Day Trading: What not to do
So is day trading the shortcut to the land of bounty, or a path to quick financial doom? This is a question that traders who learn forex have been asking for a long time. As with many other subjects, the correct answer is somewhere between the two extreme opinions. Day trading is unlikely to get the average person rich quickly, but it is possible to do well with this strategy provided that you abide by some simple rules and principles while choosing the configuration that is most suitable to opening a day trading position.
Day trading involves the buying and selling of currency pairs (or stocks) in quick succession during the course of a day. The difference with scalping lies in the fact that a day trader can sometimes hold a position for two days, while the scalper will routinely enter and exit tens of trades on any trading day, and will never hold a trade for more than ten minutes or so. The difference between swing trading and day trading is that the swing trader doesn’t have a particular time-frame for the opening or closing of a position, while the day trader usually aims to complete a series of transaction in the course of a single trading day.
To be successful with this style, we must first understand that being a day trader doesn’t mean that we must trade every single day. Instead, choosing the right time, and the right setup for a trade is perhaps the most crucial aspect of a successful day trading strategy. The professional day trader does a lot more planning than the average, or novice trader. He is up-to-date with news flow, and has a particular expectation from a day’s developments before he will initiate a trade. In other words, he awaits extreme market positioning, news shocks, and sometimes technical scenarios to create those rare conditions where profitable trade opportunities arise quickly, and disappear with equal speed. The day trader never allows the market to direct his decisions. He’s quick to cut losses, and realize profits if the conditions that he anticipated are in place, or, if sudden developments invalidate his initial scenario, and quick reaction is a necessity.
To illustrate this with an example, let’s consider the case of a day trader who wants to trade an intra day news release for quick and sizable profits. After carefully considering the various options before him, he will determine an outcome that will justify entry into the market, be it a surprising number, an unexpected announcement, or something similar. After that, he will decide on a price level which will trigger the opening of a position if it is reached during the day. This price level would be valid only in the short period after the news release, and after that will not trigger a trade. The day trader sticks to these principles when managing his positions, and there is nothing arbitrary or random about his choices.
Learning about day trading is a process, and although a good forex course may be helpful, the trader must ultimately train himself to acquire the discipline and the frame of mind that lead to success with this strategy. Day trading is rewarding and exciting, but a profitable trader will make sure that he is never caught off guard when events go against him. With such an attitude, day trading can be as profitable as any other strategy.
Tags: Currency, currency pairs, Day Trader, Day Trading, E Trade, Forex, Learn Forex, Market Positioning, pairs, Profitable Trade, profits, swing trader, swing trading, traders, trades, trading strategyPosted in
