All indicators in theform of MACD’s, stochastics, RSI, Gann, Elliot Waves, etc arecompletely useless to your trading. Forget the whole lot and ignorethem. At best they distract you from what only matters (price) atworse they make you believe you can actually predict the future andthis leads to losing money.
Moving Averages are an“aid” to trading. Got it? A visual aid nothing more and nothingless. I use one in my day trading simply to keep me on the right sideof the trend.
Day trading is not abouttaking many trades throughout the day. Successful day trading iswaiting for 1-4 high probability trades each day and trading themsuccessfully. What is successful trading?:
1) Not risking more than2% of your equity on any one trade
2) Cutting those losingtrades.
3) Letting the winnersrun
4) Being consistent. YOUMUST stay true to one method and not jump around from method tomethod and/or keep tweaking the rules.
I want to be clear here.This is not going to be a “How to Guide” It’s a very basic andvery easy system. Apply it consistently with low leverage (<3X)and see your account grow over time. What kind of returns can bemade? 2-6% per month. There will be losing periods. Heck you willeven have losing months. No day trader I know wins every month. Yourjob is to keep those losing periods down to a minimum so you can liveto trade another day.
I have seen systemspromising 20%+ per month. But when you look at their “hypotheticalresults” you have to lose up to 75% of your money to do this? Andwhat if it stops working? Be realistic. Don’t be greedy. This leadsto big losses and stress. Be happy with small monthly gains thatgrow. 4% on $200,000 is $8,000 per month. I once talked to a guywhose job it was to evaluate trading systems for an auditing firm.What he said has always stuck with me. He said, “Mark” out of thethousands of systems I have come across this is what I found. Thevery simple systems. The ones you could write on the back of anenvelope were the winning methods. The more complicated the system.The more rules and indicators that had the worse their performance.Amazing. And some of these systems trades institutional money worthhundreds of millions of dollars. I am trying to drill this into youbecause it’s human nature to want a super complicated system. Tobeat the markets using something new. I have seen traders makingmillions. And every time it was with a very simple system BUT themarkets lined up. I.e the markets moved big. And when they do youwant to catch those moves with a simple price system. It’s neverthe system stupid it’s always the markets and
the trader trading them.When I started day trading forex. I tried to scalp the markets using1 minute and 5 minute bar charts. I lost tons of money. I am tellingyou now anything less than 15 minute charts and the noise, randommovement is too much to trade. When I moved up to 15 minute barcharts and went with the trend I started making money. Not on everytrade. But over time I was making more than I was losing.
Go with the Trend:
We are day traders butyou still get the best moves that go with the trend. Markets react,correct and move counter trend for a short. For this use a 30 barExpediential Moving Average. Overlay this on the 15 minute Bar chartof your currency pair. (Here I use the Euro$/USD) Trade from 08:00GMT until 17:00 GMT only. Ignore all news items/ fundamentals.
What you want TO SEE AREprices (15 minute bar) go through the 30 bat moving Average. Thenwait for the correction.
*** PRICES MUST NOT CLOSEBACK THROUGH THE MOVING AVERAGE**
So if you are looking atbuying the EUR$ and the price goes up through the 30 bar Movingaverage on the correction the 15 minute bar must not close below thismoving average. If it does scratch the trade and wait. You have to bedisciplined and patient. It’s about getting a few almost certainpossibly trades every day. It’s not about jumping in and outrandomly.
Enrty
15 minute bar with theM.A. I talked about above. Entry is either:
1) A break out from theminute bar.
2) A breakout from areversal.
See the trade below. Takethe breakout of the 15 minute bar UNLESS there is a reversal barwhich gives a better entry. Always enter orders 3 pips above or belowthe 15 minute entry bar.
Exit
Once in a Trade your exitis simply by using the following rules on your trailing stop loss:When you are in a trade this is how you profit or get out with asmall loss. You simply trail the stop loss as the trade goes yourway. Do not try to get out when you “think” it has moved enough,etc. Let the price hit the stop to get you out:
1) When you are in atrade. The initial stop goes at 20 pips away. Use hard stops. Themaximum you want to lose is 20 pips.
2) Keep trailing the stopby 20 pips as new lows/highs are made.
3) When you are 20 pipsup in profit now trail your stop by 15 pips.
4) If you are luckyenough to hit 30 pips in profit now move your trailing stop to 10pips.
Most of the time you willget knocked out of the trade with around 10-15 pips profit.Occasionally you snag a real fast market and I have made over 50 pipson some trades. The tightness of the trailing stop usually means youcan’t ride out the correction. But we don’t want to.
That’s it. Trade.Watch, wait and repeat. GBP/USD Trade: Small consistent profits usingmy simple system. Sorry I couldn’t add more fluff and page fillerfor those guys who want a 200-page+ system. It’s not my style. Getin the markets and start looking for these trades.
Day trading can be asstressful or as enjoyable as you make it out to be. OK? If you findyour-self worrying excessively about your trade is it because you aretrading too much? No confidence in the system? Trade light. Keep themargin down. It’s not about getting rich quick but having theability to make a few hundred dollars or a few thousand dollars everymonth from the markets from your home. Some traders I know stoptrading when they hit a daily target. So they make $700 and call it aday. Others trade all day. It’s your choice but if you are in itfor the long term think about taking some time off regularly.
