If you’ve heard of day trading, you might imagine a twenty-something in their pyjamas, staring at a computer all day until they make thousands upon thousands of dollars. If this is your conception of a day trader, you’re not totally wrong; there are people who make a sizable amount of money doing it all day, every day.
For the rest of us though, engaging in day trading can still be a valid and worthwhile pursuit! All that day trading refers to anyway is the buying and selling of assets over short time frames, which is something anyone can do to earn income, as long as they understand the complexities of the discipline.
So, if you’re looking to start day trading, specifically day trading forex, read on! In this article, you’ll learn more about forex day trading, how to start, some tips to consider, and how to manage your risk.
Day trading shares the same fundamental goal as other forms of forex trading, which is to buy and sell different currency pairs. The basic principles of forex trading apply here too, where you aim to purchase currency at a low price and sell it at a higher price. Just like in regular forex trading, you can still utilise your chosen trading approach, whether it's technical analysis of charts and patterns or fundamental analysis of global economic and financial factors.
What sets day trading apart, however, is its speed. Day trading involves buying and selling currency pairs within the same trading day. Unlike long-term investing, where traders hold positions for days, weeks, or even months, day traders aim to capitalise on short-term price movements to make quick profits.
Day trading forex can be taken as seriously as a full career, or as lightly as a sporadic source of income. In either case, we advise a few tips.
Firstly, as usual, you’ll want to have a solid trading plan that outlines your trading goals and your personal level of risk tolerance. With day trading, because of the short time frame, you’ll want to factor in the additional element of daily or short-term goals, as well as your cues for when to pull out or stop trading for the day. If you stick to your plan, and only trade when conditions are in your favour, you’ll have a good chance of making day trading a sustainable and enjoyable way to earn.
Secondly, consider utilising a trading journal to track your trades, review your performance, and improve your strategy. Day trading’s short time frame means that you’ll want to be as precise as you can be. If this means you’ll need help in remembering price fluctuations and patterns, then keeping a journal will definitely be useful.
Finally, it would help to monitor industry news and events which impact currency prices. Since day trading is mostly instantaneous, news can affect trades as soon as they happen. Do your best to stay on top of the political and economic landscape of the countries whose currency pairs you’re trading.
Yes, forex day trading can be an opportunity for significant profits, but as with any trading, there is risk involved. Before you place that first trade, try to dwell on what your risk tolerance is, so that you can minimise loss and protect trading capital. To do this, you can try to set strict stop-loss orders, limiting the amount you can use. This is particularly useful for day trading since it can be tempting to beat FOMO or make up for losses before the day ends. Setting stop-loss orders will constrain you from exacerbating any losses and get you emotionally ready to trade again the next day.
Another is to avoid putting all your eggs in one basket. Try to diversify the pairs you trade, and don’t make an excessive number of trades every day. Even if day trading is short-term, a long-term vision of progression is still one of the keys to sustainable success.
Forex day trading can be challenging, but it can also be fulfilling. As long as you approach the trades with careful planning and a solid strategy, you have a good chance of making profits. Remember to always manage your risk, recognise any pitfalls, and when in doubt, stick to the basics and fundamentals.
Good luck, and happy trading!
Accumarkets is a trusted Forex trading platform that offers clients an innovative and user-friendly online trading platform.
Trading Foreign Exchange (Forex) using Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin before using any of the services.
Accumarkets is a product of Elite Financial Services (Pty) Ltd, South Africa, with company number 2022/887158/07, an authorised financial services provider, licensed and regulated by the Financial Sector Conduct Authority (FSCA) in South Africa, with FSP No. 52677. Accumarkets, a product of Elite Financial Services (Pty) Ltd is the platform that Clients use to trade derivatives that are issued by Neo Brokers Namibia Pty Ltd, a company established and operating from the Republic of Namibia, with company number 2022/0418 and registered address No. 19 Palladium Street, Prosperita, Windhoek, Republic of Namibia, the counterparty and principal to the contract for difference purchased by you (the Client). In using the services, you agree to be bound by the client agreement which is entered into and binding between you (the Client) and Neo Brokers Namibia Pty Ltd.
Accumarkets (Pty) Ltd. does not offer services to US investors or any other jurisdiction where such distribution or use would be contrary to local law or regulation.
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