Advantages of Day Trading In Forex
June 17, 2019
financial markets is a different experience for people. Depending on
personality and risk appetite, different trading styles exist. A trading style refers to a trader’s attitude
towards the market. More precisely, it relates
to the time horizon traders are willing to let their trades open before cutting
the loss or marking the profit.
like to keep their positions open for a long time. They have plenty of
financial resources and typically act way ahead of the curve.
ahead of the curve means anticipating a change in the underlying fundamental
conditions and willingly placing a bet that the market will turn. The time
horizon doesn’t matter as these traders use fundamentals and changes in the macroeconomic picture.
changes take time to form, and investors
need plenty of patience and resources to wait for the market to turn.
traders are investors that have little patience and less time on their hands. Either pressed by the need to perform on a relatively
small timeframe ( the look at the daily, four-hour or even the hourly charts)
or the lack of capital to keep positions open for longer, swing traders wait
for a few hours, days, or even a couple of weeks until closing a trade.
retail traders fall into this category, but not as many as those involved in
What is Day
emerged as a form of Forex
trading where traders close all
open positions at or before the end of the trading day. Any Forex broker is more than
happy to have as many retail traders involved in day trading as they will
generate important commissions.
not forget that brokerage houses live from commissioning, by intermediating the
access to the interbank market.
Forex trading system
based on day trading requires that all positions are closed at the end of the trading day. No matter what, either
with a profit or with a loss, the traders close the positions.
called intraday trading, day trading is a disciplined approach that resembles
scalping. When scalping, traders keep positions open for a brief period and use lower timeframes like
the one-minute or maximum the five-minute chart.
day trading, the
timeframe doesn’t matter, as long as the position is closed at the end of the trading day. For instance, even the monthly chart
is useful in day trading.
there’s a candlestick pattern like a hammer (reversal pattern that forms at the
bottom of bearish trends), the market typically retraces 50% or 61.8% before
putting a bottom. Therefore, traders act
on a daily basis but consider a timeframe
that usually isn’t used by scalpers.
of the many day trading
advantages is that traders avoid negative swaps. A swap is the differential between the two currencies that make the
pair, and it may be negative.
In fact, the last years brought
some changes in the monetary policies around the world, as the recession forced central banks to ease below
zero. The process resulted in many currency pairs having a negative swap and
affecting the balances of swing traders and investors.
trading the Forex market,
however, avoids such costs. Moreover, by closing the positions at the end of
the trading day, traders benefit from better
money management than other trading styles.