Forex Day Trading


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Forex Day Trading

In the world of Forex trading, one of the typical types of trading method are called Forex day trading. The actual meaning of this phrase, Forex day trading, is just as its name suggested, trading (buying and selling) which is all done in one day. However, only a small proportion of Forex traders in the Forex market practice such a method although it is undeniable that, day trading gives a higher profit earning percentage due to the fast trading cycles. The reason behind this is due to the fact where Forex day trading is extremely risky in a certain sense.

For now, let us examine some of the advantages of Forex day trading. First of all, as mentioned earlier, due to the fast trading cycle, Forex day trading can be more profitable as basically, Forex day trading takes advantage of the swings in the financial market, be it up or down. In addition to that, Forex day trading is done intraday, which in term means, Forex day trading do not involve any sort of risk from overnight exposure as by the end of the day, the trader would have trade off all of their currencies at hand.
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Although Forex day trading is neither illegal nor unethical, it is not a recommended method of trading for most of the people due to some of the drawback involved. For starters, most estimates believe that 8 out of 10 day traders suffer a loss in Forex. The main reason behind this is due to the high risk involved in Forex day trading. Most day traders suffered a loss in day trading simply because they believe that the nature of the financial market is somehow predictable, however, recent academic research proves that the change in financial market is NOT predictable. Another major drawback in Forex day trading is the fact where most day trading strategies involved using the leverage of borrowed money in order to finance a trading. This is one of the reasons why many Forex traders tend to lose a huge fortune and end up in debt, simply because borrowing money to trade is an extremely perilous move. Besides that, the work involved in Forex day trading is most stressful compared to other trading methods such as swing trading or position trading. This is said so as for Forex day trading, Forex trader needs to be very active during the trading time in the Forex market as they needs to put on a close watch on all of the tinkering quotes regarding the exchange rate on the computer terminal and once a change in the momentum of the currency is spotted, Forex trader will have to start trading immediately in mere minutes. Another great disadvantage which arises from Forex day trading is the cost needed for day trading. The cost needed for Forex day trading is higher compared to other means of trading is because, due to the rapid cycle rate in day trading, a Forex trader will most likely find himself ending up with a huge sum of commissions to pay to the firm.

After a brief examination on Forex day trading, it can be concluded where Forex day trading is not everyone's cup of tea due to the high risk involved in it. Therefore, for people who are thinking of day trading, the basic rule of thumb is to invest conservatively in day trading. Lastly, before starting to day trade, one must first, fully understand the basic operation of marginal trading a nd the huge amount of risk involved in Forex day trading.


Forex Day Trading Reference
http://daytrading.about.com/cs/educationtraining/a/shortterm_types.htm
http://www.sec.gov/answers/daytrading.htm
http://www.sec.gov/investor/pubs/daytips.htm
http://www.netpicks.com/articles/dayvsswingtrd.html
http://slate.msn.com/id/1003329/



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