Loding Loading ...
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors.
Before trading, please ensure that you fully understand the risks involved
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors. Before trading, please ensure that you fully understand the risks involved

What is forex day trading?

Forex day trading is the buying and selling of currency pairs within the same trading day. It is a type of short-term trading.

Forex day trading is the buying and selling of currency pairs within the same trading day. It is a type of short-term trading. Typically, traders will place a number of forex trades per day, and close them out at the end of the trading day. Day traders do not like holding overnight positions. The price fluctuations of liquid currency pairs can provide plenty of opportunities for day traders, so they will usually look for currency pairs which are highly liquid and volatile.

Day trading is particularly popular among retail forex traders. It can be a quick way to see returns on an investment. However, this short-term approach to trading is not suitable for everyone. It is best suited to traders who have enough time to analyze the markets and monitor their trades throughout the day.

Day forex trading involves reacting to short-term fluctuations in the price of currency pairs and therefore requires control and focus. Discipline and the ability to stick to a trading strategy are also important. Numerous trading platforms offer a range of trading tools to help traders create indicators and devise potential entry and exit points for their trades.

Forex day trading strategies

It is important for traders to familiarize themselves with different strategies when it comes to trading the foreign exchange market. Typical forex trading strategies will involve some form of analysis, whether this is technical analysis, fundamental analysis, or a combination of the two. Day traders will use this analysis to help decide when to buy and sell currency pairs.

It can be the case that more than one strategy is needed for forex day trading. As market conditions vary on a day-to-day basis, traders should be prepared to adapt their strategy, for example during times of high market liquidity.

NEWS TRADING

Traders will want to stay up-to-date on the latest trading news releases in the short-term. Knowing what is going on in the markets can help traders prepare for potential trading decisions in advance, and to plan their trading goals and strategies at the start of the day. Central bank announcements, interest-rate changes and other economic data releases can impact currency prices, so it is important to keep track of major economic announcements and news events as a day trader.

TREND TRADING

Another popular way traders approach forex day trading is through trend trading. This involves looking at longer-term charts to identify a trend. Once the overall trend is established, traders would look at a chart with a smaller time-frame for trends moving in the same direction. Various indicators can be used to help traders determine the trend.

MOMENTUM TRADING

Momentum trading is another popular approach to forex day trading. This approach looks for strong price moves paired with a high volume of trading in the direction of the move. Momentum trading involves being able to wait for the best opportunity to open a position.

BREAKOUT TRADING

Breakout trading is a common strategy in forex trading. It involves waiting for big market moves. These big moves can be caused by things like changes in a country’s economic data. They can happen unexpectedly or after expected economic announcements. With breakout trading, a trader would wait for prices to break through a significant price level, indicating the start of a trend. The trader would then open a position in the direction they expect prices to move. Breakout trading is an efficient strategy for those who keep up-to-date with economic and political news.

CHARTS AND ORDER TYPES

Understanding charts and order types is also fundamental to any forex day trading strategy. Day trading takes place over a short time period, so it is necessary to make quick decisions. Traders should be able to read charts efficiently and accurately so that this does not slow down their trading. Similarly, traders should know their order types well. This applies to both getting in and out of the markets. Orders are important as they can help traders determine when to open a trade and maximize potential profit, as well as close their trades to reduce losses. If a trader does not know their order types well, this can slow down their trading, and ultimately cost them money.

What risks are involved in forex day trading?

Risks involved in forex day trading mainly include substantial loss of capital. It is generally acknowledged that trading in narrow time frames can expose the trader to more risks. Plus, trading currency pairs on margin, can expose the trader to more risk. Margin trading requires a smaller investment, which gives traders leverage to more substantial trading volumes. The risks are greater as well, however, as the trader could end up losing more than their deposit if prices move in the opposite direction.

Unexpected news events can also cause volatility in the forex markets. During volatile market conditions, aggressive use of leverage could result in substantial losses. It is good practice to limit the amount of risk you are exposed to on each trade. For example, risking only one per cent of your overall trading account balance on each trade.

Another way to control the risk on each trade is to implement stop losses. Stop-loss orders can be applied to each individual trade. They allow the trader to set a price level at which to exit a losing trade. Stop-loss orders execute automatically, so it is good practice to apply them to every trade.

It is important to bear in mind, however, that stop-loss orders do not guarantee that your position will be closed out at the price you set. During volatile market conditions, prices can move from one level to another. Sometimes they skip the level in between. This is known as slippage. In this case, stop losses could execute at a worse level than what had been set, causing larger losses. Some brokers will offer what are known as guaranteed stop-loss orders in order to prevent this. For a small cost, they are guaranteed to close out your trade at the price set.

Failing to research a broker properly before trading with them can also be another risk of forex day trading. It is important to be aware of brokers who are not fully authorized and regulated by the country’s regulatory authority. All forex brokers are subject to certain regulation. A broker’s software is also very important. Day traders need a direct access broker, whose platform is reliable. In day trading, every second counts, therefore it is important that pricing is in real-time and that trades can be placed easily and efficiently.

Summary

Forex day trading is the buying and selling of currencies within the same trading day. Day traders will rarely hold a trade overnight, which is one way to avoid holding costs. Forex day trading is often seen as a way to make a quick return on your investments, however, it is not suitable for everyone. There are certain things you should consider before engaging in this type of trading.

For one thing, forex day traders should have enough time at their disposal to be able to monitor their trades throughout the day. Forex day trading takes a lot of discipline. Traders will need to have the time and knowledge to conduct their trading analysis on a day-to-day basis. Currency pairs which are highly liquid, and volatile are most attractive to day traders. The price fluctuations of liquid currency pairs can provide plenty of trading opportunities. However, this also means the trading situation can change very rapidly, and day traders will need to monitor any open positions and respond to this.

