Forex Day Trading
In essence forex day trading, as
depicted from its name, refers to trading the intra day
market moves to try to gain small to medium sized profits in
any given trading day. Most people will not have the time or
resources to 'position trade' like the major institutions
and banks who tend to look at the big picture holding onto
trades for weeks or months. Forex day trading is much more
stressful, in comparison to position trading, and requires
guts and a keen business sense. Forex day trading involves a
number of currency exchanges per trading day, adding up the
profits to a day’s income.
Technology
advances like the internet have spawned a new craze, where
anyone with a secure internet connection prepared to
undertake a small amount of training can engage in forex day
trading on the foreign exchange (FOREX) market.
Just as a day
trader will closely track stock price movements on the Dow
Jones Industrial Average all over the world, forex day
trading is possible by monitoring currency fluctuations in a
similar fashion. The forex day trading system is
specifically designed for use with the 1, 5 or 10-15 minute
charts, with the goal of taking 5-30 pip profits per trade -
closing bad trades out using tight stops, or hedging any
losing trades.
Forex day
trading aims at using the smallest amount of one currency,
say the US dollar, to purchase another currency like the
British Pound. If supply of the pound lessens in a busy
market, it will cost more dollars to buy pounds, and the
forex traders hope to sell their pounds at a higher than
their purchase price. In many respects, forex day trading
behaviour is very similar to day
trading in stocks, where the aim of nearly all traders is to
buy low and sell high, with the forex day trading having few
more advantages in comparison to the futures or stocks
market. For more information about these advantages, see
Forex Advantages.
The global
forex day trading market can trade in excess of a trillion
dollars a day. Sheer market size means there is considerable
money to be made, and lost, through miscalculation. It is
neither a guaranteed, nor easy path to riches, so traders
should be educated in how to play the market. Instructional
packages are available, and should be carefully reviewed as
they can easily range in quality and price.
In forex day
trading, also, there is an opportunity to extend the profits
by choosing the right trading time, as explained below.
The three major forex day trading
sessions are as follows (all in Eastern Standard Time):
-
New York open 7:00
AM to 4:00 PM
-
Japanese/Australian open 7:00 PM to 3:00 AM
-
London open 3:00
AM to 11:00 AM
** Often, the best forex day trading times are at the
beginning 3-5 hours of the above mentioned opening times,
because the major currency pairs tend to move the most in a
particular direction, especially when there are economic
news releases.
The absolute best time for forex trading is from 3 am to 11
am est. The
New York and London trading sessions overlap between 7 and
11 am EST. The volatility is much higher and trading
opportunities are much more frequent with bigger moves,
especially in these four hours.
The currency pair that moves the most during these hours are
the Usd/Chf
(#1), then the Gbp/Usd,
then the Eur/Usd,
then the Usd/Jpy.
This is when you can make 30-100 pips trading in just a few
minutes or hours, using any of the strategies in any time
frame, especially around news releases.
If you need help in converting EST time zone to your time
zone, please use any of the following world time zone
converters:
http://www.worldtimezone.com
http://timeanddate.com/worldclock
It is a good idea to go to http://www.fxstreet.com first
thing in the morning to check out some forecasts and news
release times for the day. Always check before you start
trading and write down the support/resistance, trend,
trading range, target highs & lows, news release times, etc.
on a Daily Trading Sheet that you design for yourself.
Another place to find out when the world economic news
releases are is to go to http://www.forexnews.com and scroll
down to the bottom of the website for the list of the
current week news releases that impact the Forex markets.
Most often, the economic news release is scheduled for 8:30
AM EST. If you are in a forex day trading deal at this time,
make sure you have your stop loss at a place you are happy
with. The volatility is scary and fast, but if you aren't
already in a trade, you can jump in once you see the major
trend, usually after the first 5-15 minutes. Look at a 30
min forex day trading chart to see the major trend.
Important Note: Most of the forex brokerages have now
stopped guaranteeing their stops during fundamental news
release times, as the volatility is so extreme, that the
price can often move faster than their servers can keep up
with. Thus, please be very aware that getting into and out
of a forex trade when you want, can sometimes be next to
impossible. You can possibly encounter several things during
news release times: whipsaw of the price, slippage, freezing
of the platform, disconnects, re-quotes of price, loss of
money, etc. Don't bother calling up any dealing desk to
complain, as they are all now distancing themselves from
this problem, and they all have a disclaimer on their
websites for such forex day trading problems. It is a
buyer-beware type of situation. If you choose to play the
news, you have to be aware of its risks. The rewards can be
very great in just a few minutes, or it can go against you.
Make sure that you immediately put in your stop.
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