This week, Rolf sat down with Moritz, who has been negotiating for many years.
Rolf asked Moritz the most frequently asked questions we receive from new and aspiring traders of the day. Moritz also shares his most important business tips of the day.
Moritz also teaches his daily trading strategy and provides several weekly live daily trading updates to our mentoring program.
Below the video, you will find a summary of the points we have discussed.
1 Best instrumental
When choosing your instruments for daily trading, there are two main things to keep in mind:
The most important factor is the diffusion of the underlying instrument. For daily trading, it is essential to have the tightest possible differentials. Therefore, in Forex, trading exotic currency pairs is almost impossible and not recommended. The differentials of exotic Forex pairs are too high.
Because day traders only capture small trades, spreads can quickly consume your profits, completely ruining the reward-risk ratio and turning even the best system into a loser.
Second, day traders should ensure that they adhere to instruments that have a sufficiently large daily scope and that exhibit decent volatility.
The relationship between daily range and spread is particularly important. While some smaller currency pairs may have higher differences compared to some major currency pairs, higher daily volatility may still make some smaller trades profitable.
Therefore, when choosing your day trading instruments, check the volatility-differential ratio.
2 The best time to negotiate
As mentioned in the first point, day traders need volatility. To find the greatest amount of volatility in a reliable way is to focus on trading open sessions.
Especially London and New York openings are very popular for day traders in the foreign exchange market. These two sessions are the most active and, openly, high volatility and high price movements can usually be found with great reliability.
Day traders typically start their trading day 30 minutes before the opening to prepare (more on that in the next point) and then change the session to anywhere between 60 and 180 minutes after the opening until the first wave of volatility subsides and traders head for the lunch break.
3 How many instruments for new traders?
Moritz recommends focusing on the 28 major / minor currency pairs. However, do not change all 28 currency pairs at all times. Instead, before the trading session, review the entire list and filter out the best engines and those that show the best possible trading opportunities.
Typically, you come up with a list of about 5 to 8 currency pairs for the given day, which show promising configurations and trading patterns.
Creating trading plans before the session is one of the most important things a trader can do to prepare for the optimal trading day.
4 best time periods
First, it is always recommended to establish a multi-period, top-down trading approach. The highest time period provides directional bias, and at the lowest time periods, time your entries.
Moritz’s strategy usually uses 1H as a higher time period and then goes as low as the 1min interval to find the right entry and place his trading orders. This allows you to trade with the highest time period management and use trade orders adjusted in the shortest timeframes to get the optimal reward: risk ratio and short retention time.
5 What are you looking for in a hallway?
The most important thing to look for in a broker is the regulatory situation. Where is the corridor regulated? It is usually worth going with the larger, regulated runners in the strictest jurisdictions.
Second, as a daily trader, low spreads are essential. Even better, look for a runner with a fixed differential model. This allows you to establish a worry-free trading approach and not encounter spread peaks.
6 Position size as daytrader
The risk management approach of an everyday trader differs significantly from a swing trader. As a daily trader, your risk percentage per transaction should always be set and each transaction should have the same risk percentage.
At the same time, day traders also use significantly less for trading risk than swing traders. The reason is that day traders find themselves with streaks and declines in a much shorter time. While day trading is not necessarily less profitable than swing trading, you will have more trades in a given day / week as a day trader and therefore the emotional pressure can be much greater as a day trader.
Having five losses in a row can happen quickly as a daily trader and risk 2% per trade, as swing traders do, would result in a 10% daily reduction. This can cause emotional problems and get involved with the psychology of a trader.
Swing traders can grow slowly and become losing streaks and taking long breaks between trades will also help swing traders manage their mental capital more effectively.
7 Is daily trading more difficult from an emotional point of view?
The next logical question that arises is whether daily trading is more difficult compared to swing trading?
And, as always, the case is not so black and white and the answer lies somewhere in the middle.
The advantage of being a day trader is that your trading day is very short and day traders do not usually trade more than 3-4 hours a day at most. And once finished, they don’t have the stress of holding operations overnight and being in positions for extended periods of time. FOMO also shrinks considerably because you don’t have to wait that long to do an operation.
On the other hand, you need to be able to have the best possible performance every day as a daily operator. Focus, emotional resilience and preparation are key attributes of successful marketers.
In the end, there is nothing better or worse and each person will prefer a different style of negotiation, based on their own personal profile and strengths.
8-day negotiation with a job
Daily trading with a regular 9 to 5 job can be a challenge, but there are ways to make it work.
First, it largely depends on where you live and, subsequently, what login hours are available.
For example, a trader who lives in the Asian time zone can trade open in New York after work. However, the trader needs to be able to concentrate and get a high return after a day of work.
A trader living in North America, especially on the west coast, can change his New York session before going to work if he is willing to sacrifice a few hours of sleep.
A trader in Europe will have more difficulty, as the London opening will fall just on its first working day and the New York opening takes place in the early afternoon. Negotiating the open Asian session is the only option left. However, the Asian session may require the trader to go to bed much later and lose hours of sleep.
To see if daily trading is appropriate, some aspiring traders use their annual vacation as an experiment. Set aside two weeks while you’re out of work and simulate a daily shopping life and apply a daily trader’s calendar. Within two weeks, you will have a rough idea of the daily negotiation you are comfortable with or if you prefer to be a swing trader.
Did you find the tips helpful?
What do you want me to ask Moritz in our next video “Ask a Day Trader”? Leave a comment below!
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