The “secret” of this trading strategy is that the shorter the duration of your trade, the less money you will make.
Think about any investment you have ever made. Did you make a killing in one day?
And even if you are so lucky, how many times have managed to repeat it? Not many. That is because of the universal rule of life which is the same as the universal rule of speculation: it takes time for profits to grow.
Successful traders know that in 1 minute a market can only move a certain distance, in 5 minutes it can go a little further, and in 60 minutes - even further. And no one knows how far it can move in a day or a week. Unsuccessful traders want to trade in a very short time frame and thus automatically limit their profit potential.
By definition, they limit their profits and adhere to an unlimited loss scenario. No wonder, many traders have achieved such poor results in short-term trading. They have locked themselves in a no-win situation, following a misconception often spread by brokers or trading system sellers: you can make loads of money by catching market highs and lows throughout the day. This view is supported by a seemingly rational statement: when trading within only one day and never leaving open positions overnight, you are not exposed to news or major changes, thereby limiting your risk. This is absolutely wrong for two reasons.
First of all, your risk is under your control. The only control we have in this business is to set a stop loss, a level at which we exit the trade. It is true that the next morning the market could gap beyond your stop loss, but this happens very rarely. Even then, we are still able to limit our losses by placing a stop loss and doing our best to get out of losing trades. Losers hold on to losses, winners don't.
Once you have set your stop loss levels, you can only lose about that amount of money. No matter when or how you got into the trade, your stop limits your risk. Your risk is the same no matter if you buy at an all-time high or low of a new market.
When you avoid leaving positions overnight, you limit the time your investment needs to grow. Sometimes the market will open against you. But if you are on the right track, most of the time the market will open in your favor.
More importantly, by closing your trades at the end of the day, or worse, on the 5- or 10-minute charts, you radically limit your profit potential. As we mentioned earlier, the difference between losers and winners is that losers hold onto their losses. Another difference is that winners hold onto their winning positions while losers get out too early. It is almost as if losers can't stand being in a winning trade. They are so happy to get a winning deal, that they bail out of it far too early (usually, by getting out during the day of entry).
You will never make big money until you learn how to hold on to your winning positions, and the longer you hold them, the more profit potential you have. Successful farmers don't plant a crop and then dig it up every few minutes to see how it is doing. They let it germinate and grow. The success of a trader is no different from the work of a farmer: it takes time to create winners.