Following my bunch of lines piece yesterday I thought I´d follow up with a little info on what it is really like to be a full time trader.
Whenever I tell people I´m a trader I usually get one of two responses:
- a blank stare followed by ….. a longer blank stare
- a blank stare followed by a knowing comment about how they also “trade stocks and shares”
Most people really have no idea what being a trader actually is. Most think its about being something to do with the stock market and investing in some sort of buy to hold strategy just as many of them have done in various retirement funds etc. Nobody has a real clue beyond that.
So I try and educate them a little.
First I tell them I don’t buy shares – I ´trade´ currencies. Namely the eurusd pair. Then I explain what that actually means – the pair is the exchange rate or the relationship of the Euro to the US dollar, like what they look at when they are planning a holiday to the States. Then I explain that I buy or sell this ´exchange rate´ depending on whether I think its going to go up or down.
Then I tell them I do this on a daily basis but never take possession of any actual currency and I can have any number of long or short ´trades´during the day – the word ´short´ here usually gets an extra raised eyebrow. This is about as far as I get before the blank stare returns!
Trading for most people is a strange and esoteric world that they can only visualize by what they think they know (buying and selling shares in various funds etc.) or through what they have seen on Netflix, Wall Street or the Wolf of… etc.
Unless, that is, they think they have a worldly-wise view of these things (men mostly) because it would be a a bit humiliating to let on that they really have no idea.
After we get to this point we either get a question such as “…ok so what do you think is going to happen to the stock market..,.? ” or “…where do you think the exchange rate is going cos I need to buy some and d´ya think I should wait or buy now…?”
At which point I return the blank stare and…. suggest we get another beer!!
I jest a little here, but you get the point – trading is not what people think it is.
Firstly, it’s not investing, which I think is the biggest misunderstanding.
Secondly, its not like being Leonardo Di Caprio!
Its about waiting and being patient; analyzing your charts and reading the financial press; keeping up to speed with central bank monetary policy and then after considering the relative implications of this… taking a bet.
It is about risk and money management, technical chart analysis, pattern recognition and trade execution.
It is about knowing when to be in the market and when not; about when to cut your losses and when to let them run.
It is about knowing who to listen to and then making your own decisions; about keeping your own counsel at all times and not being influenced by the legions of talking heads who spout daily (like me lol).
It is about being able to watch a chart and know what its telling you. About anticipating the next move and being ready for it. About reacting to price shifts and knowing why you´ve reacted that way.
Its about keeping an open mind at all times, not being dogmatic and being aware of your own tendency to seek confirmation bias.
But mostly, it´s about dealing with uncertainty on a minute by minute, hour by hour, day by day basis and being comfortable with this. It is this point which is the deal breaker for most people.
Being comfortable in an uncertain world where you can lose your house or make a fortune… or simply make a living. This is the real killer …because it breeds fear, and fear is the grim reaper of most would be traders.
Now you know just a little bit more about what being a day trader really means.
So on that cheery note … lets take a look at todays charts….
On the daily we can see that yesterday formed a long legged doji which is usually a good indication that the downside has been tested and higher prices look likely. This pushes the odds back to the upside as we have a more decisive daily pattern but we need to watch price action closely here as it could also be retraced back down..
EURUSD Daily Chart
On the hourly chart, look out for the levels noted to the downside to act a potential upside reversal / inflection points. 1.1550s look good to me for a test upwards to begin with and I would be looking at 1.1470s / 80 to try a long position. As ever it will depend on the price action I get on the 5m chart at these hourly levels.
EURUSD Hourly Chart
Good luck for today :).
Please note: All opinions expressed above are from the author and not necessarily shared by The Armchair Trader. All financial investments involve an element of risk. The value of your investment may fall as well as rise and you may get back less than your initial investment. With Spread bets and CFDs your losses may exceed your deposits.