Many traders email me asking how they can trade with their busy schedule or say that they don’t have time to sit in front of their computer watching the markets all day. My answer is usually something along the lines of: “Well you don’t have to sit in front of your computer all day if you learn to trade end-of-day Forex strategies”. Now, by ‘end-of-day’, I simply mean after the New York close; it doesn’t have to be exactly at the New York close, but generally there’s a large gap of time between the NY close and the London open where trading is very quiet (the Asian session), and this is the best time to analyze the daily charts and make your trading decisions. This is what I mean when I say “end-of-day trading”.
You might be wondering why I am not a big fan of intra-day trading. Well, the reasons are pretty simple; there is more random price movement or market ‘noise’ on the intra-day charts, and they thus contain more ‘clutter’ and are just more difficult to trade than the daily charts. For a skilled trader who is already successful, intra-day trading might be something to consider. But, if you are a beginner, a struggling trader, or simply someone who doesn’t have a lot of time each day to devote to trading, trading the daily charts in an end-of-day manner is going to be your best option.
Keep your day job
End-of-day trading basically allows you to fit in trading around your schedule, whatever it may be. You can keep your day job with no problems. Many people seem to think that if they can’t sit and watch the markets all day then they can’t trade, this is simply not true.
In fact, being away from the market is actually good for you – this is a ‘hidden’ advantage to end-of-day trading. Since you won’t be as involved with the markets you will have a ‘natural filter’ against over-trading and this will likely increase your bottom line at the end of the year. It’s a statistically proven fact that low-frequency traders make more money over the long-run than high-frequency traders, on average.
As an end-of-day Forex trader you can live your life exactly as you are now, but instead of spending 30 minutes watching television at night, you can simply analyze the markets according to your trading plan and look for price action trading setups. It might seem too good to be true, but really it’s not; the truth of the matter is that once you learn an effective trading strategy and develop into an effective trading plan, you really do not need to spend hours analyzing the markets each day.
Less clutter on your charts and in your brain
Humans have a tendency to make trading far more complicated than it really is. I am not saying that trading is ‘easy’, because as we all know it’s not easy to make consistent money in the markets. But, most people make the entire process of trading far too complicated, and really the analysis part of trading is actually very simple. The difficult aspect of trading lies in taking profits and remaining unemotional. Deciding to enter or not is the easiest decision you have to make in the markets; essentially it all boils down to this; there’s either a signal or there’s not.
Once you have learned and mastered an effective trading strategy like price action, you then need to formulate it into a trading plan. After that, it’s as simple as checking the markets each day after the New York close and seeing if your trading edge is present. Once you develop this into a routine it really should not take more than 30 minutes or so for you to decide if there’s a signal worth trading. I get emails from traders everyday telling me they are frustrated and confused and then they tell me they are using forex indicators and checking the markets all day…they simply cannot see the forest for the trees! Meaning, the REASON they are frustrated and confused is because they are over-complicating the easiest part of trading, which is analyzing the charts and looking for a trading signal.
More ‘bang for your buck’
What I mean by ‘more bang for your buck’ is that by being a daily chart end-of-day trader you are making more effective and efficient use of your time. Since daily chart signals are more powerful and contain more ‘weight’ than intraday signals, it means your time is better spent analyzing the daily charts after the NY close where you can simply check the markets for a signal real quick and then walk away. Any signal you find is likely to be much more significant than a signal you may have found earlier in the day or night on an intra-day chart. Thus, you are getting more out of spending less time in the markets by focusing on the daily charts rather than sitting at your computer all day trying to trade the intra-day charts.
HOW to trade end-of-day
Another email question I often get is “How do I trade end of day” or “What is end of day trading”? So, this next part should clearly answer those questions, and if you email me about it I am going to refer you to this article ;)! So, let’s discuss how to trade Forex (or any market) end-of-day:
Remember this: 30 minutes a day is all you need to analyze the markets and find your entry or manage your trades:
• It ALL starts with the signal – You scan your favorite markets and first look for a clear signal of one of the setups in your trading plan. After you have mastered your trading strategy this should be a very easy and quick task, taking no more than about 10 to 15 minutes. You are simply looking at the daily chart time frames for obvious instances of your trading edge. If nothing stands out to you after 10 minutes or so of analyzing the markets, there probably is nothing worth risking your money on. Where traders get into trouble is when they don’t see an obvious signal right away and then keep looking until they convince themselves there’s something worth trading, even though there isn’t. This is a very easy trap to fall into and you’ve got to ignore that temptation to ‘dig up’ something to trade when there is nothing ‘ripe’ staring you in the face.
• Looking for levels – Match a signal up to a level; if you find an obvious price action setup the next thing you’ll do is see if it lines up with any obvious level(s). You’ll have to draw in the key daily chart levels at the start of the week and then analyze and adjust them if needed each day after the New York close. This is also not something that will take much time after you get some education under your belt and understand what a key level is vs. a level that isn’t as significant. Here’s a video on drawing support and resistance levels.
• Gauge market conditions – Is the market trending or consolidating…? If it’s trending is it in a strong trend or is it slowly grinding higher or lower? Is the market in distinct trading range? Where are the obvious key boundaries of the trading range? Make sure your signal makes sense in the context of the current market conditions. For example, maybe you see a decent looking pin bar strategy but it’s against a very strong trend…probably not the best setup then.
• Make your own daily commentary – Making a daily commentary of your favorite markets is a good way to get an objective view of the charts each day. Using the guidelines in your trading plan and the three points above, go over your favorite markets each day and make notes about what you see, actually write or type it out so that it becomes a habit. Then once you finish with your top 5 or 10 favorite markets, go back and re-read your comments and see if anything really stands out to you. This process will give you a good overview of what’s happening in the market and will help you better understand the overall market picture and whether or not anything is worth trading…it will help you stay “in tune” with the markets and will work to develop your discretionary trading sense. This is one of the biggest things that helped me become successful in the markets.
• When you’re done, you’re done – Once you go through your daily ‘end-of-day routine’, you have two possible outcomes: there’s either a trade or there’s not. Either way you should walk away. You either enter your trade parameters or you do nothing, and either way you should leave your charts until the next day, then come back and see what happened. This act alone will almost completely cut out the temptation to over-trade, which is most trader’s biggest downfall. You aren’t going to help anything by looking at the markets and staring at your trades. Sure, you might nip a couple of would-be losers early, but in the long-run you’re only going to end up cutting your winners short, closing trades at breakeven, and generally just interfering in your trades when you shouldn’t.
This 24 hour break from the markets shows that you release your arrogance and that you truly understand you can’t control the markets. Let the market do the work for you, you should have already accepted your risk on the trade…you should basically assume you are going to lose on the trade, so that every time you come back the next day and see a winning trade it’s a nice surprise, and a loser is not a disappointment but rather something you already expected. It’s when people expect to win on every trade that they start becoming emotional.
Summing up the end-of-day trading strategy
As you can see, end-of-day trading is not only a good strategy, but it’s also a philosophy. The philosophy of not being glued to your charts, of accepting that the market will do what it wants, and of generally just being less involved with the markets is a mature trading philosophy that shows understanding of how the markets work and of how the trading game is won. It really allows you to release that ‘need’ to be right and to control everything in your trading. So, even as you become more experienced and perhaps want to trade lower time frame charts, this philosophy of briefly checking the markets for your trading edge, making a decision and then walking away, will still benefit you and can still be used. This philosophy is at the heart of my personal trading style and you can learn more about it in my Forex trading course and members’ community here.