Before you can truly understand the basics of forex day trading, you must first be familiar with two terms – forex and day trading.
The foreign exchange market, or more commonly called as forex, is a global financial market for trading currencies. Day trading, on the other hand, refers to the buying and selling of securities on the same day. Thus, forex day trading is simply the buying and selling of currencies within the day.
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If you wish to engage in forex day trading, you should be able to make snap decisions with your money because many things can happen in minutes, if not in seconds.
This type of financial trading likewise entails a lot of focus because you will be staring at screens, graphs and charts during the day. This may be hard initially, but with hard work and determination, you can develop the skill over time.
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Although forex day trading can be a hard nut to crack at first, it is better than stock day trading in many ways. For one, the foreign exchange market is open 24 hours in a day, which means that any trader can freely choose which hours to trade. Thus, the trader, and not the market itself, define the beginning and end of the trading day.
Also, remember that in stock trading, you need to choose among hundreds of individual stocks. This is quite overwhelming compared to the relatively few seven major currencies and some other minor currencies that you need to choose from in forex trading.
Forex is likewise the liquid market in the world. This allows a trader to enter and exit a stock at a good price as liquidity usually results to close spread between the bids and asked price.
Another feature that makes forex day trading attractive is it provides minor investors the freedom to trade currencies with fewer restrictions compared to stock day trading. With forex, one can easily make a living speculating on various foreign currencies.
However, since forex is largely affected by any news or events that may have an impact on the economy, it’s very important that one pay close attention to any current news that affects the currency exchange rates.
Disclaimer: Just as with any other trading business, forex day trading has potential risks and benefits. So in order to corner the market, one must be very alert and vigilant so that your investments will result in profits, not losses.