Thursday, 1 November 2018
Trading With Different Time Frames
Traders A & B both worked in the same investment bank.
Trader A longed EUR/USD while Trader B shorted EUR/USD; both at the same exact time and at the same price.
Both of them made money.
How is this possible?
Trader A is a swing trader who holds his position for several days to several weeks.
His stop loss is 100 pips away from his entry price.
Upon entering his trade, he suffered a -40 pip loss on that day. But since his stop order was not triggered, he was able to hold on to his money losing trade and give time for his trading thesis to work.
Eventually, the EUR/USD rallied and he was able to close the trade 5 days later for a 200 pips profit.
Trader B is an intraday trader.
His stop loss is 10 pips away from his entry price.
Right off the bat, his short EUR/USD position turned into a quick profit of 40 pips.
Normally, I am more of a Trend Following Trader who likes to hold my positions for several weeks or months. Profits got more meat mah!
However, I can't dictate what I want to the markets... Even going to Waterloo Street and pray to Kwan Im Ma also no use!
If the mountain don't turn, I turn.
Swing trading is a lot easier to transition to.
But man! Intraday trading is a lot taxing and harder to execute... I swear some of the price movements look totally random! And they probably are!
Only no choice will I dabble in intrady trading. Especially for those 1 day up, 1 day down kind of days.
In this situation, I rather close all my trading positions at the end of the day.
This is to lock-in whatever profits I had, if not they will disappear the next day when the market reversed #@!!%&(&%$@!
LOL!
Do note one important caveat.
Irregardless of whatever time frames I trade in, I always enter my stop loss order immediately when an order is filled.
My entries are discretionary; my exits are systematic.
Why?
I don't trust myself when it comes to taking losses.
Plus I can't be staring at the screen all the time if I used mental stops, can I?
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not only intra day trend are unpredictable, long term trend is also unpredictable.
ReplyDeletecoconut,
DeleteI am not smart to be the early movers (smart money), but if I can jump on the developing trend as part of the early majority, I would be very happy!
Just as long I have the late majority and laggards to sell to :)
temperament,
ReplyDeleteI have no wish to be someone else's bacon ;)
decide what is worth trading for and that determines timeframe? When trading S&P i will target what I think the next 100 point move will be. any projected move below that threshold may not be worth the effort..
ReplyDeleteSGRetailTrader,
Delete100 handles for the S&P minis?
In money terms, that's the equivalent of a 500 pips move for a full-sized currency futures contract ;)
In trending markets, of course I would be happy to do that trade too!
But in 1 day up, 1 day down markets, like the S&P minis today swinging within a 60 handles range, locking-in a 30 to 40 point profit is not too shabby ;)
After lunch, those who longed the S&P but didn't take profit when it surged after Trump's trade talk "good news", would be been stopped out now with all US indexes in the red after the US opening :(
Well, the euphoria ended quickly!
Guess what? Tomorrow morning they could all be in the green with their famous last hour reversal?
I have to get in sync with the markets.
Like you, I would much prefer to get my 500 pips in one single position trade.
Sometimes I have to settle for 5 x 100 pips swing trades.
And it could also be 25 x 20 pips intraday trades!
LOL!
Just expanding my skill sets to include intraday trading, when needed ;)
Hi SMOL,
ReplyDeleteThis week I learnt that setting stop-loss is an art. As intra-weeks volatility differs, even when trading for a longer time-frame, I find myself constantly adjusting my stop to cater to the wild swings.
So I just gave up.
Rainbow girl,
DeleteThat's why I decided to change my trading time frame instead since last Friday.
When market is quite volatile as in 1 day up, 1 day down, it does not pay to trade for the longer time frame which I prefer - I would be stopped out.
In the past, I would be sitting on the sidelines; I don't play.
This time, I challenged myself.
Oh! By the way, each time frame has their own stop-loss rule. And remember our No. 1 trading poke:
Never let a short term trade turn into a long term investment!
Hi Jared,
ReplyDeleteTake care of your health when you do intra-day trading. Good health and mental alertness is more important when doing intra-day trading to keep execution risks low. Strike while the iron is hot for as long as you can. For less versatile traders like me, I'm happy to watch as a spectator since I'll be burnt by the hot iron:)
Live long, have fun and prosper.
hyom hyom,
DeleteThanks!
I am back to the relaxed state.
Made some kopi money. They don't matter in the big scheme of things, but got some new insights on how much I can take the stress of trading more than 12 hours a day ;)
I can't!
LOL!
this kind of wild swing are common in the 90s and 2000s, back in those days we have many many champion tok kong trader like me being wipe out everyday!
ReplyDeletetoday i never heard people get wipe out, lost a bit of money making hell lot of noise! we have lost touch of reality.
coconut,
DeleteI've talked to seniors who reminisce about those CLOB cowboy trading days...
Now that's volatility!
Last Thursday and Friday power move up; today STI dropped like a stone...
I don't play liao :(
I go sit on the sideline and suck my thumb.
I've no clue now whether STI will break 3000 or 3100???
No feeling; no commit ;)
LOL!
Aye, hence the context of my earlier comment. No 100 pt move in SPX expected, not worth the trouble to enter! Don't play a trade unless the movement can be big enough
DeleteSGRetailTrader,
DeleteI get you.
But if market whole year like that I can't be sitting on the sidelines forever...
I want to expand my skillsets so I can not only trade in trending markets, I can also survive in flat sideways markets too.
Shorter time frames are so much harder for my low engine cc brain :(
Now I wait for a catalyst to appear.
Let's see how the markets will respond to the US mid-term elections!
temperament,
ReplyDeleteSome theory is better than total ignorance.
But no theory in the world can replace first hand practical experience ;)
For trading with leveraged vehicles, no use of stop orders is like driving without seatbelts...
Most of the time we can get away with it, but just one time unlucky we'll gonna get hurt serious, serious!
temperament,
ReplyDeleteThe same can be said of investing.
That's why Peter Lynch's 10 bagger is so attractive during my time.
Got one 10 bagger, can cover the rest of our investment dead duds!
Theory is sound.
Problem is execution...
How to know which stock will be a 10 bagger in the future?
One interesting note though.
It seems the newer generation of retail "investors" have no animal spirits in them!?
Or maybe they are high income or very comfortable at work.
6-8% dividends very happy; 2.5% to 4% CPF interest they salivate?
No one wants to shoot for the moon anymore?
All herbivores?
Trading is hunting. Investing is farming.
ReplyDeleteIn hunting; you hit or miss!
In farming; it takes time but you will never know whether you can harvest or not.
As farmer; once you have grown money tree; you can shake legs and money drops from sky
ReplyDeletetemperament,
ReplyDeleteMy secondary 2 geography teacher motivated us by saying:
"If others take 10 minutes to understand, and you need 8 hours to understand... So be it! Once you've understood, there's no difference!"
We are BOTH strolling down the mountain; we are the same, same ;)
CW,
ReplyDeleteThat's a very apt analogy of trading and investing :)
A hunter is like the bird with no legs - the day it stops flying, thats the day it rests forever...