If you’ve been observing the foreign exchange market for a while, you must have noticed a trend where most trades are concluded within a day. Day trading is also the method most new traders choose to begin with because it requires slightly less research than long-term positioning.
What is Forex Day Trading
So how exactly does day trading work? Of course, you’ll be following the usual “buy low, sell high” strategy with forex trading. However, in the case of day trading, you face a much smaller profit margin because instead of focusing on the long-term trend, you are concluding the trade within the same day.
Pros and Cons
Unlike positioning, day trade usually opens the trade at the beginning of the day and concludes the trade toward the end of the day when you reach your target. You can use different strategies when it comes to forex day trading, but first of all, make sure you understand the pros and cons of engaging in day trading.
For benefits, day trading stands out because:
- You can generate rapid returns
- You can choose to go long term at any moment, but can’t go long term today trading at will.
- Day trading typically charge fewer fees
Meanwhile, there are disadvantages with day trading
- It is harder to make a large profit if you don’t have enough funds
- If you invest in high volumes, you could face severe loss as well
- Some markets may lack official regulation
However, if you decide to give day trading a shot, pay attention to the following things.
Learn the Fundamentals
Always begin with learning the basics. Forex trading is essentially a science, and like all other scientific subjects, you must understand rules and definitions before you can start trading. Start with understanding how external happenings impact a currency’s strength. Read up on day trading best practices before getting into the game.
Find a Reliable Broker
A reliable broker is your most trustworthy partner in forex trading. Therefore, make sure you do your research. When you simply search for a forex broker on google, you will find a handful of results. To determine whether a broker is reliable, pay attention to the following:
- Check their licenses
- Look them up on third-party review platforms
- See if they have a solid brokerage report
- Make sure they have an excellent customer support team
Set an Exit Strategy
Create a stop-loss, so you know when to pull away from a trade. Stop-loss is critical for day trading because your turnaround time is short. Similarly, also set a target price so you know you wouldn’t be getting too greedy. An intelligent trader knows when to call it a day, even if secretly you wonder if you can push a bit further.
Learn More About Forex Day Trading
Does this help you get started with day trading? We hope so. As you progress, you will come across different day trading strategies. Some buy at the lowest pricing point to maximize their profit. Others make small scalping trades and build a larger profit with trade volume.
In the end, the best strategy is one that fits your personality and helps you reach your goal.