From Stock Day Trader to Forex Swing Trader: Cory Mitchell

Cory Mitchell is a proprietary trader and Chartered Market Technician specializing in short to medium-term technical strategies. He is the founder of VantagePointTrading.com, a website focused on trader education and market analysis. Mitchell has been trading multiple markets and educating traders since 2005. He has been widely published and is a member of the Canadian Society of Technical Analysts and the Market Technicians Association.

Why do you trade forex? What attracted you to the currency trading market rather than other markets (stocks, options, futures, etc)?

I actually started out day trading stocks in 2005 after graduating from university, and continued to do so till about 2010. While I was still trading stocks I started to dabble in forex. What I like about forex is that I can set up trades at all hours, and I was able to get started in with a relatively small amount of capital due to the leverage available. I can day trade during the European open and again during the US session, or I can spend time looking through longer-term charts for swing trades. The flexibility I have trading forex is unlike any other market.

How did you start trading forex? What were the big mistakes you made and important lessons you learned when you started trading?

Trading forex seemed like a natural extension of my career. I was a stock trader for a proprietary trading firm, and forex gave me something to outside of stock market hours. With stocks I would be looking through hundreds of securities, running screens and watching multiple stocks at one time. With forex I watch fewer pairs. Since I am exclusively a technical trader, trading forex is less work. Slowly the forex market won me over and I left stock trading to focus primarily on forex trading.

Starting out in forex, my biggest lesson was that, while leverage can be a friend, it is also a foe. I made small deposits in two forex accounts and blew through the money pretty quickly before settling into a rhythm. While I knew I should be using the rule all along, the quick losses made me realize the importance of controlling risk - not risking more than 1 or 2% capital on any given trade. I maintain that rule today, and never risk more than 2% of my account on a single forex trade.

What is different about your trading now compared to when you first started?

At the beginning, whether trading stocks or forex, my entire philosophy was geared toward finding the perfect entry and exit. After years of trading though, I realized that the perfect entry or exit doesn’t exist - at least not all the time. Therefore, my focus has shifted to discipline; executing trades according to a plan, keeping risk well controlled and keeping as much emotion out of my trading as possible. I have also given up my need to be “right” on the direction of the market and have realized that I will often be wrong.

What type of trader are you now?

I’m primary a swing trader and may even be considered long-term by some forex traders. My trades last anywhere from several days to several months. I focus almost exclusively on the forex market and will trade whichever pairs show great potential relative to risk. I originally was a scalper and day trader, and I occasionally go back to that if I have a full day to sit in front of my computer and a pair is moving well. But for the most part I swing trade simply because it requires very little time.

Did you develop your own trading system?

Yes. I use a fairly simple system based almost entirely on risk management and some simple technical analysis principles. I have found keeping the risk limited on each trade is the most important element of my trading—far more important than entries and exits. I therefore, keep the risk of each trade below 2% of my current account balance. Most trades are below 1%, but I occasionally will add to my position size if the trade is showing a profit and good technicals. Since I know my maximum risk, I then determine where my stop will be and then how many lots I can take.

My entries and exits are mainly based on concepts such as trendlines and chart pattern breakouts. I always try to trade with the trend and don’t enter a pair until it is already moving in the direction I want. In other words, I don’t try to pick or bottoms until there is some sort of confirmation that a top or bottom has likely already taken place.

How often do you trade? What timeframe?

It really depends on how much action there is and the type of trends that are occurring. There are times when it is very easy to make money, and other times it is very hard because the pairs are choppy or not moving significantly. Therefore, there are certain times when I trade every day and other times when I only make a trade or two every couple months. Trading is just as much about knowing when to sit on my hands as it is about making trades.

Do you have any indicators, releases or other information sources you depend on?

I don’t follow news and don’t care too much whether a data release comes in over or under consensus. I do make a note of when data releases come out so I am aware of the potential for increased volatility. As for indicators, my main indicator is the average true range (ATR). While I may use an RSI or some other indicator to occasionally confirm a trade set-up, the ATR is a staple on my screen. The simple indicator is so useful, and yet it is often overlooked. Especially on day trades, the ATR helps provide me with a probability of how likely it is that my profit target will be hit during the trading session. If I see a great set-up to go long, but the pair has already moved up 100 pips that day and the ATR for the pair is 110 pips, then there probably is not a lot of room for it left to run - so I will more than likely not take the trade.

Do you focus on specific currency pairs?

I mainly focus on majors, but occasionally will step outside that and trade some crosses if I see a good trade set-up. I don’t trade any exotic currencies though, as the spreads and movements can be erratic. I trade pairs which are some mix of the USD, CAD, AUD, NZD, JPY, EUR and GBP.

See Cory Mitchell’s latest market comments, analysis and articles here: http://vantagepointtrading.com/daily-blog