Day Trading Forex Basics

'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.'

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Day trading Forex Basics

As intimidating and complicated Day trading Forex 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. It can be done 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 so you don’t end up losing whatever capital you invest in this venture.

Knowing the market

While it is easy enough to get into, an 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 success.

Knowing your capital for day trading Forex

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.

Knowing which strategies to adapt

One might be 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 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 you might be interested in trading. As mentioned earlier, 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. You need to familiarise yourself with them to become an expert.
Positional trades is when traders position themselves to profit within the 50% to 80% ATR with only 0.1 – 5% risk involved on a single trade.

1. Intraday trading: Scalping

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.

2. Intraday trading : Counter trades

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  above the probable range of ATR.
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 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. The rewards are considerable compared to the risks.

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