By Ian Drew
Day trade as the name suggests involves trade transaction of TODAY and just today only. There is no scope for yesterday, tomorrow or any other day in day trade. In day trade the trader books profit by capturing intraday price swings.
Day trading forex currency can be extremely risky due to the inherent nature of the forex market. Forex market is an extremely volatile market where you can often witness large currency movements in matter of minutes. However if you are disciplined and are willing to follow the rules of the game you can definitely profit from day trading.
Here are some useful tips to get you started in day trading :
- Learn and be thorough in forex concepts and operations of the forex market. Keep yourself abreast about all important international news which may impact currency movements at all times.
- Not every trade transaction will necessarily translate into profits. Hence devise a strategy for yourself and stick to it. Driven by greed, do not alter your strategy unless absolutely essential.
- In forex terminology currency volatility denotes the amount of price change with relation to time. There are various price swings intra day in volatile currency pairs. These swings are in fact the opportunities, which you as a day trader must be able to identify and cash on to book profits.
- When day trading forex currency look for volatility in conjunction with liquidity. Liquid markets provide good order fills, which will help you make smaller profits. The most liquid currency pairs are the ones that are the most volatile. The major liquid pairs are EUR/USD, GBP/USD, USD/JPY and USD/CHF. These pairs provide best volatility and hence great opportunity for you to day trade.
Lastly follow the golden rule of any trading- resist temptation. Irrespective of price swings stick to your pre determined stop loss levels and stay disciplined. Adhere to your strategy and focus on an appropriate time frame chart.
There are various theories on time frame analysis. Some day traders follow the principle that larger time frame analysis enables them to select better day trades. There are others who find this a time consuming exercise, which does not add much value. Depending upon your exposure to the forex market you can choose a method most suited to you.
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