One of the ways that a lot of traders consider trading forex rates is through day trading. If you are thinking about this then you need to know about the basics of forex rates day trading. It is best to know what tools you need and the amount of capital that you require. You also have to consider the psychological aspects of day trading and whether this is the right method for you.
What is Forex Rates Day Trading?
When you complete day trading with forex rates you are going to be completing short-term trades. This means that your trades do not last for more than a day. Day traders do not have any trades held overnight and they do not hold onto a trade for more than a few hours. There are a few trading strategies that day traders can use. Some traders will use a combination of different strategies to match the market conditions. However, most day traders will have one strategy that they use every day.
The Tools You Need
The day trader needs to have tools that allow them to complete technical and fundamental analysis. Day traders have to consider both type of analysis in order to be profitable. The technical analysis tools that you use should relate to the trading strategy that you are going to use.
One technical tool that you may want to avoid with day trading is the Fibonacci retracement. This tool is ideal for long-term trading, but when used with short-term trades can give incorrect information. One of the most commonly used technical tools is the moving average. This can be employed in many different ways to suit any short-term trading strategy.
The fundamental tools that these traders need are mainly forex calendars and news feeds. The forex calendar allows the trader to see which releases are coming up during the day. The news feed can provide breaking news that affects the market and price movements.
The Psychology of Day Trading
When you look at day trading you have to consider if this is the right option for you. There are a lot of people who do not do well with day trading and you may be one of them. Day trading is ideal for people who are happy sitting in front of their computer for the day. Day traders also have to be ready to deal with fast paced situations where they have to make quick decisions.
However, day traders also need to be disciplined. There are a lot of traders who assume that the fast nature of day trading means that you do not have the same strict rules as long-term trading. The truth is that the rules you have when day trading are stricter. The fast paced natures of these traders’ means that you can risk more than long-term traders. Without discipline you will lose a lot of money through day trading.
The Capital You Need
Most traders state that long-term traders need more money than short-term. While this can be true when you trade with day trading you have to have enough leverage to balance the risks of leverage. Day traders generally use leverage to increase their gains. If you do not have enough capital to buffer the leverage then you increase your trading risks to unsafe levels.