What Is Day-Trading in Forex? Key Takeaways
Forex exchange (FX) is a global marketplace for exchanging national currencies. The forex trading market stands at around $7.5 trillion in a day, where nearly 90% of the trading is based on speculation. Day trading in forex involves opening and closing the position within a single day. Forex trading carries a high level of inherent risk due to its aggressive leveraging feature and high fluctuations in the currency price. “If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.”
— Bill Lipschutz
(One of the most famous forex traders ever)
The Forex market is a highly popular trading platform for millions of traders and investors around the world. Wondering why? Because it’s open 24/7 a day.
Did you know that the volume of the forex trading market stands at around $7.5 trillion in a day? Which is gigantic, by the way!
But what exactly is day trading in forex?
Well, the forex exchange (FX) is a global marketplace for exchanging national currencies. Day trading in forex involves opening and closing the position within a single day to take advantage of the small market movements.
But how do the forex traders make this much money?
Well, you’re about to find out soon! In this comprehensive guide, I will walk you through the perfect day trading strategies most successful traders use.
And how you can use the most profitable Forex EA which operates based on a predefined algorithm to maximize your profits.
Let’s start!
Understanding Day Trading In simple terms, forex trading is like currency exchanges you do when you are traveling abroad. The trader buys a currency and simply sells it for a higher profit when the price fluctuates. This is how you can make profits as a trader with the comfort of sitting back at your home.
Currencies are exchanged in the forex exchange market, which is a global marketplace open 24/7 a day from Monday to Friday.
The trade happens over the counter (OTC), which means there is no physical exchange of the currencies (Like in the stocks). The market is overseen by a global network of banks and financial institutions.
Day Trading Strategies Do you know that nearly 90% of forex trading is based on speculation?
But what can you do to avoid speculation and make a perfect trade based on market trends? Well, here are some strategies you can use:
Risk Management in Day Trading In the context of trading, risk management involves taking robust steps to effectively reduce your trading losses.
Here are some risk management techniques you can use:
Position sizing: This determines the right amount of capital you should risk. Stop loss: it is one of the most used risk management strategies that involves placing a limit below your purchase price to secure your losses. Trailing stop loss: Just another variant of traditional stop loss, that is used to protect your gains after a certain point. Did You Know?
The highest trading currency in the forex market is the US Dollar, which features nearly 80% of the trade.
Pros and Cons of Day Trading Forex trading is huge and provides both opportunities and risks. There are several benefits and downsides of forex trading. Take a look!
Pros Cons Forex market has the largest trading volume in the world, with over $700 billion daily trading volume. Forex trading carries a high level of inherent risk due to its aggressive leveraging feature. Traded 24/7 a day from Monday to Friday. Fewer regulations when compared to other marketplaces such as stocks and bonds. Traders with less or no cash can also enter the market. Thanks to the margin trading with a good leveraging ratio. The Forex market presents the highest leverage that maximizes the risk of losing a good amount of cash. The Forex market has the maximum degree of liquidity, making it simple to buy and sell currencies on time. Just like bonds and stocks offer additional returns in the form of interest and dividends, forex trading does not come with benefits. It is more decentralized than trading bonds and the stock market. It requires a technical understanding of the economic fundamentals.
Cons Forex trading carries a high level of inherent risk due to its aggressive leveraging feature. Fewer regulations when compared to other marketplaces such as stocks and bonds. The Forex market presents the highest leverage that maximizes the risk of losing a good amount of cash. Just like bonds and stocks offer additional returns in the form of interest and dividends, forex trading does not come with benefits. It requires a technical understanding of the economic fundamentals. Summary In closing, Forex day trading is a short-term trading strategy that may seem like a quick return on your investment, but it is not and surely not suitable for everyone.
Forex trading has its risks and due to its aggressive leveraging and highly volatile currencies, it can easily get you huge losses, especially if you are a beginner.
Thanks for reading!
