Forex Signals Deadly Sin 3: Focusing On Intraday Forex Signals
There are a lot of different ways to participate in the Forex market.
- You can scalp the market looking for a few pips of profit.
- You can trade Intraday where you look to profit from short term moves over a 24 hour period.
- You can swing trade looking to profit off short to medium term swings in the market.
- You can trend trade where you try to hold on for long term profits.
When you are looking for Forex signals to follow, you need to decide what type of trader you want to be. Even though you are not making the trading decisions yourself, you still need to pick your trading style. And the style you pick can determine your ability to succeed… even before the first trade is placed.
In this lesson I want to go over why you should NOT focus on Intraday Trading Signals for the best chance of success.
Intraday Forex Signals Are Less Reliable
A lot of Forex traders believe the key to profitability is to be a very active trader on the lower time frames. They believe they can make more profits by catching short term moves in the market and using very tight stop losses. This would allow them to use higher lots sizes, and make a lot of money off small moves between 20 to 50 pips.
While that might be true in theory, in practice trading off the lower time frames with tight stops is a very different story. It is a well know fact, trading off the lower time frames is less reliable than the higher time frames because there is a lot of random market movement. What normally happens is you have a lot of losing trades you need to make up for with those occasional big winners.
Trading off the lower time frames and looking for Intraday profits can be a very stressful and frustrating way of trading. It is an emotional roller-coaster ride between devastating loss and euphoria on the winning days. This constant emotional struggle is not what you want in a Forex signals service.
Intraday Forex Signals Are Harder To Trade
If you are actively trading Intraday signals, you are going to have to dedicate a lot of time to trading and managing the signals. Entry signals and trade management instructions can come out any time, day or night which makes them very difficult to trade.
In my opinion, no matter how hard you try, it is impossible to trade Intraday signals correctly and get similar results as the Forex signals service you are following… so what is the point?
Intraday Forex Signals Are More Costly To Trade
Every time you place a trade, you need to pay the broker a spread cost. The more trades you place, the more you end up paying the broker. So, while active Intraday trading might be exactly what your broker wants you to do, it is not what you want to do if you want to keep trading costs down.
Let’s say you are trading Intraday Forex signals with an average of 20 pips profit. And let’s also say the average spread cost is 2 pips. That means you are paying your broker 10% compared to the profits you are making. And since you are trading more and have a lot of losing trades as well… it turns out that your trading costs are very high proportionally to the potential profits.
On the other hand, let’s say you are trading longer term Forex signals with an average of 200 pips profit. With the same pip cost of 2 pips, this means you are only paying your broker 1%. And since you are placing fewer trades, your trading costs are very low.
The Solution: Forex Signals On Higher Time Frames
The solution should be obvious. Instead of looking for active trading off the lower time frames, look for signals that place fewer trades off the higher time frames. The Forex signals will be more reliable, be easier to trade and cost less in trading costs.
It is important to understand that trading MORE does not mean you are going to be more profitable. Losing trades are part of trading… no matter what type of trader you are. Regardless of whether you are a short term Intraday trader or a long term Swing trader, there will be losses.
In reality, trading more means there are going to be more losses to deal with. This can be very hard to take emotionally, especially for a signals follower paying for a service. It can also lead to lower profits, since a lot of your winning trades just go to make up the losses on the losing trades.
So, abandon the fantasy of making tons of money trading Intraday signals. Embrace the reality of systematically growing wealth over time using longer term signals. And avoid committing the Deadly Sin of focusing on Intraday Forex Signals.
If you have 10 minutes a trading day to place and manage trades, you can trade our signals!