A Primer on Forex Day Trading

A Primer on Forex Day Trading

In its essence, forex day trading requires that a trade is opened and closed within the same day. It usually entails a series of rapid trades by a specialist in the forex market. The day trader could be an employee of a financial firm or even an individual operating from home.

In fact, most new entrants to the forex market make a start with this mode of trading. It offers a number of benefits including the obvious one of allowing the trader to observe every move of the market. This gives a great degree of control and provides reassurance to the person playing the market.

Day trading offers several benefits

Those traders who opt for the day trading route to get into the forex market enjoy several advantages. Firstly, a person can take a position, observe the market closely for a limited amount of time, and then close the trade when a profit has been made.

Another great plus for day trading is that at the end of the day there are no open positions. This reduces the element of risk as any event that occurs when you are not at your screen cannot cause you a loss. Many day traders view this as a major attraction of this method of forex trading.

Of course, if the market moves in the opposite direction when you are actively trading, the resultant loss can be capped immediately. Watching the developments at every stage also allows for multiple trades to be made in a relatively short period of time, providing an opportunity to capitalise on the swings in the market.

But it is useful to keep in mind that the ability to make many trades rapidly can result in losses piling up. If a trader finds the pace of day trading too fast and prefers a technique that is more easy-paced, a shift to swing trading can be made.

Swing trading

This is a short-term trading strategy that takes advantage of a trend or ‘swing’ to provide a profit opportunity. A trading position can be closed on the same day but would usually spill over to the next day or even later.

In this method, the number of trades is restricted as it is being attempted to cash in on a trend in the market. The potential for profit is greater but events occurring when you are not at your screen can increase your chances of a loss.

A careful approach can lead to steady gains

It is common knowledge that forex trading can be a risky venture. But the prospect of high profits accompanies the risk. Forex day trading offers an opportunity to maximise profits while allowing the trader to watch every movement of the market so that an exit can be made at any point of time.

The day trader must have the temperament for this activity. It is essential to have the discipline to exit the market when a profit target has been met. It is even more important to have the self-control to close a trade when the market moves against you.

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