Multi-Time Analysis in Day Trading

Multi-Time Analysis in Day Trading

As a day trader, your success is determined by a number of things. Some of these factors that determine your level of success include: your knowledge of the financial and economic markets, your patience, understanding of the various analysis tools, and your character as a trader. Unless you have a good understanding of all these, chances are that you will end up losing your money. I know your main goal of entering the day trading market is to make money. However, this money won’t be made if you continue using the wrong strategies. In this article, I will highlight the key details about time and why it matters for you as a day trader. As a day trader, your trading horizon is hours if not minutes. By this, you want to open and close trades within a matter of minutes or hour with a profit. Swing traders on the other hand want to open trades that will remain open for a day or two. Long term traders (investors) want to open trades that will last for a few months.

Volume or lot size

As a day trader, the volume and lot sizes that you use per trade will play a very important role. They will determine whether you will make or lose money. Lot sizes are basically the sizes of your trade. Lot sizes range from zero to any number. The number of lot size to use should depend on the amount of money you have in your trading account and your time horizon. For instance, if you have an account with $100,000, then you can be comfortable to use a 10 lot size. This is simply because you have a larger margin of safety. However, if you have a micro or mini account, you should limit the lot size you use to 3. This will help you absorb losses while limiting the margin call. For me, I have a rule to never use a lot size larger than 2. With this volume, I usually have a lot of peace during trades.

Asset class

As I have explained before, in high frequency trading, there are various asset classes which you can use to make money. These asset classes are: commodities (such as gold and oil), equities (such as Apple and Google), indices (such as NASDAQ and Dow), currencies (such as EUR/USD), and bonds (such as treasury bills) among others. Each of these asset classes require a different view of analysis when trading. For instance, if you are using a leverage of 1:100 and you want to buy EURUSD and you are trading with $10000 your profit or loss will be very different compared to when you buy oil. Remember that EURUSD trades at 1.0867 while crude is trading at $29.34 a barrel. In multi-time analysis therefore, you should have these in mind to avoid making abnormal losses.

Economic or financial data

While there are many aspects that move market up and down, the fact is that economic and financial data are the key movers. Economic data refers to numbers concerning the broader economy. They include: inflation, GDP, and jobs among others. On the other and, financial data include numbers such as earnings for particular companies. As a day trader, I advise you to always avoid trading 30 minutes before or after the release of economic data. This will help you avoid being at the center of volatility. For financial data, traders can use these numbers to allocate their capital. For instance, if a company such as Intel is reporting, you should pay close attention. Intel provides chips to companies such as Microsoft and HP. If their revenues decline, then chances are high that hardware companies will also disappoint. This will in turn open a trading opportunity to short.

Market open and close times

With the internet, people are now trading around the world. The advantage of this is that investors react to the three main market areas: Asia, America, and Europe. In multi-time analysis, it is very important to understand the different times which these markets open. This is because the asset classes will move in different directions during such times.