Day Trading Strategy

forex strategy day trading

The large number of participants in the London forex market and the high value of the transactions makes the London session more volatile than the other two forex sessions. In this article, we will explore each of these forex market sessions including their key characteristics – forex time zones and how they affect trading. When it comes to your money management process, you could size each trade in relation to the amount of money in your trading account and how successfully you have traded in the recent past. Other important factors to check out include the broker’s minimum deposit, customer service and trading platform. In addition to providing their own proprietary trading platforms, many brokers run the MT4 and MT5 platforms, letting you open a demo account without committing your own funds.

forex strategy day trading

If you find that scalping feels too fast-paced for you and swing trading seems too drawn out, then Day Trading could offer the perfect tempo for your trading endeavors. Here, we’ll explore why trading within the same day could be the ideal choice for you. Incorporating sentiment analysis into your news fading will filter out bad trade, boosting your win rate and increasing profitability. Futures and forwards are contracts applied by businesses and investors to hedge against risks. Both types of contracts depend on the settlement of the price of the asset.

How to Start DayTrading Forex

To successfully swing trade forex decide on the currency pairs you will be trading, the timeframe, and your entry and exit points. It’s also important to set a stop-loss and profit targets for each trade. The next step is to learn how to read charts and identify chart patterns. Forex day trading, also known as intraday trading, refers to the practice of opening and closing trades within a single trading day. Unlike long-term investments, day traders aim to profit from short-term price movements in currency pairs. They take advantage of volatility in the forex market to make quick profits.

If it is confirmed that the market is indeed trading in a range, you can expect the price to bounce off the support and resistance levels. You need to monitor the trading volume when the price nears the support or resistance levels to predict the movement of price. For example, a significant spike in trading volume near the support or resistance level could confirm a breakout.

Example of a Basic Forex Trading Strategy

However, in the event that the pair increases in value, you will never lose more than 3% of your stake. If you’re interested in news trading, we devote an entire section to it in our School of Pipsology called “Trading the News“. This information could be a report releasing economic data, such as unemployment, interest rates, or inflation, or simply breaking news or random presidential tweets. As a rule of thumb, you want to target the same amount of pips that makes up your determined range.

Have you ever thought about why a huge number of all forex trades are closed during one day? Because of a high level of volatility, the price of currencies changes every day. Thus, a lot of traders choose to open and close positions within one day. Therefore, it’s very difficult to predict the price movement in the long-term perspective.

Creating a Forex Trading Strategy

Opening a position before the news announcement ignores the fact that the trend may go oppositely because of some minute details of the news or even the wrong timing. Opening a position after the news is published also required some delay, for volatility to settle and a steady trend to build up. This indicator predicts the major reversals of forex pair price based on analysis of previous price behavior. The indicator relies on the acceleration in price movement to predict the next price moves, since this acceleration often changes before the actual price reversal happens. Hence, by detecting this point of slowing down, a trader can predict a future reverse of price trend, whether up or down. Many who try it lose money, but the strategies and techniques described above may help you create a potentially profitable strategy.

forex strategy day trading

You can now set up your forex order for the currency pair that you wish to speculate on. EToro – like all regulated brokers in the forex arena, will first require you to open an account. You can do this by visiting the eToro homepage and clicking on the ‘Join Now’ button.

How to Learn Day Trading

When the price is booming, the volume value is up to volume, and when the price plummets, it’s the down volume. It’s not the numerical value that matters; it’s the steepness and direction of the slope that prompt what will happen next. One line is calculated as a “faster” average and another one stands for “slower” trends. Say, one MA is calculated over 10 days and the other one spans over 20 days.

  • When both higher and lower timeframes indicate a downtrend, a day trader might consider joining the bearish trend.
  • Knowing an instrument’s highs and lows (support and resilience levels) allows you to predict when the price will change direction and accordingly when you want to enter or exit a trade.
  • The liquid major pair in the forex market is EUR/USD – which will see you trade the exchange rate between the euro and US dollar.
  • Tweaking is always necessary, as no one has a true “holy grail” trading strategy.
  • As such, you will need to be well versed in technical analysis to succeed in this segment of the forex trading scene.

There is no one-size-fits-all answer to this question – as it depends on a number of factors. For example, this includes the types of pairs you are trading, how much you are staking, what percentage gains you make, and how much leverage you apply. This is because some trader might remain open for several hours while others for just a few minutes. Forex operates around the clock – so you can trade at any time of your choosing. However, it’s best to avoid trading over the weekend – as liquidity levels are significantly lower. EToro is also home to the previously discussed Copy Trading tool – which again, is ideal for newbies.

Forex trading

Currency pairs are the basis of forex trading, and they represent the value of one currency relative to another. The advantage of day trading Forex is that you will not be marked as a pattern day trader. Also, the markets are a lot more volatile in Forex, so you can capture a big move quickly.

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