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 climbs above 1.1500 ahead of Fed meeting
EUR/USD climbs past the 1.1500 barrier on Wednesday amid a sluggish reversal in the US Dollar. Meanwhile, market investors remain cautious ahead of the Federal Reserve's interest rate announcement later in the European evening.
GBP/USD: Gains appear capped by 1.3480 prior to FOMC
GBP/USD now challenges the upper end of its daily range, approaching the 1.3470-1.3480 band as investors continue to evaluate the UK inflation data and gear up for the upcoming FOMC gathering.
Japanese Yen rebounds modestly despite weak trade data, Fed policy in focus
USD/JPY slips back below 145.00 as traders turn cautious ahead of the Federal Reserve’s interest rate decision. The Japanese Yen finds modest support despite soft trade data and a steady Bank of Japan policy stance. The focus shifts to the Fed dot plot and its policy tone for cues on USD/JPY’s next move.
Editors’ Picks
Fed expected to stand pat, dot plot to drive market reaction – LIVE
The Fed is widely expected to keep the policy rate unchanged at the 4.25%-4.5% following the June meeting. The revised Summary of Economic Projections could significantly influence the US Dollar's (USD) valuation ahead of Fed Chairman Powell's press conference.
EUR/USD climbs above 1.1500 ahead of Fed meeting
EUR/USD climbs past the 1.1500 barrier on Wednesday amid a sluggish reversal in the US Dollar. Meanwhile, market investors remain cautious ahead of the Federal Reserve's interest rate announcement later in the European evening.
Gold appears range-bound around $3,400, eyes on the Fed, Powell
Gold is trading with a bullish bias and seems to be flat around $3,400 per troy ounce on Wednesday. Rising geopolitical tensions in the Middle East, along with ongoing trade uncertainties, continue to weigh on market confidence and lend some extra support to the yellow metal ahead of the Fed gathering.
GBP/USD: Gains appear capped by 1.3480 prior to FOMC
GBP/USD now challenges the upper end of its daily range, approaching the 1.3470-1.3480 band as investors continue to evaluate the UK inflation data and gear up for the upcoming FOMC gathering.
Bitcoin, Ethereum and XRP defend key support on sixth day of Israel-Iran war, what to expect
Bitcoin (BTC), Ethereum (ETH), and XRP are holding steady above key support levels. The top three cryptocurrencies have weathered the geopolitical tension and macroeconomic events of the past week.
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