Day trading the Foreign Exchange Markets (Forex) or (FX) adheres to the same concept of other styles of currency trading but differs slightly in the terms of execution, functionality and risk tolerance levels. Each day numerous traders worldwide indulged in trading substantial sums of money on the various stock exchanges and foreign currency exchanges in an attempt to profit from it. The term "Day Trading" essentially means an investor purchases a currency intending to make a profit that day, with no intention of holding the currency at the end of the trading period.
The trader will sell the currency at a loss if need be, in order to avoid the risk of an event happening somewhere in the world that could have an adverse affect on the currency they purchased. A few examples of the circumstances that could cause a decrease to a currencies value could be one of the following; a geopolitical event, a governmental report released regarding a countries economy or an increase in the price of a commodity, such as oil or gold. By day trading the currency investor has substantially decreased their risk of an occurrence out of their control happening and not being able to react to it immediately.
A currency day traders system could either be manual or software based, although the present statistics show vast majority on all FX traders utilize a computer based trading system and this is growing yearly, not only for day traders but all traders. The day trader's style will usually based on either signals or trends or a combination of both. They assemble the information in the form of fundamentals, utilization of various charting systems, technical analysis and gathering of news coverage.
Day trading is usually conducted in either a highly volatile market or once a trend in a currency had been determined. Each and every professional currency day trader has developed their own specific personality towards trading and might have found another market form they prefer to trade in.
A highly volatile market offers the day a huge upside for profits where as their downside risk is controlled and considerable less than the upside gain potential. They control the downside risk through the use of a Stop Loss (SL,) which the trader will set when initiating the trade or anytime the trade is still open. The SL is usually set very low, so even the slightest downside in the currency could force a sale. One huge advantage the currency trader has over a stock trader is this is a highly liquid market where the sale of the currency occurs instantly in most circumstances. Where as a stock investor could put in a SL and since their market is so much smaller there is a possibility nobody will purchase stock at the SL price, which often times leads to substantial losses which rarely happen to the currency trader.
The other type of market day traders like to concentrate on are markets where a trend in a particular currency has been established thus ensuring profits. A trend by definition is an established movement that is predictable. The day traders usually are the first ones to recognize the trends starting and the first to realize a trend changing. The ability to get in at the beginning of the trend line and getting out at the end of the trend line almost always leads to substantial profits for the trader.
To the novice entering the currency market day trading can certainly facility your success in a timely fashion. Unfortunately, recognizing the starting or ending of a trend line is not an easy process. In order to trade in a highly volatile market the concept of SL must be understood at the highest level. There are numerous commercial Forex training courses and currency trading software systems that have been developed especially for the day trader. The cost of these products is not that expensive and will certainly improve the learning curve as well as your wild adventure in becoming a profitable currency day trader.
William R. Alheim, Jr., CPA, MA - The TOP 10 Forex Trading Systems http://www.tradingforexreviews.com/ - Good Luck! I look forward to seeing you on the trading floor making money! |
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