What is day trading?
In essence, day trading is a specify way to trade the markets that the trades they take are based on a defined exit time scale, with the trade exit usually being at the end of the trading day if prior target has not been reached.
The advantages to this form of trading is that positions are not held overnight, thus you are not going to wake up to a position that is significantly worse if something has happened overnight. As the forex market is unique in the fact that it doesn’t close, so the only gapping likely is over the weekend so the danger is somewhat mitigated. However, it does have a nominal close, finishing at the end of the New York session prior to the Asian open and events can still happen overnight that can have an adverse effect on your positions if you are unable to monitor them while you are asleep.
Problems with Day trading
As with all forms of trading there are problems. The primary one being that your position must work out by a fixed time. Longer term traders can wait for positions to work out, this is not an option available to the day trader.
There are theoretical issues with the principle as well The idea of trading through market timing is questioned by those who believe in the efficient market hypothesis. The theory as put forward in the is based on the notion that, at any given time, prices of instruments fully reflect the value of a certain stock and/or market. Hence, it would therefore be impossible in the long run for a trader to make a return on investment because nobody has access to information not currently available to everybody else.
Many experts don’t now regard this method of trading as credible in modern financial markets. The caveat to this argument is that market efficiency has not always caught up with current market conditions thus providing traders with opportunity.
Planning to day trade
If you plan on day trading in the forex market, be willing to jump on and trade at any time. News that can affect the value of a foreign currency can happen day or night, and you have to be willing to act on it right away if you want to make a quick profit.
Understand the differences in day-trading and long-term trading. With day-trading, what you’re doing is initiating and following through on a trade in one business day. Other types of trading can take days, weeks or even months to finish, and they also require much more of an investment from traders to follow through with.
Trading with Forex is all about understanding numbers and how things trend. It’s also about understanding how certain currencies work against each other. These things can be difficult to learn unless you’re looking in the right place.
One important tip to keep in mind with trading forex is that nothing is for certain. This is important to keep in mind so that you can prepare yourself for failure and possibly trade in a way that inflicts the least amount of damage on you financially. You need a clear plan on how much risk you can allow and still remain on top.
When starting out, focus your energy on a single currency pair. Part of a successful forex trading strategy is staying on top of market changes staying well-informed and up-to-date. This can be difficult enough with one pair for a beginner, so attempting to keep up with multiple trading pairs when you are still new and learning is a recipe for failure.