Considering your forex day trading strategy is also important. There are various strategies that can be employed. These include momentum trading and breakout trading. Staying up-to-date with key economic announcements is also beneficial to this type of trading. Market conditions are likely to change on a daily basis. The most successful traders will therefore also be prepared to change their strategies.

Finally, as with any trading, forex day trading has its risks. An overly aggressive use of leverage, combined with volatile currency pairs in day trading environment, could lead to large losses. Forex day traders should ensure that they implement risk-management tools such as stop-loss orders to minimize losses.

Source: CMC Markets UK

Disclaimer: Century Financial Consultancy LLC (“CFC”) is Limited Liability Company incorporated under the Laws of UAE and is duly licensed and regulated by the Emirates Securities and Commodities Authority of UAE (SCA). This document is a marketing material and is for informational purposes only and must not be construed to be an advice to invest or otherwise in any investment or financial product. CFC does not guarantee as to adequacy, accuracy, completeness or reliability of any information or data contained herein and under no circumstances whatsoever none of such information or data be construed as an advice or trading strategy or recommendation to deal (Buy/Sell) in any investment or financial product. CFC is not responsible or liable for any result, gain or loss, based on this information, in whole or in part.

PLEASE READ THE FOLLOWING TERMS AND CONDITIONS OF ACCESS FOR THE PUBLICATION BEFORE THE USE THEREOF.

By use of the publication and continuing to access the publication, you accept these terms and conditions and undertake to be bound by the acceptance. CFC reserves the right to amend, remove, or add to the publication and Disclaimer at any time without any prior notice to you. Such modifications shall be effective immediately. Accordingly, please continue to review this Disclaimer whenever accessing, or using the publication. Your access of, and use of the publication, after modifications to the Disclaimer will constitute your acceptance of the terms and conditions of use of the publication, as modified. If, at any time, you do not wish to accept the content of this Disclaimer, you may not access, or use the publication. Any terms and conditions proposed by you which are in addition to or which conflict with this Disclaimer are expressly rejected by CFC and shall be of no force or effect.

No information as given herein by CFC in this publication should be construed as an offer, recommendation or solicitation to purchase or dispose of any securities/financial instruments/products or to enter in any transaction or adopt any hedging, trading or investment strategy. Neither this publication nor anything contained herein shall form the basis of any contract or commitment whatsoever. Distribution of this publication does not oblige CFC to enter into any transaction.

The content of this publication should not be considered legal, regulatory, credit, tax or accounting advice. Anyone proposing to rely on or use the information contained in the publication should independently verify and check the accuracy, completeness, reliability and suitability of the information and should obtain independent and specific advice from appropriate professionals or experts regarding information contained in this publication. CFC cannot be held responsible for the impact of any transactional costs or any taxes as may be applicable on transactions.

Information contained herein is based on various sources, including but not limited to public information, annual reports and statistical data that CFC considers reliable. However, CFC makes no representation or warranty as to the accuracy or completeness of any report or statistical data made in or in connection with this publication and accepts no responsibility whatsoever for any loss or damage caused by any act or omission taken as a result of the information contained in this publication. The articles does not take into account the investment objectives, financial situations and specific needs of recipients. The recipient of this publication must make its own independent decisions regarding whether this communication and any securities or financial instruments mentioned herein, is appropriate in the light of its existing portfolio holdings and/or investment needs.

This document is a marketing material and has been prepared by individual(s), marketing and/or research personnel of CFC. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is purely a marketing communication. In this publication, any opinions, news, research, analysis, prices, or other information constitute is a general market commentary, and do not constitute the opinion or advice of CFC or any form of personal or investment advice. CFC neither endorses nor guarantees offerings of third party, nor is CFC responsible for the content, veracity or opinions of third-party speakers, presenters, participants or providers. CFC will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Charts, graphs and related data or information provided in this publication are intended to serve for illustrative purposes only. The information contained in this publication is prepared as of a particular date and time and will not reflect subsequent changes in the market or changes in any other factors relevant to their determination. All statements as to future matters are not guaranteed to be accurate. CFC expressly disclaims any obligation to update or revise any forward-looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

Staff members/employees of CFC may provide/present oral or written market commentary or analysis to you that reflect opinions that are contrary to the opinions expressed in this research and may contain insights and reports that are inconsistent with the views expressed in this publication. Neither CFC nor any of its affiliates, group companies, directors, employees, agents or representatives assume any liability nor shall they be made liable for any damages whether direct, indirect, special or consequential including loss of revenue or profits that may arise from or in connection with the use of the information provided in this publication.

Information or data provided by means in this publication may have many inherent limitations, like module errors or lack accuracy in its historical data. Data included in the publication may rely on models that do not reflect or take into account all potentially significant factors such as market risk, liquidity risk, credit risk etc.

The use of our information, products and services should be on your own due diligence and you agree that CFC is not liable for any failure to achieve desired return on investment that is in any manner related to availing of services or products of CFC and use of our information, products and services. You acknowledge and agree that past investment performance is not indicative of the future performance results of any investment and that the information contained herein is not to be used as an indication for the future performance of any investment activity.

This publication is being furnished to you solely for your information and neither it nor any part of it may be used, forwarded, disclosed, distributed or delivered to anyone else. You may not copy, reproduce, display, modify or create derivative works from any data or information contained in this publication.

Services offered by CFC include products that are traded on margin and can result in losses that exceed deposits. Before deciding to trade on margin products, you should consider your investment objectives, risk tolerance and your level of experience on these products. Trading with leverage carries significant risk of losses and as such margin products are not suitable for every investor and you should ensure that you understand the risks involved and should seek independent advice from professionals or experts if necessary.

trade-talks
brainy-bull
mental-funda
wow
get-started