What is day trading? Day trading is a trading approach in the Forex market where trading positions are not carried over to the next day. Means that a day trader opens and closes all his or her trading positions within one day. According to the resent researches the majority of Forex traders in Singapore and other countries are mainly use this trading approach when trading Forex market online.
Perhaps the main reason why most of traders are using day trading approach in Forex because it doesn’t require much capital, since in order to generate good profits using day trading you just need to open a lot of trades with relatively high leverage. In addition, new traders believe that it is much easier to trade the Forex market within a day and count the profits by the end of the day than waiting days or even weeks looking for a good trading opportunity.
On my mind the main reason why many traders are choosing a day trading strategy to trade Forex market is because they are lack of patience and that’s the reason why day trading is mostly for dummies – the beginner Forex traders who don’t have much trading experience and didn’t develop those skills a good Forex trader must have – patience, self control and money management.
On the other hand, day trading might be one of the best trading approaches for dummies because traders will learn quickly how the market works, what moves them and gain some basic trading skills. Day trading for dummies is a good school of practical trading in the Forex market.
The main features of day trading in the Forex market:
• No matter what happens in the Forex market, all trades must be closed by the end of the day. Do not close your trades at the last moment, it is better to get prepared to this procedure in advance.
• Day trading is a short time trading, that’s why the most of the trades are closed within a few minutes and the maximum transactions often do not exceed one or two hours.
• This trading approach has a considerable psychological difficulty for many Forex traders because an average day trader may open tens or even hundreds of trades during one day. If you are doing thoughtful and measured trading, it is enough having just a couple of profitable trades during a day to earn good money. However, the day trading approach is very similar to scalping.
• Even if you are trading in a mini account, and your deposit is small, the profits can be significant if you use high leverage. In some cases your leverage may be as high as 1:1000. But you need to be very careful when using high leverage as it increases your risks of losses.
• All trades are made on the time frame of one, five or 10 minutes.
• You can use different Forex trading strategies when trading within a day: trend trading, trading on the news, scalping and others.
Day trading advantages:
You can start trading with a small amount of money. As a result, you can get the most out of your investment. Means that day trading approach may help you multiply your initial deposit in a very short time. Once a trader wants to close a trade, he or she can do it instantly.
Day trading disadvantages:
The biggest disadvantage of day trading is that a trader is staying busy and under pressure during the trading session. This is a very hard time for a trader from the psychological point of view. A trader must stay focused on the market and the financial events that may take place during the day. Make a clear analysis of the situation in the Forex market. The main condition of the day trading is to close all positions by the end of the day and it means that some of them may be negative.
Day trading approach can fit almost every trader. The only thing is that you need to develop some trading habits, use a reliable trading strategy and of course be very patient.