Night Trading, Don't Be Just Another Falling Star


What is a "Falling Star?" A Falling star, also known as a "shooting star," is a streak of light seen in the night, caused by tiny bits of dust and rock (meteoroids) falling into the Earth's atmosphere as they burn up. That very short-lived light trail is actually a meteor. Unfortunately, so many night traders become nothing more than a falling star. Why? Because they cannot follow their own conceived trading system.

Night trading has its own set of unique qualities and, being a futures market, its own set of volatilities. As a night trader, you first need to be able to identify the market you are trading, and then construct a trading system to literally "out-trade, out-smart, and out-last" any barriers you may run into.

What's in a trading system? A complete trading system would have some basic elements, entry signals, exit signals, "plan b" strategies to handle the worst case scenarios, etc. To say the least, a trading system needs rules and the rules need to be followed. There are of course, lots of parameters that can be put into a trading system, moving averages, relative strength, bollinger bands, stochastic, etc. But unless those rules are followed, you really do have a "shooting star."

Do trading systems really work? The answer in a nutshell is yes and no.

Here's the basic problem. Probably most day traders, by their nature, are not investors. Investors tend to be people who look for securities where they can stash their money so that it can generate good returns without them having to do anything. Once they find a good paying, safe place, they want to hold onto that for a long time.

Now take the average trader. These people are not looking to stash their cash for any long period of time. Instead, they are looking to buy and sell as quickly as possible for a nice profit. So ask a getin/getout type of person to follow rules and stick to them, day after day, that's tough. It's really not in their nature.

What makes night trading even more susceptible to not following rules is that it is a lightly traded market at night, with fewer buyers and sellers. Price does not move nearly as fast as during a trading day. Night traders feel they don't have to follow the rules as strictly as they might during the day.

Failing to follow your trading system, regardless if it is day or night, will leave you looking like a falling star, a very short-lived streak of light.

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