A Day in the Life ..
Ok, so you're a trader but what do you actually do?
I have always been shy. My Myers Briggs is INTP - I'm an Introvert and I have never liked the lime light (unless I'm hiding behind my Les Paul plugged into my 40 Watt Fender Hot Rod) or talking about me or what I do. When it comes to sharing experience with other people on
the same trading journey though, It seems that I'm a different person! One of the things I get asked about, particularly by folks who are new to this, is "Ok, but what do you actually do? what does your day look like?". I'm sure every trader you speak to will have their own routine (see The Basics on this website for more on this) and if they've done it for a while (like I have) it will be largely unconscious but anyway I thought it would be interesting to see if I can recount it, for what it's worth ... here goes ..
My alarm clock goes off at 6am each weekday morning. I get up, do some Pilates exercises (sitting watching screens for long periods, takes its toll on the back, take care of it), have breakfast, feed the cat, shower, dress - 10 minutes meditation to reset the "system" then, by about 6.45am I'm off to my office, across the landing, to fire up my computers. I'm in the UK so that's about 7.45am in continental Europe, so I'm usually sitting in front of my screens ready for the European market open at 7am UK time (8am continental European time). I have a standard, tower PC, hooked into broadband via an Ethernet cable (wireless can be dodgy around here sometimes) with two monitors running Tradestation for FX charts and my laptop for running the spread betting execution platforms. I've been using two spread-betting platforms since 2004 - these are CMC and IGindex. They both have fairly good charting capabilities too but I rarely use them for analysis. I've used others but how many do you really need! I'm finding that it's useful to have two in case you find yourself in a situation where you want (or need) to hedge against something going wrong on your other platform. This is a fairly risky (some might say reckless or even stupid) technique so I would not recommend it but when you know what you're doing it can help minimise net losses.
So now I'm ready to start assessing the markets, reviewing any current trades I have in play and looking for new trading opportunities. We are talking Foreign Exchange (FX) here almost exclusively although I do like to see what's happening with the DAX as well as that can offer some nice moves. First I'll check the economic calendar (I use Forex Factory but there are others) and I'll also take a look at the "dollar index" for a state of health on the USD overall. It's the big one for FX traders. For FX, I'll typically already have some "positions" in play from previous sessions, so I'll take a look at how those are doing first and take any necessary actions - e.g getting out because they've gone (or are going) wrong, tightening any trailing stops or even adding to a position. My style has developed over thousands of hours of screen-time so I tend to rely a lot on "intuition" over mechanics. My view is that trading is as much an art as it is a science. In some ways, more of an art than a science - which to me makes relying on mechanical systems actually dangerous. You need a
"feel" for the market, hence the theme of my website regarding the importance of screen time. One of my favourite quotes from Tao te Ching says it best - trying to understand the market by using a mechanical trading system is like "trying to understand running water by catching it in a bucket". So I have learned to trust my "right brain" in that sense. With regards to how long I'm in a trade, it really depends on what the chart tells me - ie where are the next levels of support or resistance (signifying potential unfilled orders or other parties waiting to get in cheaper/more expensive) which could halt the direction of travel). Sometimes I can be in a trade for as long as a week or even longer. Other times, I'll see a trade, say on a 15 minute or even a 5 minute chart, which is going to be done in a few minutes. It depends on what your plan is for the trade - i.e where the target is or where you decide you are wrong and this will be largely governed by the time frame you're considering to trade in.
Foreign Exchange is a global market and so it operates 24 hours-a-day, 5 days a week. In the UK that's practically (you can start late on Sunday night if you want because Australia will be open by then) from about 6am on Monday morning through 9pm ... ish on Friday night. So whilst we are asleep in the UK they're busy in Asia and Australasia. Whilst the markets are open, prices will move but by the time it's opening in Europe, the other side of the world has been asleep for several hours so it gets quiet when that happens. People (brokers, "gurus" people who sell you systems, i.e people who want your money) will tell you you can trade FX 24 hours a day. Well yes, you can - it's not untrue - they're not lying but it doesn't move much when there aren't many people awake trading with each other - and here we're talking about the big financial institutions who actually make the market move. Aforementioned "people" love this 24 hour fact because trading turns into gambling when it's quiet and we all know the only winners in a gambling setup are the casinos. Keep it real is my advice.
The European market open is a fairly key event in the daily trading timetable, as it provides a pronounced up-tick in volatility with the number and size of transactions, (traders buying and selling currencies) increases markedly as traders come to their desks. This causes prices to change markedly coming up to and through the 7am UK time period. So, whilst you could stay up all night and all day (and some of us have actually done this!) movement (volatility) varies dramatically across 24 hours. We pragmatists - who don't venture into casinos any more - start to pay particular attention to our screens from 7am (UK time) and look for signs of institutional (the banks) traders coming in and taking positions. This is a key point actually in that, trading is fundamentally dependent on the price of something changing. If prices aren't changing then there's no opportunity for profit - i.e selling at a higher price than you bought something and vice versa.
