make money from them - for 2 main reasons which are outlined below.

If you think you can make money day trading, you need to think again and read the facts below.

If you are thinking of buying a day trading system ask any vendor to show you a real track record of profits and you won’t get one.

The reason?

Day trading by its very nature is flawed and does not produce consistent profits over the longer term.

1. How Currencies trend

On a short term daily basis trying to guess the action in a day is similar to flipping a coin. – All short term daily movements are random.

Currency markets reflect the health of the economy overall and trend longer term.

If you look at long term trend following you have reliable data to work with over a period of time but this is not so in day trading.

If you are a technical trader (and most day trading systems are) if you don’t have enough reliable data you cannot attempt to put the odds in your favour.

2. Day trading breaks the fundamental rule of trading:

You have heard it many times: “cut your losses and run your profits” You need to have far bigger profits than losses to make profits longer term.

Sure you can cut your losses but you can’t run your profits.

Generally most readers have more losing trades than winners and if you cut a winning trade in a day session how can you ever make money? – You can’t.

You will simply lose your equity quickly day trading.

So why do traders do it?

Because they believe vendors who make claims and produce hypothetical track records.

Check with these vendors and ask for a track record you won’t get one.

They make money selling you the system and then making more money on kickbacks from brokers (remember transaction costs are higher) on day trading systems.

So broker and vendor win you lose your money that’s the real story of most day traders.

If you want to make money trade longer term and also never buy a system from a vendor unless you get a real-time track record, over at least 3 years – however you will wait a long time for one of those on a day trading system



MCDEVITT

Kelly Price asked:


If you are going to trade currencies then you need a currency trading system and below we are going to give you the points you need to consider when building one for yourself which is a lot simpler than many traders believe.

Firs Things First.

Currency trading is a game of odds not certainties so ignore any of the theories or inputs that claim you can predict with science.

So immediately bin Fibonacci, and anything to do with Elliot wave or Gann. They don’t work and won’t help you achieve currency trading success.

Now - its time to get a currency trading system together, that trades the odds and keep this in mind:

Your system should be simple.

It should only contain a few indicators and use support, resistance as its foundation.

It’s a known fact that simple systems work best, as they are more robust in the face of ever changing market conditions.

Make a system to complicated and it has too many elements to break and will lose.

Now here is your currency trading system plan.

1. Base it On Support and Resistance

Make sure that it’s valid i.e. several tests, that if the levels hold or break, their considered important by the market.

2. Use valid Data

That means forex swing trading or trend following, with data long enough that you can calculate the odds. Forget forex day trading systems - they don’t work and never will as the data is too short to be meaningful.

3. Use Breakouts

By all means sell into resistance and buy into support, but if the levels give way remember to:

Buy breakouts!

If you don’t, you will miss some of the best high odds trades.

It’s a fact that most of the best trends start from new market highs NOT market lows. If you don’t know about breakout methodology, its simple to understand and a timeless way of making money, so make it part of your forex education.

4. Confirm Confirm Confirm!

Don’t simply execute trading signals and hope that levels hold or break - confirm them first.

This is one of the major errors novice traders make, they want to predict.

Well, if you predict you are hoping and the market will slaughter you - so make sure you confirm.

Make sure price momentum is going in the direction of your trading signal. If you don’t know about momentum indicators then its time to learn. Start with the stochastic, Relative Strength Index and ADX, There are more but these are excellent ones to start with.

These indicators will confirm and trigger your trading signal so you’re trading with price momentum and the odds will be on your side.

5. Understand Standard Deviation

If you don’t understand standard deviation of price and volatility, you will lose.

Volatility destroys more novice traders than anything else – so learn to deal with it or join the 95% of traders who get wiped out.

REMEMBER

If you understand the 5 points above and work on them, you can build your own currency trading system – it’s not hard to do.

The difficult part about forex trading is not so much getting a method - but having confidence in it and trading it with discipline. If you don’t trade with discipline you will lose and you must have confidence to acquire discipline.

If you build your own system based upon the above points, you will have a logical simple system, which is easy to understand have confidence in, can lead you to big Forex profits and currency trading success.



COUVERTIER

Sacha Tarkovsky asked:


Many day trading systems rely on pivot points to determine where the market may go next and believe that these indicate important points of support and resistance that can be acted upon for profit.

Let’s take a look at them in more detail.

A pivot point is a point of rotation hence the name.

Pivot points are support and resistance levels derived from the previous period’s high, low, and closing values.

The period by day traders in currencies is normally taken from the daily chart or from the hourly chart.

You can also combine pivot points with traditional support and resistance techniques to enter and exit trades

In simple terms a pivot point is used to denote support and resistance within the period traded.

So do they work in day and intra-day trading?

I have never seen anyone make long term profits with them.

I see lots of vendors of systems that claim they do, but never seen a track record of real time profits.

Fact is this has to be one of the stupidest ways to trade.

How can you accurately predict where prices are going to go in such a short time period?

Pivot points are of no use whatsoever in a short time frame.

Think about it.

Trillions of dollars are traded each day by many millions of participants and most of these are not interested in daily or intra day action and pay no attention to it.

The ones who do, tend to be the mug speculators who think day trading works and of course it doesn’t.

To make money with any form of technical trading you need to have data that you can use that can help you get the odds in your favor.

Daily or intra day pivot points don’t help you do that.

It looks good as theory on paper, but try it in the market and you will lose your equity longer term.

TRY THIS SIMPLE TEST

If any vendor tries to sell you a system based upon pivot points, ask them for their real time track record of profits over the long term and see if you get one.



TOCCI