Day Trading Talk

Kelly Price asked:


Day trading is popular with huge numbers of novice traders yet you are guaranteed to lose in the longer term, as the logic it is based upon is simply not true and can never work.

Lets look at the two reasons why if you day trade you will lose.

Before we get started on the reasons why day trading is a guaranteed route to losses lets look at why you see track records with huge profits on many day forex day trading systems.

Here is the reason they all carry a disclaimer like the one below which means they have NEVER been traded:

“CFTC RULE 4.41 – Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown”.

So you can make anything up you like and the track record is not worth the paper it’s written on.

What’s the point in having a track record if it isn’t real and also you would think that the person selling the system would actually show confidence and trade it!

The reason they don’t is most are sold by marketing companies looking to dupe naïve and greedy investors. Try and find a forex day trader with a real time track record and let me know if you find one you won’t

So why doesn’t day trading work?

The reason is obvious all volatility in short time frames is of a random nature and all support and resistance levels are not valid.

You cannot get the odds in your favor when day trading and if you can’t get the odds in your favor you will lose – Period.

You simply can’t judge in such a short time span what prices will do.

You have millions of people all with different motivations and personalities and to say you can measure what this vast diverse group will do in under a day is simply destined to failure.

So the next time you see that tempting day trading track record check the small profit, as chances are its never been traded. Then think about the above and you will see that day trading is a total mugs game.



Kevin

Sacha Tarkovsky asked:


Day traders look to use hourly charts within the day so they can trade with limited risk and get out with a profit.

When doing this they use a variety of technical indicators such as pivot points to help them.

Let’s see how intra day charts can be used to help make profits in forex day trading.

The answer is you cannot make profits consistently trading using intra day charts!

This is obvious to most people except day traders.

The Proof

The reason is obvious, but many novice traders fall for the hyped sales copy of vendors selling these forex day trading systems.

However, if you ask them for their real time track record you won’t get one.

Of course, you will get a hypothetical track record done in hindsight.

These show wonderful profits, but as the track record has been constructed in hindsight knowing the closing prices it’s not exactly hard to make money!

If I knew tomorrow’s closing price today I would be a multi millionaire but of course forex trading is not like that.

The reason why intra day charts are useless and day trading logic is flawed:

1. Consider this everyday trillions of dollars are traded by countless millions of traders all with different investment objectives and styles.

To think that this mass can be predicted in the time period of a few hours is laughable.

2. Most of these traders pay no attention to day or intra day levels the only people who do are day traders and their a tiny losing majority.

As these levels are not considered important, volatility can and does take prices anywhere.

3. It’s a fact that volatility within in any day is random.

It doesn’t matter what indicators you use, day traders are working with meaningless data.

4. Day traders who use intra day charts think that they can restrict risk, but of course they actually create it.

Their stop levels get triggered the majority of the time, as volatility stops them out.

When their lucky enough to get a winner, they don’t run the position and are grateful to get out with any profit they can.

So not only do day traders use meaningless data, they also break the fundamental rule of investing:

Cut your losses and run your profits to cover them.

Day traders to be fair do keep losses small ( and they have a lot of them ) but of course they can’t run profits to cover them.

What is the end result?

A wipe out of account equity.

If you want to lose your money quickly, their really is no better way then trading with intra day charts.

So why do so many people fall for day trading systems?

They tend to be greedy investors who think forex trading is easy, or novice traders who don’t know any better.

Day trading systems are sold by vendors who rely on attractive sales copy.

They tend to fall into two groups failed brokers or marketing people who have never traded.

Of course their not stupid enough to trade the systems they sell themselves – That’s why you never get a real time track record

They simply make money from selling the system and leave buyers to lose money.

They win, day traders lose, it really is that simple.



Jesse

Sacha Tarkovsky asked:


If you want day trading success you need to be able to deal with volatility and determine where prices will move within the day.

If you can’t do this then you will never achieve long term day trading success.

So how do you deal with volatility? Lets look first at what causes it.

The volatility in any daily session is caused by the participants and these include millions of different traders in several groups:

1. Central Banks – Generally intervene form time to time to stabilize currency movements.

2. Hedgers – Looking simply to hedge risk.

3. Large speculators or funds – Looking to make money for themselves or their clients.

4. Small speculators – Everyone else.

The above participants all have different ways of trading and represent diverse investment objectives.

The vast majority are not concerned about daily or hourly volatility and these levels are not considered significant but by a small minority day traders.

The snap shot of a day is too small for anyone to judge where volatility will take prices.

Most traders are not interested in it volatility in a daily time frame is random.

Day traders who look at support, resistance or ranges in a day to trade are using meaningless data which is not valid and that’s why they lose.

If you are trying to day trade you simply cannot measure where volatility will take prices and this is obvious to every trader but not day traders.

They think they can achieve day trading success but their quest is doomed to failure.

The test

You will see lots of day traders on the net and talking about making regular money monthly or trading with 70% accuracy but this is simply nonsense.

Ask any day trader for a real time track record of consistent profits over the long term and you won’t get one.

You will probably get a hypothetical track record however that’s done in hindsight, let’s see – could I make a profit knowing the closing prices?

Umm think I might!

If you want to trade you need to have the odds on your side and day trading does not do this and that’s why no one wins longer term.



Derek