Know more about Forex Day Trading
Forex day trading, potentially, can be highly profitable. It can bring huge returns overnight, but like any other investment vehicles, it carries a commensurate amount of risk – the bigger the profit potential, the bigger the risk. Thus, the activity can be very mentally-taxing that it is not ideal for everyone, especially inexperienced traders.
What is day trading? Basically, it involves taking a trading position and holding it for a short period of time, from a couple of minutes to several hours. Then, at trading closing time, all positions are closed.
Day trading is being mistaken for position trading and swing trading, which are different activities altogether. Position trading may involve positions held for months or years, while swing trading may involve holding on to trading positions from several hours to a few days. A different skills set is required for each of the trading styles mentioned.
For day trading, you may need to focus on your computer to effectively monitor and manage your trading positions. You’ll make lots of trades the entire day without considering the possible market changes that may happen overnight. Your goal is to make more winning trades than losses. The key is the use of the proper strategies on a situational basis.
There will be days when your losses will outnumber your wins, but still emerge with a profit at the end of the day. This can happen if you are able to cut losses by exiting early and allowing winning positions to run a bit longer to gain substantial profits. Thus, wins are optimized while losing trades are minimized.
If you can achieve winning days on a regular basis, imagine how much money you can make in a month or a year. Because of the trading market’s volatility, it is possible to build wealth through day trading, but you can also get wiped out if you are not careful. So you must know when to exit and when to stay on a particular position.
A good system in place and the use of the right trading strategies are important if you are to succeed in this activity. This includes obtaining timely and reliable trading signals that you can use to make quick decisions. Bear in mind that not all timeframes and indicators are suited for day trading where you work on short timeframes. Most day traders only use 1 to 5-minute charts. However, some find 1-minute charts too short to allow them to come up with the right trading decisions.
Systems and strategies vary from one trader to another depending on what works well for a particular trader. If you want to be a good day trader, you have to develop a trading strategy of your own. This will come in time. Just be patient, and keep on learning from your actual experiences or by taking lessons.
Source: Admiral Markets Philippines