Forex Day Trading
As Forex is a 24 hour / 5 day trading market, some use a 24 hour period as the day trading range, while some use the main North American forex trading session (which is the most liquid of the global trading hours) as a basis for their day trading using the foreign exchange market. There are several ways to participate in the forex market. One traditional way is through banks and other participants that make the forex market. However, typical minimum capital (margin) requirements are quite high and for any smaller amounts you may get wide bid-ask spreads and thus your trading profitability will suffer. Another, newer, way is to participate through mini forex accounts, where the minimum forex account requirements are much lower than that from the traditional banks and other participants. The downside to such accounts is that typically, but not always, there is just one market maker for the account, which is the company that provides the mini forex account. Overall, some traders prefer day trading in forex because of the high liquidity of the main forex currency pairs and the 24 hour trading possibilities during the weekdays. However, if you decide to trade on the more exotic, lesser traded and thus less liquid currency pairs, typically, the spreads are much wider on those trades and you may require much greater volatility to achieve profitable trading potential due to higher bid ask spreads. Forex Day Trading StrategiesThere are several basic strategies available to trade the forex market as a day trading platform. One is a systematic approach, which typically uses technical analysis for trading signals (market entry & exit). Another is based on fundamental analysis, typically economic events (such as inflation figures) or other news that affect the currency pairs movements. Some use a combination of the two. Specific trading methods include day trading scalping strategy, which aims to profit from small movements in the currency pairs. Another is currency arbitrage. All currencies are interdependent, and if the quotes in one market not in equilibrium with quotes in another market, a trader can profit from this discrepancy. Currency arbitrage has become much easier, and thus harder to profit from (due to increased competition, which assures that prices stay in equilibrium), due to real-time quotes and trading over the internet. As in all trading, it's very important that you develop a complete trading system with money management, back-test it with historical data, and try it with demo accounts (if available), before committing any real money to it. Even then, nothing assures that a system based on past profitability is successful in the future. As day trading is a very volatile environment, and involves lots of short term volatility, many traders doing this type of trading do it as a full time employment. |