The Forex Market is a goldmine. There are enough opportunities to profit from the over $5 trillion that circulates in it every day. Little surprise that it keeps attracting more enthusiasts from diverse areas of human activity and even from other financial markets.
There are many styles for participating in the market as a retail trader. Day Trading Forex is one of them. And here is a guide to help you towards doing it well.
Understand what you are signing up for.
First of all, you need to understand what you are signing up for by deciding to become a day trader. Day Trading is a style of trading whereby all positions are initiated and closed within the same trading day. It is a fast-paced style that requires top-notch dedication and alertness.
Oftentimes, it is impossible to combine day trading with a day job. More or less, it is a full-time job itself. Little wonder that most traders who initially started day trading Forex while simultaneously keeping their day job eventually had to ditch it. It can simply be stressful trying to combine both.
Hence, you should first seek to understand Day Trading and the demands it places on its practitioners. Then, you should evaluate it in light of personal factors such as personality, risk tolerance, preferences, and even family commitments. After doing so, you will be able to decide if it is right for you or not, or how you can adapt it for your needs.
Find a broker with low costs.
As a day trader, there is the problem of high trading costs to solve. Here it is: brokers make their money by charging spread on the trades that their customers take.
That is, spread is the difference between the price at which the market is willing to buy the currency pair from you and the price at which it is willing to sell to you. Otherwise, brokers can also make money by charging flat commissions on trades.
Since you will be placing more trades in a day as a day trader, these fees can easily accumulate to become a huge financial burden for you. Therefore, it is important that you choose a broker that offers a competitive fee structure. Such a choice will help you to keep most of your gains.
Develop a short-term trading strategy suitable for your needs.
Trading, of whatever kind, should never be embarked upon if you do not have a strategy in place. Also, the strategy must be adequately tailored to your needs. That is, it is one thing to have a strategy; it is another to have one that perfectly fits your trading style.
As a day trader, you have to factor that into consideration. Importantly, too, to make your trading systematic, you must always base it on defined rules. These rules will help you to identify clear signals for entering and exiting positions and to make gains on them.
However, before you deploy a strategy, ensure to backtest it. You do this by observing its performance in past market situations. Also, you can forward-test it on a demo account.
Focus on a particular asset and master it.
Most likely, you have been told to diversify when you trade. Unfortunately, that advice works only some of the time. You are a newbie and what you should rather do is focus on a particular asset and master it. Jumping from one asset to another will do you more harm than good.
Additionally, though, you can go for a correlated asset. For example, the Canadian Dollar (CAD) is positively correlated to oil. However, the most important thing is to concentrate on a highly liquid asset. As long as it moves and you perfectly understand it, go for it. That’s the one to master. And that is enough.
Be patient and calm.
Finally, buddy, be patient. Be calm. Day trading is hard. But earning with it is not impossible. To boost your success rate, you have to harness all the recommendations to make a complete and effective trading approach. You must always follow your plan. Under no condition should whimsical desires override your objective analyses.
Moreover, you should realize that it is impossible not to lose money in the Forex Market, notwithstanding the style you use. And since you will be doing day trading, you even have to be extra careful. Your goal should be to make more money than you lose. To do that, always cut your losses and extend your wins.
Day Trading can be stressful, no doubt. In fact, it will be tough. Most times, you will want to give up. But you should stay on. Keep your cool through. The profits are beautiful to see and on them you should set your eyes.
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