Day trading is one of the most common trading styles. It basically involves opening a trade and then closing it all within one day, usually within as little as two hours. This way of trading is completely different to longer-term forex trading, where more understanding of the markets and political events is important, however, it still requires the ability to analyze markets. Day traders also need to have time available to them during the day to plan and monitor the trades that they take out.
There are a number of things that day traders need to pay close attention to in order to be successful. Many of these are considered to be scientific approaches and strategies. We have covered the most important in this article.
Choosing a Forex Broker
Perhaps the most important part of day trading is choosing a forex broker to trade with. This guide has a list of the best brokers available to US citizens. Before choosing a broker, you’ll need to work out which currency pairs you want to focus on trading, whether you need any additional tools to help you, and how user-friendly you need the platform to be. With this information in mind, you can choose a broker that will be ideal. Then you can look into the different scientific trading approaches, which are described below.
Trend trading involves monitoring rebounds, or trades that are decreasing in price, and immediately investing once the trend changes and starts to increase. The plan here is to buy at the lowest point and then sell a few hours later when the currency has increased again in value. Graphical tools like Fibonacci are very useful with trend trading, and you’ll also want to look into basic trend indicator tools, which can help make the purchasing and selling decisions a lot easier.
Counter Trend Trading
Counter trend trading is a strategy that assumes that a certain pattern will reverse; the trader aims to make a profit from that reversal. Typically, this is best used in medium trades, but it can also be employed on a day trading basis as well if the trader knows what they are doing. Counter trend traders rely on oscillators, indicators and envelope channels in order to make decisions, and this is a great option for traders who see strong potential in a pattern’s reversal.
Finally, we have breakout trading. This is ideal for day traders as it involves taking a position with a trade during its early stages. Traders generally purchase a stock or a currency after looking at its resistance and support levels. Those that have touched these areas a lot are wise investments. Once the stock or currency finally breaks out, this is when there is a profit to be made.
Forex trading is quite technical and while you can find forex trading platforms that will help you, and robo advisors that can help you to determine what to invest in, it’s also worth looking into the science behind some of the most common trading strategies. This will help to increase your knowledge and, ultimately, boost your understanding helping you to make better trades.