Foreign Exchange Day Trading

In essence foreign exchange 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. Foreign exchange day trading is much more stressful, in comparison to position trading, and requires guts and a keen business sense. Foreign exchange 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 foreign exchange day trading on the FOREX (foreign exchange) market.

Just as a day trader will closely track stock price movements on the Dow Jones Industrial Average all over the world, foreign exchange day trading is possible by monitoring currency fluctuations in a similar fashion. The foreign exchange 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.

Foreign exchange 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 foreign exchange traders hope to sell their pounds at a higher than their purchase price. In many respects, foreign exchange 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 foreign exchange day trading having few more advantages in comparison to the futures or stocks market. For more information about these advantages, see Foreign Exchange Benefits.

The global foreign exchange 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 foreign exchange day trading, also, there is an opportunity to extend the profits by choosing the right trading time, as explained below.

The three major foreign exchange day trading sessions are as follows (all in Eastern Standard Time):

1. New York open 7:00 AM to 4:00 PM

2. Japanese/Australian open 7:00 PM to 3:00 AM

3. London open 3:00 AM to 11:00 AM

** Often, the best foreign exchange 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 foreign exchange 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 foreign exchange 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 foreign exchange 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 foreign exchange 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 foreign exchange 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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