The Micro in the Macro
I’m very happy that I’ve been trained as a day trader, and I’m very happy with my day job. The two, however, don’t always mix. Day-trading takes a lot of training/conditioning to get to the point where you are just reacting. It takes an interesting mix of concentration and relaxation similar to that of a sniper, or hunter. Some time’s it looks very simple, just a matter of being in the right place at the right time, and sometimes there’s some mental gymnastics involved just to break-even or take a small loss. You cannot be actively day-trading and doing anything else. It definitely does not lend itself to multi-tasking.
Swing-Trading, and or Position Trading however, are different games all together. You can essentially have the same trading plan and use the same signals, but you are using higher time frame charts. And generally speaking, when you are using higher time frame charts the risk/reward for your efforts is going to improve. Your winning percentage may not be as high, but you are definitely in a position to catch bigger moves, and it is a lot less labor intensive.
Let me show you an example of a more favorable risk reward associated with higher time frames. And in doing so introduce you to a concept we call “The Micro in the Macro”. First let’s define what we mean by micro in the macro. Markets typify fractal geometry, and technical analysis is a study in trend direction, momentum measurement, and pattern recognition. Often times the pattern on the larger time horizons will be replicated on the smaller time horizons, and powerful moves can follow. The Head & Shoulder Top in place on the USDJPY chart is a great example of this, with a smaller Head & Shoulder Top playing out yesterday on the 60 minute chart, even replicating the neck line test on the micro version.
I spotted this swing trading set-up yesterday — see chart below – and over the course of the last 24 hours made some good pips with a lot less work. In fact I made the bulk of the pips while I was sleeping last night, and another good batch while I was at lunch earlier today. Keep in mind my initial risk was higher also, because I had to place a stop far enough away to where I don’t get knocked out by an outlier. That’s the nature of trading higher time frames.
Jay Norris
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Jay, I prefer swing trading. I like to put trades in where I make at least 100 pips. Once I put on a trade I don’t have time to stare at the screen all day. I think that would drive me crazy.
Thanks for that informative post. That is helpful to me.
Thanks Casey, I like the idea of trading for full points, not pips!