A slight edge in financial trading systems

 

If you are looking to trade the markets over the longer term [1-3 months +] then the edge you need for your financial trading systems to be successful will be far less than if you were to trade a shorter time frame.

So what is the edge? The edge can be defined as any factor that you can apply to your trading strategy that will help you gain profits over any time frame that you are trading.

A slight edge in financial trading systems

At first glance, these long term charts supplies most of the information you need to place a trade with higher expected win rate than that of losing.

We are simply going to buy the positions in the expectancy of the price rising.

Financial trading systems

 

 

Trading apple stock

 

In fact if we look at these charts in the final quarter of the year it will be interesting to see what the profit and loss is by simply trading above and below the 200 day SMA?

Now if we look at some 1 minute forex charts that are popular with day traders we can see that it will require a much greater edge if available to make accurate decisions.

1 minute trading system

All the above price movement occurred in less than an hour. I have tried trading these time frames and it is madness.

To give us an idea of direction we will probably need to use far more indicators and our speculation needs to be analysed in far greater depth.

I feel that this type of trading [or at least to me] seems to be more like guesswork.

Even if you think that you may have an edge likelihood is that there isn’t one. With so many underlying variables trading 1-5 minute charts seems random.

Furthermore, even if there was an edge I think that the speed that the markets move creates further problems, especially if you are spread betting.

[Using binary will be your best option here as you can place the bet and leave it alone].

Panic Trading

With spread betting though and using these time frames the psychological demons of trading are queuing up to have their say.

Shall I close, add more, wait, exit, oh no 3 ticks in the wrong direction this is a disaster… close out for 5 ticks loss after your spread and the price goes back in the right direction. You enter again and pay another 2 points spread.

This is a good example of what a new day trader goes through.

It’s the quick fire decisions that hammer new day traders.

They panic and get it all wrong under pressure. Even though they may know what the correct action to take is. They don’t do it.

“Always sell what shows you a loss and keep what shows you a profit. That was so obviously the wise thing to do and was so well known to me that even now I marvel at myself for doing the reverse.”

Jesse Livermore

 

Trading Under Pressure

Financial trading quizImagine that you are taking a general knowledge quiz. And your specialist subject is dogs. Each question is asked every 1 minute.

You have time to think about the answer and the likelihood of you getting the answer right increases.

You are asking your subconscious if the answer is stored there in your brain, if you know it the answer is given.

If you don’t know the answer you may even be able to make an informed guess. Almost like using chart indicators for your brain.

Many of the questions you get correct because you have time on your side.

Now imagine the same sets of questions are being asked. But now you only have 5 seconds to get the correct answer.

This is a totally different prospect. It’s unlikely you will get as many or anywhere near as many correct answers.

You may well know the answers but under stress you just can’t give the right answer quick enough

This is much like how day trading and longer term trading results differ. The results are in direct correlation to the time that you have to make informed decisions against ill informed decisions under stress.  At least that’s my theory.

It’s simple that the longer your day trade is the more successful you will become. Trading 1 minute charts is difficult trading 4 hour charts is much easier.

I’ve proved countless times that it’s far easier to trade the long term, that’s why I recommend Vince’s style of trading.

That said, I am starting to see options trading the shorter term, although nothing using charts under an hour really.

My day trading research

As you know trying to find a winning day trading strategy is taking a lot of my time up at the moment; I’m happy that it is and I’m enjoying the challenge greatly. But there is only so much that I can do.

Little Acorns

So for the next few months I will not be placing any little acorns bets.

It’s purely because I need to be totally focused and little acorns is something that I’m using very little cash on and reward ratio is lower to my other current interests.

I will most certainly be keeping an eye on the results though [via some of the racing blogs] and will get back to it soon.

If you are using it, keep going, it really works even at level stakes.

I have noticed a few ways that might increase strike rate but it means studying the form in detail. And this adds to selection time. I will do a separate post on this soon.

Charting packages

I’m also testing out some new charting packages that are cheaper than sharescope. I thought it may be beneficial to new traders to have some other good chart options that will not cost them £50 a month.

I’ll keep you updated on my findings. At the moment I’m trying TradingView, it’s around 29 euros a month for live prices and it seems OK. Another I’m trying is Prorealtime. You can get a free trial for both and pro real time is free if you have an IG account.

 

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