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How Often Should Traders Day Trade?

August 01, 2017 11:19

Dear traders,

You may be aware of the fact that I am an avid intraday trader. When I say intraday, I refer to both intraday and intraweek short-term strategies. Unfortunately, many professional traders don't want to share successful trading methods, but that's not the case with my webinars and education that I always moderate with my broker – Admiral Markets.

I know exactly how you felt when you started to trade, and I want to help you make profits out of financial markets, be it Forex, Cryptos, and/or Equities. However, my primary focus is on the Forex market that has been my trademark since I first got known as Tarantula.

Today, I'll talk about the benefits of day trading and how often you should day trade.

Analysis and Trading

By my own definition, short-term trading refers to the trading strategies in financial markets, in which the duration between entry and exit is within the range of 1-4 days.

My experience has mostly been with short-term trading methods, and I found these to be totally stress-free, if applied correctly.

Being both a professional analyst and a trader, I've tried to put analytical strengths to work by developing a complex trading method that resulted in Price Action Trading School.

So, I tried to end up with the best of both worlds. I reap the rewards of my natural analytical abilities, while also making the trading end of things closer to manual labour.

My strategy acts as a filter for how often I should trade.

Intraday Trading Defined

Source: ATR indicator applied on EUR/USD H1 time frame, Admiral Markets MT4, July 25

Intraday trading deals with buying and selling pairs on the same day, usually during the main market hours and sessions. Major market sessions are London, New York, and Tokyo.

Intraday trading is planned strategically where profits are booked for the day. We refer to it also as day trading. There are five different types of intraday trading:

  1. Positional trades
  2. Scalps
  3. Scalp swings
  4. Breakouts
  5. Counter trades

Positional trades are usually made during the same day. Traders want to profit on intraday price action, using the ATR indicatorand pivot points. Profits usually go with 50-80% of the pair's average ATR (14), and the suggested risk is 0.5-1% per trade.

Scalping is a higher frequency trading, where traders focus on lower time frames, trying to profit from the market's volatility. Very often, traders make 15-30 scalps per day, whereas the profit is usually 5-15 pips. The risk with scalping is usually 2-5% per trade, but have in mind that if you cross 5% of your risk threshold, your account will be in a danger zone.

Scalp swing is the term I use to describe the type of trading that is something in between scalping and intraday positioning. Trades usually last from 5 minutes to 1 hour and profits are approximately 20% of the Average True Range – ATR (14).

Breakout trading is a heavy and volatile price movement through support/resistance levels. Breakout trading is also a form of scalping when trades are typically closed randomly or around the next pivot point. The previous day's high and low are two very important pivot points, for this is the definitive point where buyers or sellers come in the day before. Watch the market to either test and reverse off these points, or push through and show signs of continuation.

Counter trend trading is a reversal trading of the important historical/now moment support or resistance level, and I normally trade it when the price overshots the ATR (14) – going well below or above the projected levels. It can also be a form of EOD (End Of Day) trading. Profits are usually taken close to Fibonacci retracement levels as counter trend always starts with a retracement first.

So, by using different intraday trading approaches, you will have a plethora of tools to profit from the market movement.

Clear Advantage of Day Trading

With expansion of retail brokers (which, of course, should always be regulated), the population size of intraday traders operating in a specific intraday time frame (M1-H1) determines the profitability of the trader trading this time frame. As the number of traders trading certain intraday time frames increases, conversely, the competition also increases, and the markets become more efficient and easier to trade, in my opinion. For that reason, the correlation matrix is of great help as it provides day traders with a specific currency strength gauge.

Having developed time-tested methods – I even accept the drawdowns as the price I have to pay, with occasional losses, too.

Volatility Is Your Friend

Source: Shutterstock

There is nothing wrong in trying out intraday trading. The only thing you need to keep in mind is to never risk more than 2% of your trading capital on any trade. No-one will go bust in trading if they trade with proper risk management in place. Here is a good article on volatility. When day trading is backed by a trend and good volatility, you won't be late to discover trading opportunities and book your profits soon.

How Often Should You Day Trade?

Now we've come to the crucial question – how often should you day trade?

First, you need to have a clear trading plan. Trade what your strategy tells you. These are the rules that I follow:

  1. Monday open is not good for trading. Lack of liquidity can lead to sharp movements, without any logic.
  2. London open is good to trade. That one trade can make your day.
  3. Breakout trading is applied to day trading when a new high or low has occurred. Buy the first pullback after a new high. Sell the first rally after a new low.
  4. The last hour of trading, usually in London sessions, might often tell the truth about how strong a trend truly is. Smart money usually shows their face in the last hour, continuing to mark positions in their favour. As long as a market has consecutive strong closes, look for the trend to continue. The uptrend is most likely to end when there is a morning rally first, followed by a weak close, and vice versa for a short trend.
  5. I don't trade on bank holidays or on late Fridays.
  6. I don't trade when the market is ranging 20-30 pips during the day.
  7. Sometimes not having a position in the market equals to having a profitable position.
  8. The first hour's range should establish the framework for the rest of the trading day.

How often you should day trade is also determined by your trading strategy. Let's say that your strategy makes 60% winning trades. If you skip day trading too many times, you are more likely to skip winning trades (60%) than losing trades (40%). Always try to find the balance, and the rules above should help you out!

Cheers and safe trading,


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