Day trading has always been a tough game, requiring a very strong psyche, discipline and a high level of trading skills to succeed in.
Nowadays though it's even harder due to the stronger competition, not only by humans but especially by computers trading at a speed a human trader simply can not match up to. High-Frequency Trading is happening in literally all of the popular markets out there and like Chess, scalping has become a game where humans cannot win against the AIs anymore. Add to that the speed/location advantage of the HFT shops and the odds of success decrease even more.
My advice is to forget about scalping. Even without the trading bots, odds of success to make money scalping are very low as the trading costs involved are incredibly hard to overcome. To not get completely killed by trading costs you need to trade in very liquid markets. But that's exactly where the robots are.
But not everything is lost, maybe all you have to do is to slightly adapt as a day trader. Here are some of the things you can do:
- The longer your trades last, the higher your profits (and losses) will be on average. It's a simple fact, if your trades last 4 hours on average, you'll be much more likely to catch a big move than if you average trade lasts 5 minutes. This way the HFTs can't hurt you as much anymore and also trading costs will have much less of an impact.
- You don't have to do 20 trades per day to be a successful day trader, quite the opposite! The more you trade, the higher your trading costs and believe me these trading costs will kill you in the long run.
- Don't get married to a specific market, instead, diversify your day trading over different, uncorrelated markets. This will strongly increase your chances of success as you'll stop seeing opportunities in a market where there aren't any.
- Day trade only markets that provide a good bang for the buck. I do this by looking at the average daily range of a market in relation to the average trading costs.
- Trade the news. I know you often hear the opposite advice but if you learn how to do this right, trading the news is one of the best ways to day trade. Just look at the markets, especially currencies. Isn't it true that most big moves happen right when some economic report is coming out? Sure, volatility explodes and liquidity often isn't that great. But hey, isn't high volatility exactly what you're looking for as a day trader? Now first you need to do your homework of course and have a plan ready on how to trade each of the specific news events.
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.
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
USD/JPY climbs relentlessly ahead of BoJ meeting
The USD/JPY extends its uptrend despite verbal intervention from the Minister of Finance. The wide differential between US and Japanese interest rates is seen as a major factor contributing to the rise. The idea that a lot is already priced into the US Dollar could limit USD/JPY upside.
Editors’ Picks
EUR/USD regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.
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