All about day trading
All about day trading
There are investors and there are speculators in Fx trading. While investors buy a particular pair and hold it till it reaches resistance point where they sell, speculators are interested in the shorter period of trade. Day trading is when your activity starts and ends in a day. Needless to say, a day-trader requires proper grasp of Forex, and good reading of circumstances and instinctual knowledge of the trend-lines.
The varied types of day trading
Certain day tradings defy the existential definition of day trading and hold stocks or pairs overnight, feeling there will be a bull opening. Some day traders play it too short and are through with their trades within minutes. They are known as scalp traders. They go through technical charts for the day’s suggestive movement and then buy or sell a pair for minimal time, hoping for a positive movement where they make an exit.
Advantages for a day trading
The biggest advantage is that day trading get good leverages, considering the small time they will keep their trade for (a day max). Most brokers charge per trade and they give substantial fillip to those who indulge in multiple trades. The second and probably more comprehensive advantage is that day-traders learn the ropes quite quickly and are extremely comfortable with long-term investment when they get ready for the same. They get instinctual grab of stop-profits and losses. They become quite savvy with the technical charts.
How does a day trading operate?
Most day traders deal in margin trading, where they have to pay the leveraged amount for holding the entire unit, until the margin evaporates. For instance, a leverage of 20% will mean that one can hold 5 lots for price of one. This way, there are handsome returns when the market is bullish. However, in case of a downfall, the margin amount quickly finishes off. Ideally, the leverage shouldn’t be too high because speculators end up in red more than in green.
Essential pointers for a day trading
The most important pointer is the trend-line of the currency pair he is dealing in. If there is a systematic shift in the up or down trend, it becomes easy to speculate. Be well-read about the fiscal policies and occurrences in the countries whose currency you involve with. Check whether the moving averages are steady or too volatile. Also, be agile on instructive selling in case a currency nears support point. It is wise to invest some money in blue-chip currencies like Dollar and Yen.
Things to consider in day trading
Firstly, you need to have a stable bankroll so that you can afford and digest due losses. Secondly, you have to be strong enough to avoid high leverages. Thirdly, register with a broker with frequent trades, neat RAR, transparency and smooth transactions. Fourthly, you have to consider the commissions you ultimately pay. It is more because of the number of trades. Ideal way is to invest in 10 pips per day, and analyze your diurnal loss. Be informed about commodities and indices too. These are quite volatile and throw up a number of good wagers.