Wading into the sea of forex trading is quite a task for many beginners. But among the most common strategies in this sea, day trading takes the crown as the most popular.
What is forex day trading? What are its advantages? Let’s dig into this topic.
What is day trading?
To put it simply, day trading refers to the buying and selling of securities and closing all position within the same day. You let no overnight trades risk your money.
You can perform day trading in almost any kind of market. However, it is most popular in the forex and stock markets.
Day trading also involves leverage, which is a tool that lets you control more for an amount that’s less. Using leverage lets the trader benefit from even the smallest movements in the markets. However, it’s also worth mentioning that this goes both ways. Even the smallest move against your favor can be detrimental to your trade.
Why is it so popular?
Day trading is very popular because of the advantages it brings. Here are some of them.
Most day traders work alone, meaning they do not have 9-to-5 jobs that occupy their schedules. When you’re like this, you don’t have to follow orders. In fact, you’ll be the one giving orders.
2. Low Costs
With the advent of many online forex brokers, trading has been easier and faster. Of course, with more forex brokers comes tight competition. With tight competition comes lower prices.
Day trading is one of the most flexible strategies. If you use it with the forex market for instance, you can benefit from the movements of different currencies with enough volatility.
How to be a Good Day Trader?
If you want to be a day trader and experience those benefits, there are some things you want to tick off your list.
Being a day trader doesn’t come without any risks. In fact, any kind of trading or investing requires you to take some amount of risks.
If you want to be a day trader, you have to have ample knowledge over what’s good and what’s bad in the market. This is a requirement even with other trading strategies.
You also need to have sufficient capital to start trading. As we have said, costs are very low when you use the service of online forex brokers.
However, that’s not really saying you wouldn’t lose any money. The trick is to use only the money you can afford to lose. That’s what you call your “risk capital.”
And of course, you have to have truckloads of discipline in yourself. You cannot go into the markets expecting you can play things by ear and shooting from the hip.
In fact, discipline is necessary in any kind of investing endeavor. When you trade, you should have a plan. And when you have a trading plan, you should have the proper discipline to stick to it.
Overall, day trading is a good strategy to try for beginners. This is because it’s simple, effective, and cheap. The best thing about it is that it teaches you a lot about the financial market as you do it.