How You Can Gain From Forex Day Trading
Forex trading is now very popular and attracts newcomers on a daily basis. It involves the buying and selling of foreign exchange with the aim of making a profit in the process. Forex trading is now open to small investors and ordinary individuals who are interested in this lucrative business. You can choose to buy and sell within one day or wait weeks or months for the currency values to increase significantly before cashing in. Day trading involves trading on a currency pair within the same calendar day.
Professional day traders work either individually or for large institutions. Industry analysts point out that it is the large banks, corporations and other organizations that stand to benefit the most from day trading. This is because they have vast amounts of resources to invest, which translates to big profits. Trading for a big institution will give one access to expensive analytical software, huge amounts of capital and leverage, and a direct access to a dealing desk.
However, this does not mean that you cannot succeed in forex day trading as an individual. You can successfully make profits on a daily basis without even using an expensive system. All you need is sufficient training in technical analysis, a solid trading approach and a little experience in the forex marketplace.
Forex day trading for individuals
Forex day trading is easier if you concentrate on one currency pair. As your chosen currency pair moves, you can check out other currencies to help you figure out what is happening in the market without necessarily trading in them. Concentrating on one currency pair and watching it at regular intervals will give you a feel of the trading action and enable you to quickly discern when conditions change.
Forex day trading can be done in two ways – continuation or reversal. Continuation is concerned with trends and breakouts while reversal involves betting against a breakout and focusing on trading ranges at the edges. Your regular trading hours will determine which approach is best suited for you. The most active trading hours are good for riding trends and looking for breakouts. If you prefer to trade in the quieter hours then the best option is to trade at the edge of the range where there is a higher probability of making gains.
Regardless of which trading approach you choose, you will only succeed if you apply a proper risk vs. reward analysis. This means you have to set your stops and profit targets at the right points. Try as much as possible to stick to your chosen methodology and avoid temptations. You need to be disciplined enough to stick to your trading plan if you are not going to rely on trading software.
Automated forex trading systems can also be used in forex day trading successfully. They help to eliminate human fears and emotions that can affect effective decision making when trading. These systems increase your chances of making profits by eliminating human inefficiencies. There are many different types of automated trading systems, and they use different parameters in determining how you should trade.
The downside to using automated trading systems is that they are very rigid. They only follow the preset conditions and parameters. However, the forex market is very dynamic and changes occur by the minute. There are some changes that will require you to make decisions based on your human judgment since they are not considered by the machines. As trends continue to change over time, you may find that the automated trading system becomes obsolete, forcing you to acquire a new one. If possible, you should handle forex day trading alone. You just have to be patient and acquire the necessary skills and experience.