Retail Intraday Trading – The True Picture Out There
Before we get into the “nuts ‘n’ bolts” of day trading, allow me to throw down a cold, hard, unvarnished fact. This is the REAL picture out there. Take a look below:
The above are very real and current online broker risk disclosure statement statistics. Perform an online search with Google Search – you’ll find these statistics very accurate.
What is this picture telling you?
This picture should be telling you that “popular” really doesn’t work.
There is a REASON why the overwhelming majority of retails traders fail consistently.
What Defines A Day Trader?
At Financial Source we know intraday trading inside out as professionals. And, as professionals, we know how to make money day trading and what it’s all about to be in full-time trading as a career.
What truly defines successful day trading (or any trading) is “Professionalism.”
I really do want you to ‘get’ the professional approach to trading.
Hopefully you’re all wised-up through the link provided above. And you’re ready to talk…
(No F.O.M.O, militant marketing bats needed here!)
What Defines A Day Trade?
By strict definition, an intraday trade (or day trade) is any number of trades which you will open and then close before the end of the trading session. This means you will not have ‘carry trades’.
Carry trades are ‘carried over’ and left ‘open’ into the next trading session. A day trade will be opened and then closed all within the space of that same day.
This is all really simple stuff to understand, right?
So let me ask you a question. Because this is really where we start to hone in and identify what process is REALLY behind a successful day trade (or any trade, for that matter):
How accurately and how confidently do you think you could pick a currency pair right now and choose a direction to buy or sell? How confident would you really be that you could open and close this trade in profit by the end of the day?
Look again above at those statistics I gave you earlier. Those statistics represent the percentage of retail traders who weren’t able to make an accurate call themselves either.
That statistic also reveals (on the most part) all of those market participants which had an ‘indicator system’ simply do the thinking for them instead. Is that picture a revelation to you? Because that’s the true picture here.
What Does Intraday Trading Involve?
In fact, let’s just change the question here slightly, and apply the correct focus:
What does ‘successful’ day trading involve?
Well let me say it loud and clear in case you missed the point above: What it definitely doesn’t involve is staring at a screen waiting for an indicator or flashing red and green ‘gizmo’ to light up and tell you when to buy and sell! I hope that’s really clear by now.
Prices of a security (such as currencies) fluctuate on a daily basis. An intraday trader will study price movements (the price action) and aim to make short term, in-and-out profit from the fall or rise in the price.
How does the trader know which way price will move and when?
I can tell you this as a matter of fact:
He doesn’t KNOW any better than you do which way that currency will move, any more than he knows what number bus will come down the street in the next 5 minutes….
… without BACKGROUND RESEARCH.
It is within this statement above that we truly mark the defining distinction between good (profitable) trading, and bad (loss-making) trading.
There is a name for trading without extensive background research:
- It’s called gambling.
- It’s called playing it lucky against highest statistical odds of probability.
- It’s called retail indicator “systems”.
- It’s called plain dumb.
It’s also accurately called ‘never learning to trade properly as a professional’, and in the same way that senior traders work for banks and other large financial institutions.
How To Day Trade The Forex Markets
As mentioned previously, the price of a security fluctuates over the course of a day. So it’s important (no, correction – vital) to understand the fundamentals of intraday trading in order to make profit from these fluctuations.
Within that, there are a number of intraday trading strategies used by intraday traders, such as scalping and news based trading. However, both techniques require that the trader conduct background ‘fundamental’ research.
Let’s take a look at these techniques individually, then, and you can see for yourself the clear pros and cons of each one.
Scalping involves placing multiple trades for a very short period to take advantage of market fluctuations.
With the technique of scalping, each trade that is placed is small yielding, but each trade it is placed with HIGH VOLUME to increase profits. This strategy requires the strictest of discipline.
This strategy requires a very certain psychological temperament. It requires nerves of steel; it requires balls of titanium.
We’re talking about making money here – so, yes, we are talking about very HIGH VOLUME trading.
This professional trading strategy requires the utmost of ability. It requires a highly focused and accurate understanding of fundamental analysis and the fundamental driving market forces in play at any given time.
The key is all in the word “fundamental analysis“.
Fundamental Analysis – News-Based Intraday Trading
New-based, intraday trading aims to trade opportunities from heightened volatility around news events. Within this there are precise strategies and strict disciplines – all of which you can learn on Financial Source for free.
Traders using the news-based strategy will follow economic news reports as an indicator of short-term market movement. This post explores the definitive 3 step process to trading with an economic calendar.
Whichever strategy you use for intraday trading, you should always have a consistent plan.
Below are a few basic tips to take note of when intraday trading:
1) Choose securities with highly liquidity. This is because intraday traders must sell off their positions at the end of the day.
2) Create a research watch list..
3) Trade after the opening range has been established during the first hour.
4) Have fixed entry prices and target levels.
5) Make sure you have a stop losses to limit losses in case the price moves unexpectedly.
6) Once you have met your target goals for that trade then withdraw your profits.
7) Don’t go against the market trend. (And to comply with this, you must therefore understand overall market sentiment and economic fundamental driving forces.)
We’re all human, and we’re all unique in ourselves. Each trader is different and no single strategy suits all.
It is important to study evaluate each trading strategy and see what best suits you. Ask yourself what really resonates, or what seems more natural and logical to the way that you are as a person.
Don’t like innate risk and high pressure? Then don’t even entertain the thought of high volume scalping.
Technical Indicators And Fundamental Trading
It is a fact that currencies don’t just move. They are MOVED. However, although fundamentals are the driving forces at play, day traders will also use technical indicators to help enter and exit the markets.
Here is a very good example for you:
For the sake of example, one of the most popular indicators in use is the exponential moving average. With the right settings defined in the parameters, you could be immediately alerted as soon as price enters the opposing buy/sell zone.
This could indicate that price may well have reached an upmost range for the day, being either overbought or oversold, and now retracing. Depending on how the parameters have been defined within the respective chart timeframe, this could be as good an indication as any to take your profit now.
Once you understand the driving forces behind currency price movement (which is Central Banks and Economic Data), then you’ll actually start to see technical indicators making a whole lot more sense than before, and with a whole lot more useful application.
Through your understanding of fundamental analysis, you’ll then be able to apply indicators with a lot more practicality and workable success. On the most part, all of the indicators you’ll ever really need are available for free (as standard) on your MT4 Metatrader Platform.
Technical indicators are not meant to be relied upon to the point of absolute dependence! That would be the simple consequence of not ever learning to trade properly. The entire forex indicator “system” market is an industry built for, in, and of itself!
You really don’t need it. You really don’t want it.
Pros And Cons
What are the pros and cons of intra day trading specifically?
Upon the strictest definition, this means you WILL liquidate your trades before the close of the trading session, no matter what. This obviously translates directly into a number of pros and cons for doing so.
- 1. You will not have trades impacted by overnight news;
- 2. The stop losses you place can often be much tighter;
- 3. You’ll benefit from a more confident use of increased leverage.
- 1. Your trades are not given a sufficient amount time to increase your profit;
- 2. You will incur more commission costs.due to high frequency of short trades.
A short term of experience will tell you if strict ‘intraday’ trading is the strategy for you, or if carrying trades over into the next session would be more preferable (as and when applicable). And we’re going to help you with these finer distinctions.
The above article should have now made you aware that to day trade (successfully), one needs to get a full and proper handle on fundamental analysis.
Be sure to check out the resource below. Bookmark it, and refer to it every single day. This is going to get you up to speed and trading the professional approach in next to no time!