I was recently asked a question regarding how I handle sleep while trading the forex market. The forex market is open for 24 hours, 5.5 days per week. And so it is a good question to ask how you handle all the news and information flow.
The question that was asked was:
Just by curiosity how do you handle your sleep while the Forex market is open for 5.5days/24hours and the flow of news/information is constant.
There are a few different ways to order flow trade. Some of them are extremely time consuming. Others can be a bit more laid back. The more hours you dedicate, generally the more inefficiencies you can find and take advantage of. The more hours you dedicate and the more currencies you follow, the more opportunities and trades you will ultimately place. Of course that also means you can over trade.
Let me start off with the trader that wants to spend the most possible time capturing every single possible inefficiency or as many as they can. This type of trader wants to go balls to the wall and really attempt to compound his or her account through intense day trading.
Day Trading with Order Flow
This type of trader wants to spend somewhere between 40-100 hours per week in order to day trade every single day. They want to capture the short term intraday inefficiencies. This type of trader is looking to take advantage of stop hunts, option barriers, and news trades.
The intense day trading order flow trader will tend to want to be awake from around 12am – 12pm EST. They want to be active during the London and New York sessions which are the more liquid and volatile. Also the larger portion of news releases are released during this time.
This trader will tend to have a few opportunities to get in sleep from around 1pm – 11pm EST. However, because they are going balls to the wall intense day trading, they are willing to wake up to take advantage of any news releases that may occur in the late New York session, like a FOMC interest rate announcement that comes out after 12pm EST.
They are news traders as well so they are willing to wake up and stay awake for the New Zealand and Australian news releases, whether they may come out at 5 PM, 6 PM, 9 PM, or 12 AM EST.
Also if there is a big macro move occurring, the market may not wait until the next London session to make its move. The market may decide to make a 200 pip move starting from the Asian session. Thus, the intense order flow trader wants to be up for those as well when the occur.
This type of trader can place anywhere from 40 – 300 trades per year.
If this trader does it correctly, they will experience the fastest account growth because they place more trades (assuming they are successful), and are able to compound their account the fastest. Traders taking this route, typically have a five figure account and are looking to get to a few hundred thousand or a million account size fairly quickly. They don’t want to trade this intensely for many consecutive years. They know they will burn out. Thus they are looking to get a big account by trading intensely for a year or two.
They get a large account by having some very profitable months. The very profitable months can be anywhere from 20% returns in a month to 200% or 300%. They are generally trading with substantial leverage so they are taking big risks. They expect the big returns.
Their plan is to get to a good size account of say $500,000 and thus if they generate 5-10% returns per month on average, that is a lot of money and they live comfortably. Then with that large account they turn into a swing trader or global macro trader which is much less time consuming.
Of course if this type of trader does it wrong, then they will over trade, take some losses and might not actually come out that much ahead. If they do it very wrong, they can take catastrophic losses and blow their accounts. Of course this intense day trader can opt to trade this way, but with less risk per trade as well and less leverage. That is another option.
Strategic Intraday Trader
This type of order flow trader likes to day trade, but do so in a strategic way. They are not looking to capture as many inefficiencies as the intense day trader. Instead they are just looking for a few key stop hunts, barrier plays, or news trades during the month. This type of trader acknowledges that they are going to miss out on a few or many trades, but they don’t care. They want to day trade, but in a slightly more laid back style.
This strategic intraday order flow trader will spend around 20 – 50 hours per week. They may choose not to trade every single day. They may only trade for three days of the week if they deem that the volatility will only be concentrated in those three days.
Strategic intraday order flow traders will typically place anywhere from 20 – 100 trades per year.
There trading hours can differ. They like to be active during the 12 AM – 12 PM London / New York session, but they may not be looking at their monitors the whole time. They can do other things around the house or the office. They may take substantial naps in between news trades or stop hunts.
They are not afraid of missing out on a few or many trades, because of their more laid back style.
They can still make very good returns, They can even have some months as good as the intense day trader. They will just be compounding the money at a slower rate due to the less number of trades they place.
Order Flow Swing Trader
This type of trader seeks to place swing trades in the forex market that last for a few days to a few weeks. They can choose either end of day order flow analysis, or to place the swing trades at various points throughout the day. They may check the market at various points throughout the day quickly, but they don’t want to be staring at it for a hour or so. They just make quick checks throughout the day to see whats going on.
This order flow swing trader will tend to spend around 10 – 30 hours per week. They can choose to take a few days off, or even weeks or months. They are not afraid of missing out on certain trades because they choose to be a swing trader. They aren’t looking to capture intraday inefficiencies.
This type of trader will typically place anywhere from 15 – 60 trades per year.
They can make decent returns, sometimes very good returns depending on how many moves they catch. Their returns, percentage wise will tend to be lower than the intense day trader and strategic day trader because of their lower frequency of trades. But if they have a large enough account they can make smaller returns, but still a lot of money.
Global Macro Order Flow Trader
The global macro order flow trader is sort of like a swing trader, except they are willing to hold trades for many more weeks or even a month or two more than the swing trader. They are looking to capture the big swings of 700 pips, 1,000 pips, 1500 pips, if and when they occur. They typically perform end of day and end of week order flow analysis. They have a very strong understanding of all the different order flow strategies. They know all the different types of order flow inefficiencies including all the short term and intraday ones, but they just choose to take advantage of the global macro ones.
The global macro trader has a crystal clear picture of what order glow generators, scenario and global macro environment is needed to trigger a trade.
This global macro order flow trader will tend to spend around 5 – 20 hours per week. They can choose to take a few days, weeks or months off. They just need to accept the fact that if they take a few weeks or months off, they might miss a global macro move.
This type of trader will typically place anywhere from 5 – 20 trades per year.
They can make decent returns, sometimes very good if they are able to get a good entry and position size with a small stop and catch the big swing. These types of traders typically have a large trading account and just want to use trading to generate some nice extra return on their capital.
Mix and Match Order Flow Trading?
You can mix and match the above trading styles. You can switch from one to another in the middle of the year. There are all sorts of different combinations to the above. Alternatively, some order flow traders may choose to try all the styles at one time. It is theoretically possible to try to be all of them at once. You would just need to know when the trade is an intraday trade and when you should convert it to swing trade and when you should convert it to a global macro trade. That way does take some serious order flow skills and thus most people don’t try to do that. They just like to specialize in one of the above.
But you can take your pick. So many order flow choices.