Who says short-term trading is not profitable? successful trader Barbara Rockefeller proved otherwise.
What comes to your mind when you hear the name "short-term trading?" That it's a quick way to make a profit? Beginner's trading style? How to trade high risk? If yes, then you are not completely wrong.
There have been many articles reviewing all sides of the trading method, ranging from its advantages, one of the most popular techniques (scalping), to the dangers and risks. From almost all discourses on short-term trading, the shortcomings of this method are often revealed as a way of trading that is high risk, time consuming, and prone to trial and error.
But have you ever considered using a short-term trading strategy from the point of view of necessity? This is a topic that Barbara Rockefeller, a successful female forex trader, brings up in her column in the book High Profits in High Heels.
According to her, a retail trader does not need to deny the fact that his capital is not sufficient to meet long-term trading conditions. Choosing a low time frame and then cultivating a short-term trading method is not a shameful act, let alone a "sin", especially if that is the style that suits your condition She lays out 5 important points in a career as a short-term trader. But before revealing the tips, let's get to know Barbara Rockefeller first.
Realistic Barbara
With more than 20 years of experience in the financial world, Barbara Rockefeller started her career in banking. This Columbia University graduate has worked at Citibank as a senior risk manager in the international division. She is now active as a writer, forex trader, and publisher of daily newsletters.
One of her newsletters, Daily Currency Briefing, contains synopsis of important events and forex predictions consumed by central banks, fund managers, and multinational companies. Her popular work is the book Technical Analysis for Dummies (2004), one of the mandatory guides for novice technicalists and has now been published in several editions.
This female trader is very realistic in explaining her tips in High Profit in High Heels, a compilation book that previously included Toni Turner and Kathy Lien's tips. Why? As an individual trader, she is well aware of his position in the market.
"What I teach and practice for my own trading is very different. Call me a cheat or a hypocrite, but while my large clients have plenty of funds to hold positions for weeks or even months, I don't have enough money to follow a similar way of trading," was her opinion.
Undeniably, Barbara Rockefeller is a trader with a lot of experience and expertise. But in fact, she did not choose the Big Picture trading system which prioritizes long-term analysis. According to her, "taking long-term positions with large sizes that (perhaps) can change the direction of the market like Warren Buffet and Soros is indeed tempting. There may also be no trader who never wants prices to move according to predictions. But remember this successful trader's guide; don't care where it goes. the price will move, just observe where it is now moving and follow the dynamics."
Time Frame Management
Of the many short-term trading tips on the market, Barbara chose the time frame (tf) as the most important component. Believe it or not, she only felt successful after reducing his time frame to a matter of hours (H1, H4, etc.). Yes, for short-term traders, focusing on low TF is very important.
Unfortunately, those who are already aware of this are sometimes still interested in long-term analysis. Not infrequently, they try to force such trading methods into their small time frames. "I have repeatedly backtested various trading rules, and believe me, 50% of them cannot be applied in various time frames," she said. So, if you have chosen a low time frame, try to complete it with a compatible short-term strategy.
How small is the usable tf? In this case, Barbara Rockefeller warns of the danger of super small time frames for technical indicators. She seems to agree with the general opinion about the risk of noise on a time frame that is too low.
Barbara revealed that applying MA in a 1 minute time frame is a stupid act, as well as using other rules in a similar time frame. Even the indicators that are considered the best will not work in super small time frames. For that, know the time frame limits as well as possible. Choose a time frame below D1, but don't reach for extreme solutions like trading on the M1 time frame.
Rely on Bars and Candlesticks
Another breakthrough that made his trading career more stable was bar analysis. The simple shape of this candlestick has been a mainstay of Barbara Rockefeller since she managed to record more profits after writing the chapter on bars in the book Technical Analysis for Dummies. What about candlesticks? After completing that part, Barbara collects even more profits!
Maybe this is what is called learning while writing. Through the process of making her book, Barbara Rockefeller re-examines the function of bars and their applications in trading. She also found that this price indicator has 2 main benefits: Simplification and the basis of technical indicators. The first use is very useful when experiencing deadlock analysis due to too many indicators. For short-term traders, the importance of technical simplicity cannot be ignored.
