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Five Secrets to Start Currency Day Trading
A few years ago, I met an extraordinary trader.
He started out in life as a high school English teacher in L.A., where he used to get kids interested in reading, just by talking to them about the markets. (He calls it his own private “Squawk Box.”)
Then after a few years of these unusual teaching methods, he graduated to trading full-time. I met him when he first started out his professional Forex career.
Today, we’re both full-time currency traders. But there’s one big difference that will always separate my buddy and me – he’s a day trader and I’m not.
Over the years, he’s developed his own private trading strategy that allows him to buy and sell currencies in the $4 trillion spot market for a few hours a day – using nothing but “his brain and his mouse.” Yet he falls asleep each night without a care in the world.
Sound impossible? It’s not.
Meet Tom Gregory.
I caught up with my buddy Tom recently for a quick interview. Below you’ll hear, in his own words, how he does it…
Day Trading = Safer?
Sean: Even with the obvious profit potential here, most traders shy away from day trading. So what are the benefits of this kind of trading that most investors miss?
Tom: In my opinion, day trading is safer than the usual “buy and hold” trading. I’m only trading for two or three hours a day, so I only have my money in the market for a few hours each time. Then I’m done. I’m out of the markets. At the end of the day, I’m always sitting in cash. Then I begin the next day in cash.
Cashing out every day protects me from any unforeseen events in the markets. I avoid all collapses, all overnight risks. If something happens during the Europe or Asia overnight, I don’t have to worry because I’m in cash at the end of the day.
And I can sleep at night because I know that my money is out of the markets waiting to get back in there again.
That’s more important now than ever. We live in a very unstable time. One day stocks will be up 1% and the next be day down 5% (or worse). We have GDPs slowing down around the world and stock markets dropping. We have financial institutions failing, natural disasters, terrorist threats, and revolutions happening on a daily basis.
These things and more can all affect the markets, increasing the volatility and risk in even the most conservative of portfolios.
It’s what people miss. They never ask: “Am I more at risk being in the markets and exposed to all event risks, or being out of the market?” Personally I’d rather be out of the market just in case.
Day Trading Currencies Is NOT Like Stocks
Tom: Also, most people mistakenly believe that day trading currencies is like day trading stocks. It’s not. To day trade stocks, you need a required $25,000 minimum. But in the Forex market, you’re trading currencies, so you can trade as little as $5,000 or $10,000.
Traders can take advantage of short-term moves with a little amount of capital.
Also, the currency market is a 24-hour-a-day market. It starts in Australia and New Zealand and follows the rising sun to Asia and then moves to Europe and New York markets. So there are always trading opportunities.
That means it’s very customizable to a person’s schedule. If you only have a few hours a day, you just pick the most liquid times in the market and you can follow the market.
Sean: I like trading during the most liquid times of the day too. Specifically, what’s your preference for the best times to trade daily?
Tom: Great question. For what I do, the most liquid times of the day are when two markets around the world are both open at the same time. That happens twice: once at night, at 1 AM EST to about 3 AM EST. That’s when you have an overlap between the Asian and European markets. Then it happens again in the morning from about 8 AM EST to 12 noon. That’s when the big institutional traders in London and New York are both trading.
Trading currencies during liquid market times is a lot like canoeing in deep water, you can row a lot farther faster than you can in shallow water.
What’s to Love About This Market
Sean: Why do you personally love day trading currencies?
Tom: I know myself. I’m an instant gratification person. I was always taught that money now is worth more than money in the future. So I like the immediate gratification of seeing my money show up in my account.
It’s been that way since my first big trade. I was short the GBP/USD (or pound/dollar), and it broke out at about 2 AM. I was trading at home in my office, and I fell asleep at my desk. I was trading standard lots, with my $4,000 account. I had 10 standard lots on this trade. When I woke up, I thought “Oh my goodness, I have a position on!”
Then I looked up. My single open position was ticking higher… $10,940… $10,950… $11,000. All I could think was “Grab your mouse! Quick sell!” I did and I made about $11,000 in three or four hours.
That morning, I filled out my form at 6:00 AM West Coast time. By 10:00 AM West Coast time, I had that $11,000 in my savings account and I went shopping.
That’s why I love this market. It’s like trading Netscape or Yahoo back in 1999. I never thought I was going to see those kinds of gains again. Suddenly Forex was like 1999 stock trading again.
Sean: So exactly how different is day trading from regular Forex trading?
Tom: The only difference is the time – it’s just a smaller scale of the same model. The mechanics of trading Forex is exactly the same. So if you understand charting and currency trading, you can do everything on a smaller time scale.
Also, people believe that day trading is lightning fast. And it’s true you do have to make quick decisions, but it might take 35 or 40 minutes for the next charting pattern to form. So you have time to react. No worries there.
A Professional Trader’s Five Secrets for Getting Started
Sean: So as a former teacher, what advice would you give to investors looking to get started in day trading?
Tom: Really there are five things you should do.
First of all, get educated. The market is a harsh teacher so they can extract money from you. People think you can look at markets and anyone can do this. But you do need to learn this stuff because people who are successful are real professionals, armed with powerful computers, research departments full of analysts, and connections in the industry. So you need more than just a casual interest in trading to win against these Big Dogs.
Next, identify what kind of trader you are. Pick the type of trading that fits your personality and your risk tolerance. A day trader wants a fast-paced environment. Instant gratification. Can you make decisions quickly? Are you good at visual recognition of patterns? If so day trading’s for you. If not, then you may want to look at longer-term currency trading (where you might hold positions for days or even weeks).
Then, set up a practice account and practice your strategy that suits your risk-tolerance. Trading with a practice account and virtual money lets you understand the concepts much faster without risking a dime of your own money. You’ll get feedback right away whether you’re right or wrong.
Fourth, open a micro-account. Try out trading with a small amount. If you can double $500, you will be able to double $5,000. But you must start small.
Finally, find a mentor who can help. You know the old saying “Teach a man to fish and he’ll eat for a lifetime.” Well I say, “Fish next to the guy who knows how to fish. Then you’ll be able to fish well forever.”
I’ll be back soon with strategies on how to trade in the Forex market. Until then…
Have a Nice Day!
Sean Hyman,
Editor, Currency Cross Trader
P.S. Right now, Tom is hosting specialized webinars to teach everyday folks how to use his best day-trading strategies. For an insider’s look at how it’s done, check out our latest video.
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Just a thought for Mr T G `s…
It would be good if we could see a demo or even better participate for a free week in the full service.
In that way we all could get a real good handle on how beneficial this $2500 investment really can be.
Hope this helps…
Kind Regards,
Neera