Thursday, 17 May 2007

Day Trading - FOREX

From now on, in order to give "The CFD Traders Blog" a bit of variety, I will endeavour to fit in some of the opinions, which have been expressed by other stock market traders.

To start the ball rolling, I have found an article written by Sacha Tarkovsky in which she says day trading in Forex is a waste of time. A view which I do not hold in trading stocks and shares using CFDs - Anyway, this is what Sacha says:

FOREX Scalping - Day Trading Your Way To a Regular Income by: sacha tarkovsky

There are many day traders who go in for FOREX scalping trading several times a day and trying to get out with small profits which will add up over time.
This form of hit and run trading is more popular than ever.
Let's look at how it works.

Well firstly, it doesn't work at all and will doom your trading to failure - Any trader who day trades or tries to scalp profits loses - PERIOD.

Here we will explain why.

Data is meaningless.

If you are studying charts you need to get the odds in your favour.

This is of course not possible in day trading as all volatility is random and prices can and do go anywhere.

This is obvious when you have millions of people trading trillions of dollars daily.

If you don't have data that can help you get the odds in your favour then it is pointless applying any technical indicator.

Moving averages, support and resistance and pivot points which are useful tools for longer term trading simply don't work in day trading.

There only good tools if you feed them with the right data! And day trading doesn't do that.

Scalping the market is doomed to failure and it's made even worse by the fact it ignores the fundamental rule of investing:

Run your profits to cover your inevitable losses. You are going to have losses even the top traders have them, but you must keep them small and day trading or scalping FOREX markets does this and it of course has a lot of them!

FOREX scalping by its very nature doesn't run profits.

So what do you end up with?

A lot of small profits ( and when your lucky enough to have a winner and it is down to luck) then you get a minor profits which can NEVER cover your losses.

FOREX scalping end up not with the trader scalping regular profits but the trader getting scalped for his entire equity.

FOREX scalping is illogical, based on meaningless data and doomed to failure.

If you want to trade avoid day trading unless of course you want to lose all your equity quickly.

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Anonymous said...

I dont agree with your comments regarding random movement of price in day trading. Technical analysis works certainly down to the 1 minute charts, there's a little more noise to deal with, but it still works. I routinely trade GBPUSD with a 6 pip stop ! and risk reward anywhere between 1:1 and 1:2 with returns of approximattely 1% a day.

There are downsides (higher transaction costs etc), but the upside is $ risk is low, and frequency of exploiting the edge is high.

Rod said...


If you read the beginning of that post I did mention that I myself did not agree with Sacha Tarkovsky.

Also, if you have been following the various posts on this blog I have mentioned a few times that my own style of trading is very much that of a scalper. I do not believe to hold on to stocks for oo long when I am using CFDs to trade.


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