The following is an email I sent to an aspiring traders based on some questions he had asked me. So with that in mind here are some random pieces of advice from one trader to another. These points are based on how I day trade, and I typically day trade on very short time frames (tick charts, 1-minute or sometimes a 5-minute chart). I have put it into point-form for easier reading (with some editing to avoid confusion).
- As a general rule I only use price action from the last few hours (often less) to make my trading decisions. If I start trading forex just before or during the US session then the last several hours of price action are used. If I am only day trading I don’t look at longer-term charts, every day is different. I don’t want to put in my head any preconceived ideas about what the trend or day will do. Only act on what is occurring relative to recent price action; don’t get bogged down by trying to look at too much data. Focus on what is happening now and the recent history.
- If there is a trend, then I trade in the direction of that trend (this will require some training to determine the trend to trade with if the price has been whipping back and forth in big moves). No guessing. If there is no trend (moving between a support and resistance level) or you are unsure of the trend direction, then there is no trend and thus no trend trades. I either wait for one to develop, or if a range is big enough then i will trade it assuming there is enough volatility for my targets to be reached with a decent probability (only if the market is exhibiting some recurring patterns I may be able to capitalize on).
- Practice Practice Practice. But practice the same thing all the time. Don’t deviate, deviating will only lead to confusion. Trade according to the rules you have only. Master that. Avoid trying other things…no “experimenting”. Build your discipline while in the demo account. Discipline is built by doing the thing you are supposed to (your plan)….REGARDLESS of ANY reason to do otherwise (including the reasons we tell ourselves). Profit is not your motive right now in demo trading….it is executing a plan. Once you have the discipline to do that then you can be handed any winning system and with a little practice be able to trade it. Don’t trade live with real money until you have been consistently profitable in a demo account for several months. If you can’t trade fake money, you’ll lose all the real money you have.
- The process of becoming an expert is exactly that ….a process. A destination is never reached because the only goal is to do what needs to be done in the moment. And that is always a challenge, so an “expert” is just someone who is better able to stay in the moment than others, and do what they are supposed to do (planned and practiced for). There is no end. As soon you start to think you have the market beat, you take yourself out of the moment and your trading suffers. So an expert is someone who practices to be able to relentlessly stay disciplined and in the moment while they are trading…and does it. I don’t know anyone who does this ALL the time…but most of the time is all you need to be an “expert” and a good trader. I find it is like a muscle though. When I quit trading for a while, when I come back I need to rebuild my discipline of sticking to my plan and execute my trades effectively. It is a continual process…which is what makes trading so much fun :)
There are some main take-aways here. Mainly, that if you build your disciple and really work at maintaining it, success is nearly an inevitability. But it means relentlessly ignoring and pushing away the thoughts in your mind that want you to deviate from the simply trading strategy you have created. Also, when day trading I don’t use a ton of price information. I look at the last few hours and that is it. That gives me all the information about trends, ranges, volatility and market structure I need for my next trade. I need to adapt as new information comes available, but looking at days worth of charts isn’t going to help me with that, so it is better to stay focused on the now. I only trade if there is enough volatility to reasonably create a decent profit. If the market is very quiet, trying to trade little moves can become very random, and isn’t worth it.