Why I'm going flat today and why day traders lose money.
I'm going flat (closing all of my open trades) today and will also explain why day traders lose money.
On Monday a new month begins along with my 36-month forex trading challenge to turn £50K starting capital into £1M. To ensure full transparency in my broker account and eToro results, all trades will be exited before the market closes this evening, whether currently in profit or running at a loss.
Frustratingly, unless something miraculous happens today it looks like I'll close out this month in eToro with a negative result for June. I'm currently running at a -2.94% loss based on their statistics, and depending on what happens by close of business tonight this will either go up or down.
Everyone wants to keep a clean sheet (positive returns each month), but in trading this is extremely difficult to do. This is one of the reasons I've added an extra four months to my trading challenge – expecting not to have at least a few months of drawdown would be completely unrealistic.
The last couple of months have seen me fine-tune my forex trading strategy. I've felt a lot more clarity with my approach, but sometimes still feel like I'm peering through a fog. With 23 currency pairs on my watchlist, at times too many signals can show up. One way to drastically improve any trading strategy is to avoid the losing trades. I believe a breakthrough yesterday with my sentiment indicator will provide an additional filter to help me do this.
It's a well knows statistic that the majority of retail traders lose money, so knowing where and how this collective group is positioned could be a useful tool. I've been using my indicator for a while now, but to some extent it was a blunt instrument. If the retail crowd was only marginally net long or net short I'd get the same reading as when they were positioned at an extreme, e.g. 90% long and 10% short. The more important reading is extreme positioning, as when the players in the market are primarily pointing in one direction, it's often the time when things are about to reverse.
Using my 90% net long example, this happens for two reasons:
Many educators have a relationship with a particular broker. Introducing their clients to this broker means every time their client trades they receive a commission on the trade. The brokers encourage day trading too – retail traders regularly blow up their accounts, which means they need a constant stream of new clients to sustain their business model.
Day trading is an easy sell to the majority. Most people are used to being paid in the form of a monthly salary or weekly wage, therefore the promise of making money each and every day (mirroring employment) is appealing. This approach invariably leads to overtrading, too much leverage and tight stop losses. The day trader unwittingly becomes the food the smart money hunts and ultimately feasts on!
This morning I've shorted USDJPY using my FULL HOUSE strategy, but whether the trade will have time to work between now and going flat is another matter. I'm excited for Monday and will be spending time at the weekend making sure all is prepared.
I'll be releasing an introduction video on Monday on my YouTube channel and then a weekly video where I'll report on my progress with full transparency. Be sure to subscribe in advance, so you don't miss anything.
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
On Monday a new month begins along with my 36-month forex trading challenge to turn £50K starting capital into £1M. To ensure full transparency in my broker account and eToro results, all trades will be exited before the market closes this evening, whether currently in profit or running at a loss.
Frustratingly, unless something miraculous happens today it looks like I'll close out this month in eToro with a negative result for June. I'm currently running at a -2.94% loss based on their statistics, and depending on what happens by close of business tonight this will either go up or down.
Everyone wants to keep a clean sheet (positive returns each month), but in trading this is extremely difficult to do. This is one of the reasons I've added an extra four months to my trading challenge – expecting not to have at least a few months of drawdown would be completely unrealistic.
The last couple of months have seen me fine-tune my forex trading strategy. I've felt a lot more clarity with my approach, but sometimes still feel like I'm peering through a fog. With 23 currency pairs on my watchlist, at times too many signals can show up. One way to drastically improve any trading strategy is to avoid the losing trades. I believe a breakthrough yesterday with my sentiment indicator will provide an additional filter to help me do this.
It's a well knows statistic that the majority of retail traders lose money, so knowing where and how this collective group is positioned could be a useful tool. I've been using my indicator for a while now, but to some extent it was a blunt instrument. If the retail crowd was only marginally net long or net short I'd get the same reading as when they were positioned at an extreme, e.g. 90% long and 10% short. The more important reading is extreme positioning, as when the players in the market are primarily pointing in one direction, it's often the time when things are about to reverse.
Using my 90% net long example, this happens for two reasons:
- With the majority of retail traders long, who is left to buy?
- The smart money (banks and other financial institutions) target the retail crowd to make their money. If retail traders are net long it doesn't take much selling for as bank to trigger the retail stops and begin a market reversal.
Many educators have a relationship with a particular broker. Introducing their clients to this broker means every time their client trades they receive a commission on the trade. The brokers encourage day trading too – retail traders regularly blow up their accounts, which means they need a constant stream of new clients to sustain their business model.
Day trading is an easy sell to the majority. Most people are used to being paid in the form of a monthly salary or weekly wage, therefore the promise of making money each and every day (mirroring employment) is appealing. This approach invariably leads to overtrading, too much leverage and tight stop losses. The day trader unwittingly becomes the food the smart money hunts and ultimately feasts on!
This morning I've shorted USDJPY using my FULL HOUSE strategy, but whether the trade will have time to work between now and going flat is another matter. I'm excited for Monday and will be spending time at the weekend making sure all is prepared.
I'll be releasing an introduction video on Monday on my YouTube channel and then a weekly video where I'll report on my progress with full transparency. Be sure to subscribe in advance, so you don't miss anything.
*********
Is it really possible to turn £50K into £1M? Over the next 36 months I'm going to find out by trading my personal account with full transparency.
Follow my 36-month challenge to turn £50K into £1M.
Read my blog here: https://stgforextvforexchallenge.blogspot.com
Subscribe on YouTube here: https://www.youtube.com/channel/UCyGySJ5IeDjq-DIJPU7nYvw
[Please note, the information presented is general educational material and does not constitute trading advice.
Trading foreign exchange (forex) on margin carries a high level of risk and may not be suitable for you or your circumstances.
Before trading forex you should investigate all of the risks, including the possibility that you could lose more than your initial investment.
It’s important to consider your investment objectives, level of experience and risk appetite. If in doubt seek advice from an independent financial advisor.]
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