| Day trading systems, everywhere I look I see them | | | | Let's look at another problem. |
| on the internet. They offer huge profits with little or | | | | 3. Volatility |
| no risk but the fact is day trading simply loses | | | | Consider a snapshot day in currency trading |
| money. | | | | Trillions of dollars are traded - that's a lot of money! |
| Ask any e-book seller for a track record to support | | | | Traders are all trading for different reasons and it is |
| their claims that their day trading system makes | | | | literally impossible to calculate what volatility or price |
| money and you will normally be met with a deafening | | | | movement will be in a specific day. |
| silence. | | | | Day traders make the mistake of thinking they can. |
| They can't produce one, because day trading is | | | | Stops take them out the market when they least |
| doomed to failure. | | | | expect it, as volatility rears its ugly head. |
| In theory, day trading sounds exciting and profitable: | | | | Day trading creates risk |
| Hopping in and out the market, taking a few pips | | | | Day traders like to talk about restricting risk, but |
| here and there and overtime your day trading will | | | | they actually create it for themselves, by trading |
| make you huge profits with low risk. | | | | with stops that are to close guaranteeing they will |
| This however is not the reality for the following | | | | lose. |
| reasons. | | | | On the other hand, they restrict their profits. |
| 1. Currency price trends | | | | The idea is to take profits quickly and move on. |
| Currencies are subject to supply and demand and are | | | | Let's look at the day trading equation: |
| a reflection of the underlying health of a countries | | | | High chance of being stopped out + never run profits |
| economy. | | | | = loses |
| If you look at any price chart you will see that over | | | | The way of course to make money in forex trading |
| the longer term trends can last for weeks, months | | | | is: |
| or even years. | | | | Run your profits to cover your inevitable losses. |
| Shorter term moves tend to be random. | | | | This is a fundamental rule of trading! |
| 2. The shorter the data the less reliable it is | | | | The acid test |
| Let's take an insurance company when they calculate | | | | Finally, day traders remind me of the old Burger King |
| your life insurance premium. | | | | advert. |
| Ask yourself this question: | | | | When they were looking at McDonalds burgers and |
| How much data do they use? | | | | insinuating they had less beef than theirs. |
| Do they calculate premiums based upon when say 10 | | | | "WHERE'S THE BEEF?" |
| people? | | | | Was the memorable phrase and to be fair McDonalds |
| Of course they don't. | | | | burgers, at least they had some! |
| They use hundreds of thousands or more, as the | | | | Ask a day trader: |
| more people they use the more reliable the data is | | | | "WHERE'S THE PROFIT?" |
| for their calculation. | | | | And you won't find any! |
| It's the same in currency trading: | | | | Thinking about it |
| You can't anticipate what is going to happen in a day | | | | That e-book I was going to buy offering me huge |
| because you simply don't have reliable data. | | | | profits for just $99.00 - Might have a Big Mac and |
| It's common sense really. | | | | fries instead its better value and I get change to. |