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 holds above 1.0650 after US data
EUR/USD trades in the upper half of its daily range slightly above 1.0650 in the American session on Friday. Following the mixed PMI data releases from the US, the US Dollar struggles to find demand helps the pair holds its ground ahead of the weekend.
GBP/USD recovers modestly, trades above 1.2250
GBP/USD gained traction and advanced above 1.2250 in the second half of the day on Friday, erasing a large portion of its daily losses in the process. The improving risk mood, as reflected by rising US stocks, limits the US Dollar's gains and provides support to the pair.
USD/JPY looks to approach 148.50 on BoJ’s decision to keep interest rates unchanged
USD/JPY retraces the recent losses due to the BoJ’s decision on no-interest rate change. BoJ could consider adjusting its ultra-loose monetary policy when reaching a 2% inflation target is within reach. Investors await US data to gain valuable insights into the economic conditions in the country.
Editors’ Picks
EUR/USD holds above 1.0650 after US data
EUR/USD trades in the upper half of its daily range slightly above 1.0650 in the American session on Friday. Following the mixed PMI data releases from the US, the US Dollar struggles to find demand helps the pair holds its ground ahead of the weekend.
GBP/USD recovers modestly, trades above 1.2250
GBP/USD gained traction and advanced above 1.2250 in the second half of the day on Friday, erasing a large portion of its daily losses in the process. The improving risk mood, as reflected by rising US stocks, limits the US Dollar's gains and provides support to the pair.
Gold consolidates above $1,920 ass US yields edge lower
Gold price clings to small recovery gains above $1,920 following Thursday's sharp decline. Following the mixed September PMI data from the US, the benchmark 10-year US Treasury bond yield is down nearly 1% on the day at around 4.45%, allowing XAU/USD to stay in positive territory.
FTX fights to clawback $157 million from former employees while creditors struggle with $7.9 billion in claims
FTX exchange initiated legal proceedings against former employees of Salameda, a Hong Kong incorporated entity that is affiliated with the platform.
Cainiao subsidiary to register for IPO as soon as next week
BABA stock surged more than 4% in Friday’s premarket after the Chinese ecommerce leader announced that its shipping and logistics business, Cainiao, will file for an initial public offering (IPO) in Hong Kong as soon as next week.
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