Day trading the forex market
Trading forex online is becoming more and more popular with the passage of every month, and it seems that not even the global financial crisis was able to stem the growth of this new business. Although forex trading offers great potential profits to retail traders, and marvelous customization options unparalleled in any other market, successfully exploiting these advantages requires education and a proper mental attitude to trading.
One of the first steps you can take towards reaching profitability in trading is choosing a fitting trading style for your taste and character. There are a number of different styles available to choose from, and day trading is a popular one that most of us are familiar with because of the stock market. How suitable is it to forex trading? What are the best conditions in which it can be utilized? We’ll take a look at this subject in this article.
News trading
Many day traders use stock market events, such as earnings releases or IPO’s for generating quick profits in trading. The same approach is equally valid in forex, but since there are no companies in the currency market, news and statistical releases are easier to obtain, analyze, and evaluate. Day trading based on news releases involves the daily opening and closing of positions in response to market surprises caused by unexpected numbers. This method is valid and profitable, but requires a considerable amount of discipline and rigor in its application.
Option expiries
Another way to day trade the currency market is using option expiries and the great volatility and fluctuations caused by them for quick profits. Unlike scalpers, we can maintain our position for as long as we want, and use wider stops while depending on technical patterns and configurations to determine the time frame of our trade.
Market Events
Market events other than statistical releases can also create great opportunities for day trading the forex market. In this case, we can choose to trade the period just before the news release, where prices enter a preliminary trend depending on market expectations. Or we can choose to trade the news event itself (such as a press conference, a central bank release, or many other possibilities) for profit. Careful application of money management strategies is necessary because of the great volatility which often accompanies these events.
Although not as important as it is for scalpers, the spread is still a major concern for day traders due to the relatively large number of positions opened and closed by them during an ordinary day. Thus, it is a good idea to search forex trading brokers to discover those that demand lower spreads, and are more accommodative to short term strategies. Day trading is a valid, and effective strategy, but it is not for beginners. It can be very lucrative when employed by a committed, and disciplined individual who knows what he wants from the market, and will stick to his principles regardless of the severity of the chaos and turmoil in the price action.