"What is our business (short-term traders) if the price moves against the fundamental direction and the main trend? We are not fundamental traders and big trends are not our top priority. We are not rich enough to be based on the primary trend. When we see a bearish reversal of a series of lower lows and lower highs, or bearish harami patterns, for example, we don't have to care if it's just a correction or a change in the main trend. As short-term traders, our position will not last long enough to be able to feel the impact of a change in the main trend," he said.
 |
Bar anatomy, Barbara Rockefeller's flagship price chart type. |
What about the second benefit? Barbara Rockefeller dares to say bars as the basis of technical indicators because according to her, price bars rarely "lie". Compared to other indicators whose signals are late, with bars we can identify a bullish market when the current open bar is near the previous low bar, then closes near the previous high bar level. In addition, Barbara Rockefeller also shared her observations during her trading in the forex market.
"Often, today's closing price is the same as the previous day's close or open. Given the large number of engaged and active market players from various time zones of the world, this is no coincidence. Traders are actually toying with minor players, myself included. They may display sentiment clearly bullish or bearish, but when price moves flat or closes near historical levels, the conditions become very uncertain. Think of it this way: There is a storm coming upon all sides, big or small players. But the difference is, big players have umbrellas while dime traders don't. Therefore, the best solution is to stay away from the market until clearer information emerges that can be interpreted," he said.
In addition to bars, this trader, author of The Global Trader (2001) book, also advocates candlesticks. More descriptive but not so predictive, according to Barbara candlesticks are still useful for short-term traders who want to get the simplicity of analyzing chart patterns. He particularly points to the engulfing pattern as the most reliable signal, because apart from being able to show the price direction, traders can also get stop hints.
Barbara Rockefeller also looks at the pattern of the harami, hanging man, and gravestone doji as the preferred candle shapes. Instead, it labels "unbelievable" three-candle patterns.
Confirm With Indicator
For Barbara Rockefeller, the function of technical indicators is actually as a confirmation of bar or candle signals. In addition to guidance from simple analytical objects such as diagonal and horizontal lines as homemade support and resistance, Barbara Rockefeller also recommends general indicators such as 10 or 20 period SMA. In addition, she adds that channel indicators also have an important role.
"I like Bollinger bands, average true range (ATR) bands, as well as standard error channels. When they all appear together on the chart and confirm each other, we will be able to see a pattern of price tops and bottoms that are quite valid. But remember, set the right target at The top and bottom positions are called greedy. Naturally, take profit targets and stop losses within the channel range," she suggested.
Furthermore, Barbara Rockefeller also noted the importance of news updates for short-term traders. Although all of the above approaches are more technical, she cannot deny that traders at least need to know the release of fundamental data so that they are not blind. However, analysis of bars, candles, and confirmation with any indicators may actually be ineffective when there is an important or unexpected news release.
Take Advantage of Changing Trading Sessions
Forex trading times that vary and are divided into certain sessions can also be used as a short-term trading strategy. The principle is simple, if the London market rally continues into the New York session, then join the crowd, but only if American traders push for higher high patterns at the beginning of the session. After that, you have at least 3 hours to look for profit opportunities. Because after that, liquidity will start to subside and the New York market will move slowly until the opening of the Asian session.
Then what if it turns out that American traders refuse to join and instead continue the London market with a lower low? Don't worry, there's still a chance here. Such a condition is called a sell opportunity on a minor correction. For that, adjust the profit target at the near level if you want to keep making profits. This is the positive point of being a short-term trader who is not fixated on big moves. Every small change can be an opportunity.
Breakout Strategy Play Rules
Not to forget, Barbara Rockefeller shows breakout trading tips for traders like herself who prefer to play in the short term. "If there is a price breakout from important levels, such as a daily or weekly high, and the bar closes at a high, then use the buy high and sell higher rule."
Meanwhile, technically, the trader, who started her career in 1990, once again emphasized the importance of bars in anticipating a breakout. As with candles, "small bars with small high and low wicks reflect market uncertainty, while large bars mean traders are very confident. If you encounter several large bars that are suddenly followed by a series of tiny bars, then be careful. "Such a decrease in volatility is usually a sign of a breakout. If you pay attention, this is almost similar to Bollinger Bands signals (volatility measuring indicators) on large time frames," she said.
Closing Message
Barbara Rockefeller is a trader who tends to be technical. Even so, she did not forget to emphasize that the main goal of a trader is to make a profit, not to prove something.
"A technical system must be used at all times to prove its backtest results. But my goal is not to find out if my backtest is valid, or the system has worked. My target is to get USD5,000 to install new windows in the house. Therefore, risk management is no longer a complicated matter."
The message is, don't be so obsessed with looking for all the opportunities that you don't know the place and time. Stay realistic in using technical analysis. If the market is in a state of uncertainty, then stay away and don't force it to trade.
