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day trading

What is Day Trading?

Day trading is one of the most widely used trading strategies by traders. It is often considered to be a pseudonym for ‘active trading’ itself.

Day trading is a short term trading style where a trader will typically take on only one trade per day. Usually the position is closed by the end of the trading day.

Day traders usually pick a side at the beginning of the day, acting on their bias, and then finish the day with either a profit or a loss. It is trading strategy that is suited for traders who have enough time to identify potential trades daily. 

 

 

How to Day Trade in Forex?

Day trading requires a decent amount of capital to be successful. Many day traders identify potential trades in the evening before the trading day by studying charts. Day traders also look to see if there are any upcoming announcements or events that could have an impact on the market and be of interest to trade.

Usually a day trader will identify one setup per day. Once identified, they would then set price alerts and order types at predetermined price points.

Day traders would then typically check the trade as the day progresses and try to close the position before the end of the trading day (17:00 GMT).

The main reason why day traders close their position before 17:00 GMT is to avoid any costs of carrying the position over to the next day, typically known as a rollover rate.

 

 

When Not To Day Trade?

– The first few hours on a Monday and last few hours on a Friday are not considered ideal trading conditions for day traders due to the lack of liquidity which can result in sharp movements in the market.

– The last hour of trading (usually in the UK & Europe session) often tells the truth about how strong a trend truly is. Therefore, it might be advised to wait as late as possible until you close a position if you are confident with your original decision.

– Do not trade when the price is ranging from upwards of 20 PIPs. Note that the range of price in the first few hours should establish the framework for how the price may range for the rest of the trading day.

 

Sometimes not having a position in the market equals to having a profitable position.

LESSON SUMMARY:

– Day trading is a short term trading style where a trader will typically take on only one trade per day.

– Day traders usually pick a side at the beginning of the day, acting on their bias, and then finish the day with either a profit or a loss.

– Many day traders identify potential trades in the evening before the trading day by studying charts.

– The main reason why day traders close their position before 17:00 GMT is to avoid any costs of carrying the position over to the next day, typically known as a rollover rate.

Lesson tags: free forex course
Back to: Free Forex Course > Step 8 - Trading Strategies
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