A Trading Day

I usually start my trading day around 5:00 AM. I don’t actually trade before the 5:30 (Pacific) reports come out, but I spend the time looking at the 15 minute – and often the 30 and 60 minute time frames – to get a feel for what was going on overnight.

Often a report will set the tone for the trading day. Is the dollar being hurt by bond sales bad economic data, political news? Things like that. You’ll often see a sustained move, up or down, for the whole day. Those days are easy to trade.

I generally start out using a smaller amount of cash. Somewhere around one-half to one percent loss instead of two percent. Then as the day progresses, and I’m ahead, I bump it up to normal until I’m getting close to my five percent goal. Then I cut back again so I don’t lose a bundle just before I quit for the day.

I rarely, if ever, use a market order (an order that’s filled at whatever price the market is trading at). I know where I want to get in and get out at all times. Using a market order doesn’t guarantee the price you want.

The trades that are most successful for me are those that are placed using a buy stop or sell stop. That’s where the price is above or below the latitude line I want to trade off, and then moves in the direction I expect. That way the movement already has momentum behind it and usually keeps going.

For example, let’s say everything is “in-sync” for prices to move higher. I don’t care about buying at the bottom of the swing. I want to see prices rising and then place my order to catch the trade – often doing so in the last phase of the upswing.

Let me give you an actual example. A trade is shaping up right now as I’m typing. (So many trades, so little time!) EUR/USD has been in a sustained downswing all afternoon as shown on the 15 min. chart on the left. Around 2 PM it bounces up.

Shortly after, stochastics on the 5 min. chart begin to roll over as shown down.

Chat 1

At the same time notice how the EMA’s have been declining all afternoon and the red line (the EMA 30) has stayed on top of the green line, confirming the decline.

Now, as the 5 min. candlestick “kisses” the EMA’s I place an order to sell 20,000 units at latitude line 1.3455. Notice I didn’t say, “Sell right now!” I only want to sell if it declines to 1.3455. I want it moving my way! You can see what happened. I’m in and then I’m out. It’s nearly identical to my pizza trade!

I probably make it look easy. But really, it’s not that hard if you just follow the rules and take it nice and easy. You can’t trade like a zombie, 24 hours a day, like some folks do at a casino. You don’t need to. You just need five percent a day!

Now, let me cover something you need to know. If you recall I try to place my orders so I don’t lose more than two percent of my capital on any one trade. If we’re trading with about five hundred dollars that’s $10.

Whoops! Time out. Here comes another trade. I can’t keep up with ‘em all! Same thing as my last trade an hour or so ago. Can you see how easy it is when you let the market come to you instead of chasing prices yourself?

Chart 2

Let’s get back to losing 2%. Initially, when I first place my order, I select my stop loss (the point at which I want to abandon the trade) ten pips away. On 20,000 units that’s a loss of $20. I do this for two reasons.

First, when my trade is executed the spread price of 1.2 pips is “activated.” Instead of starting the trade at 1.34550, it actually starts at 1.34562. If I placed my stop at 1.34600 that’s only 3.8 pips away. In an active market that’s too close. I might get stopped out needlessly.

Second, You must have a stop loss in place when the trade is executed -- for one important reason. What if your computer restarts, crashes, or you lose the internet connection? Without a protective stop you’re going to be hurt badly if prices suddenly move in the wrong direction before you can get back online.

However, once the trade is in place I start moving the stop to within 5 pips from the current price and continue moving it if prices keep going in my direction until my profit point closes the trade.

That’s how you stay out of trouble. That’s how you avoid a “bad” day!

One last thing. Be sure to select User Preferences under “Tools” and change the default “Stop Loss” and “Take Profit” boxes appropriately.

Well, that’s it. Does all this make sense. Like I said at the beginning.

“Is it really possible to earn $500 Dollars a day!” I can assure you it really is!