The brief guide that makes becoming a forex day trader simple
When people talk about day trading, they are usually talking about stocks. Stocks are an easy-to-understand asset class, and most people already own them.
But in terms of daily trading volume, stocks pale in comparison to forex, for foreign currencies. Trillions of dollars are flowing through the forex market worldwide on a daily basis. And that includes major financial institutions, large companies, and even governments.
But it also includes the individual retail trader trying to make money as a forex day trader.
Are you interested in learning how to start trading currencies, so you can start making some extra money, or making a living, from your computer at home? Keep reading below to learn how forex works, and how you can become the best day trader in the shortest amount of time.
Choose a platform
In order to trade different types of currencies, you need to choose a platform that offers short-term trading functionality.
Some forex platforms offer only the most popular trading pairs, while others off a long list of possible trading pairs, for those looking to trade exotic, volatile currencies.
Research various currency and share trading platforms and compare the cost of commissions across different companies. When making short-term trades, your profit margin will be very small. If your broker charges high commissions, it could negate any profit potential.
Choose your currencies
Next up, choose which currency pairs you want to focus on. Professional traders, who consistently turn a profit, don’t try to trade every possible currency pair. Rather, they stick to two or three trading pairs.
That way, you can spend all of your time digging into those trading pairs, looking for patterns, and gaining a deeper understanding of how this trading pair reacts to other market conditions.
The best currency pairs for day trading are the major pairs. These are the ones that include USD and other major markets, such as the Euro, the GBP, and the AUS.
Advanced traders often look deeper into more exotic fiat currency trading pairs that contain emerging markets, such as those in South America or Asia.
Learn technical and fundamental analysis
Trading is all about analysis. There are two main types; technical and fundamental.
Technical analysis is the typical day trading approach. It’s all about staring at charts that track price movements. You look for patterns that suggest a certain outcome is about to take place. You can then enter a trade based on the patterns and historical data.
Fundamental analysis looks at the big picture. It takes into account news headlines concerning global politics, financial markets, major business news, the stock market, and much more.
Over time, you can learn which factors will impact the price action of major currency pairs.
Most traders will dedicate their time to learning one of these strategies. Choose the option that suits your personality and go all in.
Become a forex day trader
It takes a ton of time to become a forex day trader. It’s not something that happens overnight, nor will it happen in a few months.
If you really want to make money, it’s going to take years of practice and learning. But once you learn how to consistently turn a profit, you can build a lucrative income stream.
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