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Forex Day Trading is a popular method of trading the markets, but how does it work? Find out with our complete guide, which includes some forex day strategies, day trading tips, 

Are you interested in forex day trading? Do you want to learn how to make money by trading currencies? If yes, then you have come to the right place. In this article, we will provide you with a Complete guide on Forex Day Trading For Beginners.

What is Forex Day Trading?

Forex day trading is a short-term trading strategy that focuses on the buying and selling of currency pairs within the same trading day.

Typically, traders will place a number of forex trades per day, and close them out at the end of the trading day, rather than hold overnight positions.

The price fluctuations of liquid currency pairs can provide plenty of opportunities for day traders, so they will usually look for currency pairs that are highly liquid and volatile.

Scalping vs Day Trading Forex

Scalping and day trading are both considered short-term styles of forex trading. The main difference between them is that scalpers hold their positions for even less time than day traders, hoping to grow their capital by making lots of small successful trades.

Whereas day traders typically open anywhere from one to five positions a day, scalpers could make dozens or even more trades in that time. Often, they’ll use automated systems to react to movement faster than humanly possible.

When’s The Best Time To Day Trade Forex?

When the market is at its most liquid, it is best to day trade forex. Day traders typically require a large amount of liquidity in order to enter and exit positions quickly and cheaply.

Currency markets typically reach their peak liquidity between 13:00 and 17:00 GMT, when the London and New York sessions overlap. However, because volume keeps changing throughout the day, you are not limited to these times.

Choosing a Forex Day Trading Strategy

Day trading limits the amount of time you can keep positions open, but not how you find and execute opportunities. You’ll need a strategy for that. There are multiple forex day trading strategies available; here is an overview of some of the most popular.

You are not required to use any of these strategies exclusively; you can combine them or use different ones according to market conditions.

Strategy 1: Trend trading

Trend trading requires analysing a long-term chart to determine the overall price direction of a market – its trend. Forex day traders will then look for opportunities in the same direction on a shorter-term chart.

The idea is that within the larger trend, there should be multiple small opportunities that are ideal for day traders. Indicators are regularly used by trend traders to identify long-term trends and to look for trades on the short-term chart.

Strategy 2: Breakout trading

Breakout traders, on the other hand, will seek outbreaks of new mini trends in their ideal markets.

To do so, they will look for markets that are ‘rangebound,’ or stuck between strong support and resistance levels. Then they’ll wait for a market to break out of this range and trade the resulting movement.

Strategy 3: News trading

The first two strategies we’ve discussed are based on technical analysis, which utilises indicators and candlestick patterns to forecast movement. However, many forex day traders prefer to stick to fundamentals.

News traders do exactly what their name implies: they expect where a currency pair will go next based on the most recent headlines and economic data.

While this may appear to be the simplest strategy at first quick look, it requires a thorough understanding of your chosen currencies. To ‘buy the rumour and sell the news,’ you’ll need to be able to predict how economic releases will affect the markets ahead of time.

Best indicators For Day Trading Forex

Understanding chart types and how to use technical indicators is fundamental for any forex day trading strategy. Day trading takes place over a short time period, so it is necessary to make quick decisions. Traders should be able to read charts efficiently and accurately so that this does not slow down their trading. The following technical indicators can be used on forex day trading charts:

  • Fibonacci retracements​
  • Simple moving average (SMA)​
  • Bollinger Bands
  • Stochastic oscillator​
  • Relative strength index (RSI)

Is Forex Day Trading Forex Profitable?

The answer is yes, but with a caveat. Forex day trading can be highly profitable if you have the right skills, knowledge, and strategy. However, it can also be highly unprofitable if you don’t know what you’re doing.

One of the key factors in determining whether or not forex day trading is profitable for you is your level of experience. If you’re new to trading or don’t have much experience with forex, you may find it difficult to be consistently profitable. On the other hand, if you have a solid understanding of the market and have developed a successful trading strategy, you can potentially make a significant amount of money.

Tips for Successful Forex Day Trading

f you’re interested in Forex Day Trading, there are a few tips you should keep in mind to increase your chances of success:

  1. Develop a trading plan: Before you start trading, you should have a clear plan in place that outlines your goals, risk tolerance, and trading strategy.
  2. Use risk management tools: To be successful in forex day trading, you need to be skilled at managing risk. This means using stop-loss orders, limiting your position sizes, and being disciplined about sticking to your trading plan.
  3. Stay up-to-date on market news and trends: The forex market is constantly changing, and staying on top of the latest news and trends can help you make better trading decisions.
  4. Practice with a demo account: Many forex brokers offer demo accounts that allow you to practice trading with virtual money. This is a great way to test out your trading strategy and build your skills without risking any real money.