Day trading on the forex market means that operations open and close on the same trading day. Positions are kept open for short periods of time. This type of trading is also called intraday trading. As with any type of Forex trading, different strategies can be used. Whichever trading strategy you choose, there are important factors to observe and rules to follow.
For day trading to work, the currency pair has to be volatile enough to move within the trading day period. The two most important factors for a day trader are volatility and liquidity. If your currency pair doesn’t move quickly, it won’t be right to use noday trading. Liquidity is what allows transactions to move at an accelerated pace. Without the liquidity that allows these operations to move quickly, the day trading of these currencies will not work.
Day Trading Strategies
One of the most popular trading strategies for day traders is called Scalping . This is the term used to explain the rapid taking of small gains from several positions each day. Scalping is a very fast type of Day Trading and this strategy is not suitable for those who do other things in their day besides Forex trading. Scalpels usually operate on 1 minute charts and focus carefully on the second one in which the news is published to make your move.
Another day trading strategy that is used is Reverse Trading. Some consultants may argue that this is the worst strategy and can be detrimental to beginner traders. Sometimes reverse trading is known as retrace trading because the trader will be observing and waiting possible setbacks against the trend. This is the biggest risk in Forex trading. This strategy requires that you wait for a price break and then the price to retreat. Then place your position after the backspace.
Momentum trading or impulse trading is another common strategy in Day Trading. This strategy helps traders pay attention to short-term trends in the forex market. The trader who is using the Momentum trading strategy will follow the hourly chart and then the 5 minute chart. You will want to use the short term minimum in a bullish trend to open your position. You will be expecting strong price movements and high trading volumes in the same direction as the price movement. The impulse trader has to be extremely disciplined in order to detect the right moment to enter and exit the market with Momentum Trading.
Any day trading strategy requires prior study of the charts before and after entering the market. The “here and now” is not enough to continue. The charts from the hours before you enter the market will really help you decide on the best strategy for you. You should look at the bigger picture when evaluating a trading strategy. As always, it is recommended to test your strategy on a demo account before using real money. Make sure you are comfortable with this strategy, which works for and makes a profit, before you adopt it in your current forex trading.