In a recent trading session I was poised to take an entry for a nice looking short trade, but the pattern I was looking for never completed and the entry order was not triggered. I waited for a while, thinking that an opportunity to the long side might develop. However, none of the trading setups I look for appeared. Eventually I decided to pack it in and enter a no-trade-day in the books.
On average, this seems to happen to me on about one trading session each week.
Now, there is a perception that day traders are frequent traders, in and out of the market several times per session. Some are, but I am not. In the past, over-trading has been a problem for me, so I have very strict rules about it. I limit myself strictly to one planned trade per day, and if one of my trading patterns does not appear, I pass on the session.
This policy does some good things for me:
- I do not rack up excessive commission fees.
- I do not revenge trade, trying to get even for the day after a loser. (This almost always results in emotional trading on inferior setups. )
- I do not give my profits back after a win.
- I am careful about choosing the trade I make (because it is the only chance I am getting today!)
- Since the majority of opportunities occur near the open, I am usually finished trading early in the session.
Most successful day traders I know do pretty much the same thing, day in, day out. Their trading methodology is boringly repetitive. They have found an edge, something which works for them, and they exploit it at every opportunity.
In my case, I look for certain setups or chart patterns to occur within a defined time period. If they do not occur, I place no trade in that session. Of course, by cutting short the period in which I am prepared to look for trades, and by limiting myself to one trade each day, I let quite a number of opportunities pass me by.
For me, this is worthwhile, not only for the reasons listed above but also for the sense of discipline and well being I get from a fixed, routine approach to the job. (Also, I know that for every opportunity missed, there will be another tomorrow!)
In my type of day trading, I probably end up taking only a few more trades than a medium term position trader. However, as my typical trades have durations of minutes as opposed to days for the position trader, my exposure to event risk in the market is much lower. This is a really important point for a conservative soul like myself.
The point to take from this is that day trading does not have to mean more trading. Quality is definitely more important than quantity. Inevitably the shorter time horizons of the day trader throw up more opportunities than fall to the longer term trader, but you do not necessarily have to take them all. Pick signals which fit your routine and maximize your winning Expectancy.
David Bennett trades US commodity futures from his home on the Gold Coast in Australia. He provides coaching and mentoring services for people wanting to start trading for themselves. Visit http://www.12oclocktrades.com to read more futures trading articles.