Many articles advise traders to avoid day trading because it is dangerous and unprofitable.
This is quite wrong.
Of course, if the trading is haphazard and done with no proper plan, a day trader will lose.
A longer term trader will lose too, but the day trader will go down quicker.
On the other hand, if a day trader has a disciplined approach, then there are considerable benefits to this trading style.
A disciplined trader is one who trades a strategy with a positive Expectancy using a sound money management approach.
Over-trading is avoided like the plague.
If no trade is available, the disciplined day trader waits until tomorrow.
Advantages of this trading approach include excellent profitability, reduced market exposure, and minimum time commitment.
Choose a market with plenty of daily volatility.
There is no need to limit yourself to currencies or equities.
Gold, oil, grains, bonds and equity indices are all suitable vehicles for the futures trader.
Consider the wheat market.
Look at these six two minute charts of trading sessions in the last few weeks.
In each case, the trades can be identified easily by looking for breakouts during the first thirty minutes of market action.
This applies equally to the four long trades and two short trades shown here.
Profitability is excellent, given that wheat trades yield $50 per point and most of the moves shown here are twenty to thirty points.
With an initial margin requirement of $2025, many participants will be trading multiple contracts.
The fill report shown for Dec 07 shows a long trade with two contracts taking only a small bite out of the overall move.
Nevertheless, seven and a half points of profit ($750 for 2 contracts) are booked for the 12 minute trade.
Short trades like this mean that your money is exposed to external event risk for very short periods.
Contrast this with longer term positions where your position is held overnight and across weekends.
Freak external events, which can and do occur more often than you would think, can devastate your trade while markets are closed and you have no power to take action.
Usually, a day trader can rely on stop loss orders being filled close to the specified price, whereas a long term position trader is exposed to the risk of external events causing price to gap right through the stop loss price.
Day traders sleep easier than position traders because they are always out of the market at the end of the day.
I trade markets like wheat during the first thirty minutes of the main trading session.
I use support and resistance strategies based on taking taking defined actions if specific chart patterns occur during that opening half hour.
If no pattern develops, I enter no trade.
I never place more than one trade each day.
If I put on a trade, I enter a limit order to take profit, a stop order for protection, and a market order to exit the position just prior to the end of the primary session.
These orders are in an OCA (one cancels another) group, so I leave them working knowing that one of them will close the trade before the session ends.
That means I can relax after the first half hour.
In fact, it is best to avoid watching each tick of the market as the trade progresses.
The truth is that most trading styles can be successful if they are implemented properly.
Day trading is no exception.
This is quite wrong.
Of course, if the trading is haphazard and done with no proper plan, a day trader will lose.
A longer term trader will lose too, but the day trader will go down quicker.
On the other hand, if a day trader has a disciplined approach, then there are considerable benefits to this trading style.
A disciplined trader is one who trades a strategy with a positive Expectancy using a sound money management approach.
Over-trading is avoided like the plague.
If no trade is available, the disciplined day trader waits until tomorrow.
Advantages of this trading approach include excellent profitability, reduced market exposure, and minimum time commitment.
Choose a market with plenty of daily volatility.
There is no need to limit yourself to currencies or equities.
Gold, oil, grains, bonds and equity indices are all suitable vehicles for the futures trader.
Consider the wheat market.
Look at these six two minute charts of trading sessions in the last few weeks.
In each case, the trades can be identified easily by looking for breakouts during the first thirty minutes of market action.
This applies equally to the four long trades and two short trades shown here.
Profitability is excellent, given that wheat trades yield $50 per point and most of the moves shown here are twenty to thirty points.
With an initial margin requirement of $2025, many participants will be trading multiple contracts.
The fill report shown for Dec 07 shows a long trade with two contracts taking only a small bite out of the overall move.
Nevertheless, seven and a half points of profit ($750 for 2 contracts) are booked for the 12 minute trade.
Short trades like this mean that your money is exposed to external event risk for very short periods.
Contrast this with longer term positions where your position is held overnight and across weekends.
Freak external events, which can and do occur more often than you would think, can devastate your trade while markets are closed and you have no power to take action.
Usually, a day trader can rely on stop loss orders being filled close to the specified price, whereas a long term position trader is exposed to the risk of external events causing price to gap right through the stop loss price.
Day traders sleep easier than position traders because they are always out of the market at the end of the day.
I trade markets like wheat during the first thirty minutes of the main trading session.
I use support and resistance strategies based on taking taking defined actions if specific chart patterns occur during that opening half hour.
If no pattern develops, I enter no trade.
I never place more than one trade each day.
If I put on a trade, I enter a limit order to take profit, a stop order for protection, and a market order to exit the position just prior to the end of the primary session.
These orders are in an OCA (one cancels another) group, so I leave them working knowing that one of them will close the trade before the session ends.
That means I can relax after the first half hour.
In fact, it is best to avoid watching each tick of the market as the trade progresses.
The truth is that most trading styles can be successful if they are implemented properly.
Day trading is no exception.
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