Fast money and making a quick buck is everyone’s dream and makes Forex day trading strategies attractive. Why? Because many think they are an easy way to become rich. Sadly many unscrupulous brokers will push that line to get you signed up, ignoring the truth. Joining successful retail Forex traders requires hard and dedication but is accessible to all.
They are strategies which will make profit over the course of a day. The idea is that you make many small profits each day, which accumulate over time into a bigger pot. No currency pairs have a straight line up or down, but rather a meandering one. This gives traders the chance to jump in when they think they have identified an opportunity, and out when they think the market will turn. This is assuming that their initial assessment is right!
There are many Forex day trading strategies, but the most common we shall discuss here. Trading Forex news consists of placing trades in the anticipation of an event concluding in a particular manner. An economic summit, a general election or something more local. Swing trading we described in a previous paragraph: where you try and ride a trend and take a small profit just before the trend changes.
Scalping involves opening and closing a trade very quickly by taking advantage of the bid-ask spread. This last strategy in particular involves making small regular profits. Of course, all it takes is one trade to go wrong and you wipe out your profits!
Different people have different reasons for trading. Some will do it for the fun, some the money and others to prove they can beat others. Some will therefore want to trade often and regularly and can afford to sit in front of a screen all day long. For the majority of us with full-time jobs, this is not possible. Day trading takes up a lot of time and places less emphasis on cornerstones of technical trading such as using the Risk reward ratio.
Because of the short-term nature of your trades, you will likely get stopped out because the volatility will be higher than you expected. If you are not using stop-losses (which we do not recommend), you may suddenly see a large loss appearing in front of your eyes, literally.
If I offered you $100 you would bite my hand off. If I offered you $100 but took away $200 would you be so quick to lose your money? This is the dilemma you face with Forex day trading strategies: for the (potential) profit you make you will have to expend an awful amount of effort. It is not economical.
If you trade on the side of your day job you simply do not have the time. You also will struggle to balance the stress with your daily routine. It is best to apply strategies which can generate a profit but without impacting your life negatively. Trading over longer time periods allows you to take full advantage of using the risk reward ratio, set and forget as well as trading against a smaller section of the market. Too many traders are trying to make money quick. Sadly, it’s an old adage but it’s very true: you are trying to make money off traders who think they can make a quick buck.
Forex day trading strategies appeals because of the endless commentary that it is a way of making money quickly. It also feeds into everyone’s ego when you close a profitable trade. This is the worst approach ever. Trading is boring. And should stay that way. You do not trade on emotion you follow a clear trading plan with rules. This means learning to avoid those (supposedly) short-term trades and focus on the longer term ones.
Everyone can get lucky at the start and make a killing. But before you know it, your new success makes you take larger positions and quickly leads you to losing everything. You are much better off taking smaller positions regularly over longer time frame trades as this will lead to increased profit and less stress!