Forex Day Trading refers to placing and closing orders within a single trading day. Day trading is very popular among traders as it brings some unique advantages over other types of trading. It is a more long-term approach than scalping, but still faster than swing trading.
One of the biggest advantages of day trading is the fact that you’re closing trades on the same day you’ve placed them, thus avoiding the overnight risks. What you choose to trade depends on the current market conditions so you don’t have to worry about what will happen during the night.
Also, day trading carries a substantial profit potential. However, this potential can only be fulfilled with a solid trading strategy and a thorough knowledge about the assets you’re trading and trends.
Follow These Rules to Improve Your Chances
If you’re a novice trader, following the guidelines below could significantly boost your chances for success in day trading. When you’re utilizing price action patterns, don’t use time frames lower than M30. reliable in day trading. This is because attempting to reflect other traders’ moves utilizing the
Consider using the H1 and higher time frames because they have proven to be the most traditional candlesticks in smaller time frames makes no sense.
Another rule that many traders take lightly is that you should NOT place an order if there’s no obvious signal. In that case, just look for another asset to trade or don’t trade that day as placing an order without a good reason rarely results in a profit.
Consider trading only 2-3 currency pairs, particularly if you’re new to trading. Even 1 currency pair can be enough and if it yields positive results, you can move on to trade another one.
As a general rule of thumb, you shouldn’t risk over 1% of the deposit. Being greedy and taking large positions can easily lead to losses and even wipe your account.
Last but not least, monitor the important economic news events that can move the market. It is advised not to trade these news 30 minutes before and after its announcement.
Disadvantages of Forex Day Trading
Just like any other type of trading, day trading also has weaknesses. First of all, predicting the trend direction in day trading is more challenging compared to other types of trading. Day trading analysts believe that there’s only one trend direction which can be determined only in the long run.
Day trading also carries a huge amount of spread. Traders have to take into consideration the amount of the received profit from a single trade and the amount of spread associated with the specific currency pair.
Furthermore, using currency pairs with a big spread is a very challenging task in day trading and the trend movement during a single trading day may not compensate for the difference.
In conclusion, day trading has a great profit potential but before you enter the Forex market you should know about the risks as well as have reliable trading and money management strategies that can lead to profit and protect your capital.
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