Day Trading Tips and Tricks

February 24, 2012

Erich Senft

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The Birds Are Back In Town — Forex and DTS

New Year, new dreams.  New expectations and goals for what the next 365 days hold in store.  I think for most traders, it is a time of the utmost promise for what it bound to be the “biggest and best” year ever!  Inevitably though, by February some people are seeing their profits and trading dreams go up in smoke.  How does that happen?  All too easily.  Many times when we set aggressive goals, or even moderate ones sometimes in trading, those goals transform into EXPECTATIONS and rather than a place to aim for, they become the only option.  This creates a tremendous amount of pressure and can lead to bad decisions.

This week was one of those weeks that if you were not careful, you could have been hurt.  Of course, by looking at DTS from the viewpoint of all 3 birds, you probably would have avoided most of the pain.  The rest just took some common sense and a little experience.  You see, as I spoke of numerous times through the week, we have not really seen a full return of volume to the market yet.  On top of that, we had NFP in the second week of the month, rather than its customary first-week Friday.  Generally speaking, that creates an environment that makes tons of good trading….difficult to impossible.  So it was easy for me to just sit out of trading towards the end of the week and think about the following week.

That’s because I no longer have to pressure myself into gains to prove anything.  There was a time that I had unrealistic and very lofty goals to get the year started off right.  Gunning for outrageous gains that I in hindsight was crazy to think I could consistently achieve.  I had the mindset that my best weeks should be the “standard” and anything less was failure.  I would maybe have some nice gains to start a month or a week.  But they were nowhere near what I wanted.  So I would continue to trade thinking if I just increased the volume of my trading, I would achieve my goals.  I started cutting corners and traded through all sorts of news even though I knew it was riskier.  I piled on automated trading programs that I had not really tested to add to the account when I wasn’t manually trading.  I had way too much risk open at all times, and didn’t sleep well, if I slept at all.  I woke up to nasty surprises (although sometimes they were big gains) of huge losses.  What always seemed like a nice trajectory to the month I had somehow always really blown by the end.  Which of course, led to even more pressure and less capital to start the next month.  It was a vicious cycle and made me want to quit trading altogether at more than one point.

I learned some hard lessons, but what I gained was the knowledge to avoid this trap again.  Here are a few points I picked up along the bumpy road to help ensure you finish that month or week as strong as you started:

  • Follow The Yellow Brick Road:  TAKE ONLY GOOD SIGNALS!  You know what I’m talking about.  Oh sure, the Falcon is ALMOST all green for a long, but then how many times have you ALMOST won the lottery?  By making sure you actually heed the signals on the system you bought and rely on, you will raise your opportunity to make consistent profits.
  • Stay Away:  When things don’t line up across 2 or 3 of the birds on the same pair, there might be a reason for that.  Can’t figure out what the birds are saying to you?  Maybe it’s better to just not trade.  After all, a good system not only shows you good entries, but keeps you out of a bad situation when things don’t line up.
  • No Pressure:  Instead of using goals as a cattle prod to “force you to focus”, use them as a cap.  Set a goal, and if you reach it, STOP TRADING.  I can’t tell you how many times I would start a week and quickly make 5-10% and think, “now that I’ve reached my goal, I can take any trade I want”
  • Don’t Worry, Be Happy:  If you make 1% in a week, that is a TOTAL victory!  I’m telling you, don’t focus on the $$$ coming with the gain, because when you build your account big enough, 1% will be more than enough to sustain you.  You see, I think many traders create these insane goals trying to force their accounts to produce far too much than what is realistic.  The main goal should be profits on a consistent basis, NOT huge gains.  Even little profits consistently can make someone very wealthy and I argue much more wealthy for longer than “your friend” who blasts out gigantic gains sporadically and never tells you about the numerous losses in between.
  • Hone Your Craft:  Instead of spending so much time looking for trades, spend more time learning about things you don’t know in the forex world.  I am constantly learning and without this pursuit even to this day I would not grow.  You have a responsibility to understand more than the system if you want to thrive as a trader.  The more corners you explore, the more of the information you already know will be used for better trading.  This extends to experimenting with your birds in different ways.  See what they look like without renkos, change the renko size and see what happens, etc…..
  • Take a Break:  This applies when you’ve had a winning streak, a losing streak, or you are simply not being able to focus and enjoy trading.  If it seems like work, you probably need a break.  Taking time away from trading and forex can give you perspective, let you have some time for reflection and often when you return, you will trade better.

These days, I am much happier to trade less, and I somehow make more.  I’m less interested in always swinging for the fences.  Between analysis and DTS, we were able to sidestep bad markets this week and focus on next week, which should provide us better conditions to make some waves.

February 24, 2012

Erich Senft

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