Day trading forex basics
Day trading forex basics: As intimidating and complicated it would seem the foreign exchange is. It only really takes a few basic rules to follow to guarantee your success in navigating through the market. This is especially true with day trading forex since prices fluctuate extremely during the day. This form of trading is popular usually because it removes the need for traders to pay fees.
Day trading forex is the exchange of securities during the same trading day. People do this in any market but is mostly used as a term within the stock market. While it is easy enough to do this, it is important to take note of a few basic rules. You don’t end up losing whatever capital you invest in this venture.
Knowing the market
While it is easy enough to get into, extensive knowledge of the ins and outs of the market is vital. This includes the fundamentals and technical aspects. The reason for this is because there is really no true guide to successful trading as everyone has their own techniques and strategies to succeed.
Knowing your capital
As a rule of thumb in any investment, your capital is any amount of money or asset that you are willing to lose without any drastic effect in your lifestyle. Day trading forex usually demands a hefty amount of capital to get started. This is due to the nature of the market itself and the fact exchanges are done within the same trading day where rapid fluctuations happen.
Day trading forex basics: strategies to adopt
People are tempted to just follow one or two strategies that are proven effective. While this can and should work short term, it is best to familiarize yourself with multiple strategies. This is important to know which would work best in certain situations. Since the conditions of the market can vary on a day to day basis. Being creative with your techniques is a recipe for success with trading.
Knowing the pros and cons of day trading
It is always best to safeguard your assets by putting risk management practices in place. The number of traders due to the increase in retail brokers recently also increase which brings in more competition. This usually is a good thing since it makes trading more efficient and easier. Because of its popularity, there are also plenty of tools to help you gauge the strength of a specific currency. Since day trading forex is basically intraday, there is no need for traders to pay fees compared to when holding on to assets overnight.
Knowing the types of Intraday trading
There are about 5 types of intraday trading to familiarize yourself with.
- Positional trades are when traders position themselves to profit within the 50% to 80% ATR (average true range) with only 0.1 – 5% risk involved on a single trade.
- The second type is called Scalping, which takes into account the market’s unpredictability. This generally entails lower time frames with the risk usually at around 2% – 5%.
- Combining the first two types is called Scalp Swing. This is when trades can happen anywhere from 5 minutes to 1 hour with profits within the 20% range of the ATR.
- Breakout trading is similar to scalping in that it denotes drastic and unpredictable price changes. Noting the highs and lows of the prior trading day are essential pivot points for traders to observe.
- The last type of day forex trading is called counter trades. This is mainly a type of end of day trading where traders go below or way above the probable range of the ATR.
Day trading forex basics conclusion
Whatever your thoughts are about intraday trading, it is most likely you’ll feel overwhelmed at first. This is not a get rich quick scheme like many people to claim it is to be. It will require you to put in time and attention to detail you will need to learn on a day to day basis to increase your chances of getting ahead. However, the rewards are considerable compared to the risks.