The global forex market is a vast entity and one that sees an estimated $6.6 trillion traded across the world every single day. What’s more, this number has increased from just $5.1 trillion in 2016, with the market continuing to grow on the back of rising demand from so-called “retail traders”.
Day trading is arguably the most popular investment vehicle in this space, but what exactly is this strategy and how can you deploy it successfully?
What is Day Trading?
As the name suggests, day trading refers to a form of speculation in securities, in which a trader buys and sells a financial instrument with the same trading day or 24-hour period.
With this in mind, all trading positions are closed before the market ceases activity for the day in question, creating a scenario where investors look to execute a large number of relatively small trades that cover a relatively small period overtime (and aren’t kept open overnight).
Before you get started, you’ll need to have knowledge and understanding of your chosen marketplace, while utilising an asset such as the MT4 platform to monitor market movements in real-time.
You’ll also need a strong grasp of money management, as you should only ever commit an amount of money to the market that you can afford to lose. As a general rule, most successful traders don’t put more than 2% of their capital on the line per trade, and following this will help you to make the most of your capital.
It’s also important that you start small, particularly in terms of the amount of capital that you use and the number of currency pairs that you target as a day trader.
For example, we’d recommend dealing with just one or two major currency pairs before scaling your efforts organically over time, ideally in line with increased profits and experience.
How to Get Started
To get started, we’d recommend using your chosen trading platform to access a so-called “demo account”, which can typically be used for a period of between three to six months and connect you to a completely simulated and real-time marketplace.
This way, you can hone your systems and experiment with different trading methodologies, while ensuring that you incorporate the components that are key to every successful day trading endeavour.
Liquidity remains one the central elements of any strategy, for example, as this refers to the ease with which assets can be bought and sold in the real-time market. By creating a diverse portfolio that combines forex with in-demand assets like gold and crude oil, you can optimise day trading liquidity and ensure that you enter and exit trades at a competitive price.
Volatility and trading volume are also central elements of any day trading strategy, they help to inform your potential profit range and offer an insight into each target asset’s volumes respectively.