Have you heard of day trading? It is a trading style that consists of opening and closing operations on the same day.
Many traders may not know what Day Trading is. Intradia trading is the purchase and sale of assets, but within the same day. Trading on this day can take place in any market, but this occurs most often in the Forex market with currency pairs, or the stock market, with indices.
The intraday trader takes advantage of the small price movements of the day, speculates during the session but closes his operations before the end of the day, without postponing any position in the course of the following day.
The strategy used by day traders is to take advantage of the up and down movements and generate profits during the session. In intraday speculation, you are generally looking for a stock, a stock index, or a currency that is very liquid.
Why day trading is commonly used?
There is no formula for being a successful intraday Forex trader. Good training is essential, but neither does it guarantee success. Risk increases when prices fluctuate sharply throughout the day.
✔️ Intraday trading eliminates the charge of commissions for keeping positions open overnight. In trading these commissions are called swaps. In some cases, when your operations are in the opposite direction to the market, this swap may be positive. That is, an income instead of a commission.
✔️ Carry out a strategy based on the acquisition of assets with positive swaps, which is called Carry Trade, but this strategy is outside the scope of this tutorial. You can learn more about her in our article on Carry Trade.
✔️ Intraday trading is also used to avoid exposure to the risk of large price movements during the night, at which time we cannot control the market or it is closed. Day Trading eliminates the risk of a gap in the stock market.
✔️ On the other hand, intraday trading, being a highly speculative activity, keeps the market running smoothly. Intraday traders are very important to the markets as they provide liquidity to the market.
How to Trade Intraday Forex – Requirements
Opinion on whether day trading is profitable is not easy. What we can assure you is that intraday Forex trading carries risk and should not be assumed without prior training and in-depth knowledge of the market.
The most important thing for any style of trading, on the intraday too, is that the trader must make a trading plan that includes detailed risk management. In other words, adequate and controlled risk / reward ratio.
Let’s see the steps to improve your operations!
1️⃣ Dominate the stock markets
A thorough understanding of how the market works and the main factors that determine market movements is essential. An intraday trader must monitor technical and fundamental indicators.
This will complement your vision of the market and allow you to identify the opportunities that different types of traders are looking for, and can complement your opinion about an investment opportunity.
2️⃣ Extraordinary discipline in Intraday Trading
In all aspects of life, discipline is important, but neglecting this discipline in intraday trading can result in big losses. Success in the stock market without discipline is virtually impossible.
You must be able to control prices during certain periods without making reckless decisions. This is difficult and requires a lot of discipline.
Sometimes the market follows the moves you anticipated, but just because you’ve been able to anticipate it doesn’t mean you should execute the order.
Sometimes seeing profitable market movements that you had predicted but failed to execute is painful, however, it is better to waste an opportunity than guarantee a loss.
3️⃣ Adapt strategies
One has to adopt one or many strategies to minimize losses and maximize profits. As market conditions vary from day to day, your strategy should also change.
A successful intraday trader has to present a new strategy almost every other day, or at least adjust his existing strategy to new market conditions. It takes a creative mind.