To trade on margin, the trader needs to open a margin account and deposit money into it. By borrowing at high leverage levels such as 300:1, 400:1, or even 500:1, a trader controls a much larger trade and stands to benefit so much more from small pip movements. That is why most day traders trade on margin. However, to gain a substantial profit on just a few pips is very hard to achieve unless you are trading a very large amount of money. Margin Tradingĭay trading involves the taking advantage of small pip movements to make a profit on short term trades. Trading such short term price swings, using an auto trader broker, is ideal for day traders and small investors because they usually do not have to compete with large investors such as banks.
Many currencies experience erratic price movements at certain times, especially when there is a release of important economic information.Ī day trader seeks to predict such movements before they happen so that he can make trades just before the price swings occur. One should also know which types of economic data have the potential to change currency prices and which time frames are most favorable for their chosen currency pairs. It is necessary for the trader to know all about different candlestick patterns to determine the most ideal trade entry and exit points.Īs a day trader, one should know when the markets are most liquid and dynamic with the highest volumes traded. The day trader should be adept at following price charts and accurately reading price movements, price volumes, and price trends. When using a market timing strategy, a trader needs to have high levels of discipline in order to capture the right trades at the right moment. This should be combined with money and risk management strategies to ensure long term profitability.Ĭlick here to read more on risk management.Ī viable risk/reward ratio is necessary for one to enjoy long term profitability as a day trader. An exception is when two time zones overlap, such as what happens when the US market opens in the morning and it is still afternoon in Europe.ĭay trading is not as easy as it may seem and forex beginners have to be especially careful to acquire the right skills and tools before venturing into day trading.Ī day trader needs to be well conversant with technical and fundamental analysis to be successful. This means the day trader will usually trade during a single time zone. A forex day trader is one who buys and sells currencies multiple times during any single trading day period without leaving any overnight positions.
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