Day traders are looking to profit from short term moves and to do this means that they have to be able to gauge short term shifts in human psychology.
Humans determine prices and if you can gauge the short term psychology you can enjoy day trading success.
Let’s look at taking advantage of the above.
The FOREX market is huge and turns over trillions of dollars a day.
The market consists of many different groups and to complicate matters these groups all have different investment objectives and ways of trading.
For example, some are hedging and others are there to make a profit.
We can identify 4 main groups:
There to hedge and offset risk in the currency chosen. They are corporations and money managers with foreign currency exposure.
2. Central Banks
Are there to look after the interests of their countries economy and currency and tend to intervene only occasionally, but when they do its big intervention!
3. Large speculators
These are large individual players and a variety of money managers looking to make profits for themselves or their clients.
4. Small speculators
This group is everyone else and consists of traders with different skill levels and investment methods.
So how can you gauge what all these people, with all their different views are going to do in a day and take advantage?
The answer is you can’t
That is way day trading success is a contradiction in terms.
In such a short time period as a day where prices can go is anyone’s guess.
Day traders will point to daily support and resistance levels being important and they can be traded.
Really? Think about how dumb this view is!
The vast bulk of participants pay no attention to day time levels of support or resistance whatsoever and don’t consider them important.
Think about it:
Day traders scratch their heads when levels that should hold are broken, but you don’t need to be a rocket scientist to work out why.
No one pays any attention to them and they have no significance.
All short term moves are random as in short time frames you cant measure human psychology accurately.
Day traders will tell you they are, but you never find a day trader that makes money in the market long term.
Maybe there is one out there but I have never met them!
There is no way you can measure human psychology in short time frames for day trading success.
Day trading levels are irrelevant and useless.
You really may as well flip a coin and decide which way to trade as the data day trading is based upon has no significance to anyone but day traders
Finally, they are a small losing minority of the whole market; don’t be tempted to join them.