When I've finished all my pre-flight checks as it were, I'll start reviewing the charts of a list of 18 currency pairs sequentially, using Multiple Time Frame analysis. This list includes all the major pairs .. GBPUSD, EURUSD, USDCAD, USDJPY etc. and a number of others.
Finding potential trades by assessing the stage of the price cycle - I typically start with the weekly candle chart and look for general direction - ie up, down or sideways and then to see where price is relative to levels of established support and resistance. If there looks to be
headroom (or foot-room) i.e there is good potential for price to continue in the general direction of the chart (moving averages can help, e.g, I use 200 and 50 SMAs) without running into a wall (ie a major support / resistance barrier) - I'll see where the price is in relation to it's overall "cycle". e.g, if the trend is down and the price is towards the top of it's current candle, assuming the trend will continue - (a primary principle of momentum trading), then I could conclude that there is potential for a short. I will call all of that the cycle test for convenience. Moving on therefore to the Daily chart for that pair: I find the Daily chart the most "significant" with regards to determining direction. So if the chart isn't showing me a strong bias I'll be cautious and look only for small intraday moves, perhaps with a lower risk on the position size in anticipation the price will most likely be jumping around whilst the market (banks) decides what it's worth. I'll then move on to the 60 minute, then 15 minute. This is a process of fine tuning entry. If the price passes the cycle test (more on this if you care to contact me) I will place an order to sell (or buy) with my spread bet platform at an appropriately "extreme" level on the 15 minute chart. Again, I'm using the 15 min' as a fine tuning device for entry. Exit levels - i.e stop loss and take profit targets are set at the same time and are functions of next significant support and resistance levels. This whole process is highly nuanced and intuitive (to me), mechanical in that I do it mechanically / unconsciously, like an accomplished musician frets chords on a guitar or a golfer wings a club - but it's not a system as such.
The next significant event of the day is the open of the UK markets at 8.00 am (UK time).
This usually provides a further kick to volatility with more noticeable movement in prices/lengthening of intra-day candles. So now we have the European and the UK markets simultaneously open. Essentially, by this time I am fully "in the zone" as it were, closely attentive across my watch list for any early signs of directions being established. i.e - are the institutional traders (banks) buying or selling today. They are doing both, of course, but if we can discern a bias then we have an edge and the opportunity to "jump on board" with them in the direction of, what looks like, the majority. I will use a "microscope" for this - i.e a 15 or even 5 minute chart but ALWAYS paying attention to longer term (ie daily chart) support, resistance and trend. We want to be trading in the direction of the daily chart, if it has one.
"So that's it then? you sit there for the rest of the day or what?" - well it depends. I
work to a business plan within which I have weekly and daily targets. As soon as I make my target for the day, I can decide what to do. Either shut down and go and do something else or carry on (at lower position size, which I can add to later if I'm right!). Now the Big Event for the day....
14.30 UK time >> US Market open - the next major event of the trading day is when the US markets open. This is at 14.30 UK time. Same drill, pretty much as for the European but now we have 3 markets open, at the same time: European, UK and US. This period usually produces the most volatility of the day and is (usually) reflected in faster movement of currency prices. In fact, depending on the variation on the US stock exchanges or any previous announcements it is quite common to see the relatively gentle trends that have been established up until "now" being completely reversed - so beware the entry of Uncle Sam into your day. The sizes of the intraday candles (e.g. on the 240, 60, 15 minute charts) also get longer indicating more movement in the same period - ie higher velocity. I tend to like the 2 or 3 hours after the US markets open best because my experience is that the momentum is more "truthful"during this period - i.e you get a more reliable sense of direction and hence trade with a higher degree of confidence that the price will continue the way it looks like it will go! It's a bit like a bicycle (again) - if you're going very, very slowly, the bicycle is not very stable and flops around all over the place. Put some speed on and it is much more stable and predictable with regards to direction. It doesn't make things easier but increased momentum gives us some higher predictability of the direction continuing. I will follow same procedure as for European and UK and depending on how I'm feeling, could trade all the way through to about 6pm. It depends.
This is an attempt at describing a pretty typical FULL day - it is not absolutely necessary to sit there all day (and in fact I don't) but if I have the time, I find sitting and riding charts is the best way of getting in tune with the market and how I have learned to trade. I hope this has been useful. Please drop me a note if you think I've missed something essential - I almost certainly have - but send me comments anyway. Happy trading. MH