When your forex day trading system is based on technical analysis, there are basically three elements to learn:
- The understanding of your forex day trading system
- The actual execution of your forex day trading system
- The times when you should NOT execute your forex day trading systems
Forex Day Trading Systems Based on Technical Analysis
When your forex day-trading system is based on technical analysis, there are certain elements outside the realm of technical analysis itself that will disrupt your trading performance.
One of them is trading through news announcements that have a major impact on the forex currency markets.
Because technical analysis is based on all existing news already being priced into the markets, news announcements throw in additional new information that will cause markets to be “re-priced” at least temporarily.
Among many other reasons, holding over news announcements can result in your open trades being taken out on spikes in prices.
Here’s a good example:
USDJPY H1 Chart
Here’s another one:
GBPUSD H1 Chart
Trading Through The FOMC Interest Rates Announcement
I had open trades before the news announcements were due to come out. I already did know about the FOMC interest rate announcement coming up, but I wanted to see how the trades would perform.
Before the announcement came out, the trade in the GBPUSD was already profitable and stops were at Breakeven. The trade in the USDJPY, however, still did not have the chance for stops to be shifted to breakeven. By all accounts, I should have closed out both trades regardless of their P/L.
While the spike caused by the news could result in bigger profits, it could also cause the forex day-trading account to take a full loss on the trade. Anytime the risk outweighs the rewards, it’s never a good trade to be in!
In the end, both trades were taken out by the spike. Although the GBPUSD was profitable, when combined with the loss in the USDJPY the overall result from both trades came up to a loss of -$62.68 on a $10,000+ demo account.
It’s not that substantial a loss, but still it was one that wasn’t necessary to take.
Before the FOMC announcement was out, the net P/L from both trades were actually positive. But after… you already know that story, right? 
Forex Day Trading Summary
You might probably be wondering why I’m showing all these little notes about my demo forex day-trading testing of the 5EMAs trading system.
To be a successful trader, it’s equally important to know what NOT to do as it is to know WHAT to do. When success is defined so clearly and obviously through your actual account statements, it’s that little “edge” that helps you to come out ahead.
In a normal working job, people still get paid when they aren’t at a 100% performance level. They could even be slacking off and still get their regularly pay check for some time. But when it comes to trading, every little bit of experience and knowledge is what will help you come out ahead over time.
When you don’t have that “edge”, it shows clearly in your trading results.
Successful Forex Day Trading is knowing about what to do. But what separates the leaders from the rest of the pack is knowing what NOT to do. And having this edge could very well mean a huge difference to your trading results over time.
You’ve got to wonder… even though I’ve made so many mistakes as a forex day-trader, the account is currently still higher than when I started. Although right now, it’s only +$163.17 ($10,163.17) from where it started at $10,000, it’s still profitable after 3 weeks of day-trading going onto 4.
Considering that I prefer to trade longer time frames and not day-trade, I think I’m learning pretty much about the day-trading the forex markets. It’s not as easy as it looks, and bad trading habits cause losses a lot faster.
It’s not much but I expect a good run would bring the account equity back to higher peaks. Sitting through the drawdown is always a tough thing to master for any trader, but once you can let go of being attached to the money, it makes trading a whole lot easier.