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3 Tips for Day Traders
1. Trade in 100 trade batches.
You need at least 100 trades to determine if a strategy works or not, but unfortunately most traders won’t even make past 10. We get bored. We get scared. We absolutely hate bleeding money NOW even it means making money LATER. Mostly we just love to tinker. No one is more guilty of that than yours truly who would be much better off if I just let my systems trade.
One piece of advice that may help. See what is the minimum amount of parameters that would make you leave the trade the f- alone and try to reduce your system to those factors. Then just trade win, lose or draw.
Remember if you don’t have 100 of the same trade -- you got nothing.
2. 4X 4 Forex
What’s the maximum lever factor you should use for forex? You are looking at it. Four times. Four times MAX. So if you are trading $10,000 of capital your maximum trade should be 40,000 units. This assumes that your maximum stop is 25 pips. If your stop is bigger than that then you are not day trading -- you are day praying.
Why 4X? At maximum size and maximum size you lose 1% per trade which is not going to bankrupt you even if you lose 10 times in a row.
Try this for the next 100 trades you will do with your system and I am pretty confident you will still be in the game when the experiment is over.
3. Don’t lift the stop -- Ever. Chip away at your losses.
Oh it’s soooo easy. The FX market is always whippy. Prices almost always reverse and that loss almost always turns to profit if you -- Just. Let. It. Float.
Except when it doesn’t. And you keep adding and adding until the account is gone and you don’t even know how you got to that point from one single, stupid trade. When losing it’s ALWAYS better to stop out. If you like the trade you can always get back in and you won’t be carrying dead inventory if you are wrong again.
Painful as it is to take a loss, it always better to chip away at it even one pip at a time. It took me 6 trades today to recover from a loss and it was worth every pip, both mentally and financially. Resolve to never lift a stop and you will always live to trade another day.