Short-term trading

Short-term trading


The “secret” is the shorter your time frame of position, the less money you earn.

It is sad, but it is true. Think about any investment you have ever been involved in. Did you succeed in hustle through everything for one day? And if you were so lucky, how many times did you repeat it? Not so many. It is because the universal rule of existence, i.e. growth, is the same as universal rule of speculation:

It takes time for profits to grow.

Successful traders know that a market can move only for a little distance for one minute, for 5 minutes it can move further, for 60 minutes – even more, and, who knows, how further – for a day or a week. Losing traders want to trade within very short periods of time, automatically limiting the potential of their profit.

Inherently, they restrict their profits and follow the scenario of unlimited losses on purpose. It is no wonder so many traders obtain such a bad result in the short-term trading. They locked themselves in impasse, following the delusion which is spread by brokers and sellers of trading systems: it is possible to make huge profit catching highs and lows of the market during the day. This opinion is supported by seemingly rational statement – trading during the day and not leaving the position opened at night, you are not exposed to news and sudden changes, limiting your risk. It is totally wrong, moreover, by two reasons.

First, your risk is under your control. The only control measure in this business is setting of stop-loss point – a level which position closes at. Next morning market can open with gap much further than your stop-loss (jump over your stop-loss), though it is rare case, but even in that situation we can limit the losses having stops and fierce desire to come out of losing deals. Losers hold on to loses, winners – never do that.

As soon as you open position with stop-losses, you can loose only estimated before amount of money. No matter when or how you opened position, your stop-loss limits your risk. Your risk is the same whether you buy at absolute high of new market or at its absolute low.

Rejection from overnight positions limits the period of time, during which your capital should be growing. Sometimes market opens against you, but if we follow the right direction, in most cases market will open in our favor.

And what is more important is finishing trading by the end of day or, worse, in some artificial moment, let’s say, by 5- or 10-minutes chart, we cardinally limit the potential of profit. Do you remember, I said that difference between losers and winners is that losers hold for their losses? Another difference is that winners hold their winning positions, meanwhile losers leave “too early”. It looks like losers cannot stand successful positions: they are so damn happy to get any profit, that leave the game too early (usually during the entry day).

You will never gain a lot of money until you learn to hold successful positions, besides, the longer you hold them, the more potential of profit you have. When successful farmers plant the field, they do not dig out the plants every minute to see how they are growing. They allow them to spring and grow up. We, traders, could adopt many things of this natural process of growing. Success of traders’ work is the same as farmers’ work, to raise successful deals, time is needed.

An extract from the book “Long-term secrets of short-term trading” by Larry Williams


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