Putting Intra-day Trading Into Perspective

Rule 1: Trade the release of weekly and monthly economic indicators but don’t get married to them. By that I mean if a U.S. number comes out better then expected buy dollars. If the dollar doesn’t go up right away sell out your long dollar position and get short. The fact that this good number has long-term positive implications for the dollar means nothing to you; you will not have a position at days end (let alone the long-term). For intra-day trading purposes, the fact that the dollar didn’t go up on good news tells you its offered at the moment and that’s all you care about.

 

Rule 2: Don’t get emotionally attached to a big intra-day move. The fact is if the EURUSD is up or down 100 points from the days opening levels, you missed it, go golfing, mow the lawn or catch a movie. Consider the following analysis for the 300 trading days between August 22, 2002 and October 17, 2003:


EURUSD opening price August 22, 2002 was .9764
EURUSD closing price October 17, 2003 was 1.1668


Buy/hold (1.1668-.9764) = +1904 Sell / hold (.9764-1.1668) = -1904

Buying 25 point dips = +1920 Selling 25 point rallies = -1008
Buying 50 point dips = +1150 Selling 50 point rallies = -1091
Buying 75 point dips = +337 Selling 75 point rallies = -575

Buying 100 point dips = +57 Selling 100 point rallies = +196
Buying 125 point dips = -96 Selling 125 point rallies = -50
Buying 150 point dips = +89 Selling 150 point rallies = +70

Buying 175 point dips = -63 Selling 175 point rallies = -36

Buying 200 point dips = -13 Selling 200 point rallies = +5

Conclusions: Big picture clearly is if you missed the first 100 points, you missed the move and or the countermove (reversal). The study also shows that beyond 100 points the price action shows no correlation to the underlying trend (long-term).


Note:

Jimmy Young is a seasoned institutional forex trader having 20 years of experience with different banks. He headed up bank FX dealing rooms. He is FX profitability consultant to major European private bank. He manages funds and also trades personal money. Between 1981 and 2004 he was a foreign exchange trader at following banks: Societe Generale, Julius Baer, Fuji Bank, Indosuez, Erste, Hill Samuel, Manufactures  Hanover, Paribas, European American. www.EurUsdTrader.com