The first step to becoming a profitable forex trader is simple and not unlike other trading strategies. As a beginner, it is advisable to practice day trading with virtual money on a demo account to learn how the forex market works. It may seem too simple, but it is vital.
➤ Another important point for Intraday Trading is choosing a good Forex broker (this point will be covered in more depth later).
As we have already said, Intraday traders perform a high number of daily operations so the spread and commissions are important.
The possibility of losing the investment is high, so it is advisable only to invest that money that “you can afford to lose” during your Intraday Trading session.
Since August 2018, ESMA has regulated leverage levels and marked the difference between professional and retail traders. This regulation tries to prevent inexperienced traders from losing large amounts of money, as leverage is a high-risk trading tool with which even professional traders can lose large amounts of money.
Another important topic in becoming a profitable trader is knowing how to read charts. This for intraday trading is essential since, unlike longer-term trading, they cannot be based on fundamentals.
Day Trading techniques and strategies
There are different techniques to operate Intradia. Some are based on economic news releases, while others are based on the opening of the stock market.
Essentials for the Intraday Trader
1️⃣ The first thing that a beginner intraday trader should detect is his profile as an investor, that is, his aversion or appetite for risk.
2️⃣ Regardless of the risk profile of the intraday trader, he must make sure to test his strategy in a risk-free environment, such as in a demo trading account, a Trading or Backtesting simulator.
3️⃣ The fundamental tool of the intraday trader is technical analysis
4️⃣ The factors that you must master and that should not be missing in the intraday strategy are volatility and liquidity
→ Volatility is the magnitude of market movements. In short-term trading, strong volatility is mandatory. This essentially reduces the selection of instruments to the major currency pairs and some cross pairs, depending on the trading sessions.
→ Liquidity is also important. A long-term trader can afford to give up 10 pips, but a short-term trader cannot as those 10 pips can be the full profit. Of course, this precision comes from the trader’s ability to trade in the short term, but also from the liquidity of the market.
If there is little liquidity in the market, orders are not always executed at the desired price. This again encourages intraday traders to trade certain instruments and only for specific periods.