Day trading is a mugs game - in FOREX currency markets, traders
who make day trades instead of following the long-term trends, are
making a serious mistake - risk/reward is terrible by comparison.
The
Internet is full of brokers and vendors encouraging traders to day
trade - and offering "sure fire" day trading systems - which is no
surprise, as they mostly have a vested interest - they are making more
commission!
Don't get sucked in by the hype surrounding currency day trading.
You make the big money from the big trends - it's the big trends that yield the big profits.
There are several day trading FOREX myths, and here are the most common ones:
1. You can keep losses small
Sure
you can - but on the other hand you won't have enough winning trades to
compensate for your losses, and you will end up losing in the long run -
you simply won't be in the move long enough to cover your inevitable
losses.
2. Spreads and commissions impact
Commissions and slippage add up in FOREX day trading, and impact on your profits and losses even further.
Lets
say, you win 50% of your trades and lose the others, (a highly
respectable hit rate) - this means the profits in the day are going to
need to be at least 2 to 3 times as big as your losses, to make
meaningful gains - and this is extremely difficult to achieve.
A
long term trend following system can make money, based upon a far lower
hit rate than 50 - 50, as the profits will (if the system is soundly
based) be far bigger than the losses.
3. FOREX day trading
systems can and do put the odds in your favour No they don't! - The fact
that people think that they can predict market movement in such a small
time frame shows a lack of knowledge.
Any currency price has a basis on the following:
Supply and Demand + Human Psychology = Market Price
The
supply and demand, and human psychology equation needs to be measured
over the long term - and cannot be accurately predicted in short time
frames such as a day.
Why? Quite simply there is not enough information to base your trading on, in short time spans.
Currency
markets are all about probability, and it can be measured more
accurately by looking at the long term, as there is a greater quantity
of reliable data to look at.
Currencies trend longer term, and the
amount of data, and reliability of trends in this period make long term
trend following the way to make money, and has several advantages:
1. You have a greater quantity of reliable data, and can calculate probability better.
2. The winning trades by their nature will be far bigger than in day trading.
3. Commission and slippage will not impact as greatly on your profits.
FOREX Day Traders don't make as much as Long Term Trend Followers
Fact
is, the odds are in favour of the long term trend followers, who target
the big profits from the big moves - NOT Day traders looking for
profits (that by their nature tend to be small) - as the profits are
being chased in a severely limited time window, which leads to losses
over time and high transaction costs.
FOREX Day trading is a mugs game - don't fall for the hype - the reality is losses.
New! A valuable FREE Currency Trader CD containing 9 critical
trading reports, tips, strategies and FOREX trading
[http://www.tradercurrencies.com/trading-currencies-articles-sitemap-5.htm]
info. Visit our web site now and grab your CD
[http://www.tradercurrencies.com]
