Forex is one of the largest financial markets anywhere in the world, where billions of dollars worth of trades are made every year.
Forex day trading is the act of quickly buying and selling foreign currencies. Instead of trades lasting weeks or even months, things usually happen during the course of one day, and even sometimes in a matter of minutes.
Because of this fast paced environment, there are many people who become interested in Forex day trading every year. The lure of fast profits and heart pounding action means there will never be a shortage of people day trading in the Forex market.
If you are new to Forex day trading, then it is important that you are aware of the finer points of what makes a successful trader. The number one reason for failure among newbie Forex traders is lack of knowledge.
With this in mind, here are some Forex day trading tips to get you started in the right direction.
In the world of Forex day trading, stop losses are a vital part of an overall winning strategy. The market can be extremely volatile at the best of times, with large swings happening when you least expect them.
If you don’t use stop losses on your trades, then a quick fluctuation in currency prices can leave you with huge losses. It’s these type of losses than can be mentally hard to recover from, especially for a newbie Forex trader.
The Forex market currently has hundreds of different currencies available for you to trade. If you are to stand any chance of making consistent profits using Forex, then it is essential that you take the time to educate yourself on only a select few currencies and countries.
Having this kind of familiarity with only a small group of currencies and countries will allow you to make more informed decisions on the right trades to make.
A big mistake that many newcomers make is to risk too much of their total trading funds on any one trade. In order to protect yourself, it’s a good idea to look at Forex day trading with a long term view, which is why you shouldn’t risk more than 2 to 5% of your funds on a trade.
Lots of traders go broke risking the majority of their money on that one hot tip which can’t fail. This is a gamblers mentality, which will only lead to disappointment.
Because of the large swings and unpredictable nature of the market, it’s very easy to get overly emotional when day trading Forex. Unfortunately, when people get too emotional, it almost always leads to bad decisions.
Remember this: Forex day trading is a long term pursuit. Some days you are up, some days you are down. It’s the traders who religiously follow a proven strategy that prevail in the end.
If you took a big loss yesterday, don’t feel that you have to make it up today. Just stick to your plan and follow your head, not your heart.