Forex Day Trading Markets
Description: This article is about day trading in forex. Find out what you should know…
Trading involves the buying and selling of financial instruments, which include stocks, currencies, options and futures, with the sole intention of achieving a profit between the price that the trade is bought at and the price that it is sold at. Forex day trading is slightly different from other types of trading because positions are normally not held overnight.
Originally, this type of trading was made available to financial institutions like banks because of the access they had to the market data and the exchanges. However, with the rise of the internet, individuals who wish to trade now have access to the same information, and they have the opportunity to undertake the same trades.
Styles of Forex Day Trading
Day trading comprises of many different styles suited to the different personalities. There are styles that go from short-term trading like scalping – where the positions that are bought are only held for a few minutes or, at times, seconds – to the longer-term swing and position trading strategies, where the position that was bought is held for the duration of the trading day. A lot of flexibility comes with day trading systems, and it is possible to hold open positions for a few hours or a few minutes, depending on whether the trade is in profit or not. There are day traders who trade using a combination of styles, but this is unusual. Most traders tend to choose one style and use that exclusively.
There are different types of trades linked to day trading. These are trend trades, ranging trades and counter-trend trades. Trend trades go with the current trend in the same direction as the current price is moving. That means that with this trend, you will buy when the price is rising. Ranging trades are those trades that swing between two prices and are generally used if the market is on a sideways move. Counter-trend trades go against the current price movement direction. That means that you will sell if the price is rising. Most of the day traders will choose one type of trade, although some will use all three types, making a choice to go with one of the methods based on the condition that the market is in at that particular time.
Traders often get caught in a few but very prevalent forex day trading errors and bad habits. It is important that you avoid these under any circumstances by learning to adapt, and developing a unique approach that is entirely your own. If you want to average down you should not add to your position; but rather, get rid of the losers rapidly with an exit strategy that you have planned beforehand. You should take time to watch any relevant news announcements until you are sure that the volatility of the market has levelled out. You should always keep your risk levels in check, and try not to lose in one day more than what you can actually make back on another. By gaining an understanding of the pitfalls related to forex day trading, and how to best avoid them, you will be more likely to be successful.