Intraday trading in the Forex currency market
There are quite a lot of strategies for trading on the Forex currency market, but they can all be divided into two main groups.
The first includes those that do not require transferring the position to the next day, the second includes longer-term transactions.
Day trading allows you to earn maximum profits even with a small starting capital; it is this type of trading that has enabled most famous traders to make their fortunes.
In this article, we will talk about the most common type of trading, namely, intraday trading.
It's the method most novice traders choose due to its apparent simplicity. However, statistics show that long-term trades yield the greatest profits.
First of all, I would like to focus on the main pros and cons of intraday trading on Forex:
The advantages of this type of trading.
1. No swap fees – no need to pay the broker to roll a position over to the next day; intraday trades are opened and closed within 24 hours, eliminating the need for traders to account for differences in interest rates on the currencies that make up the currency pair.
For some currency pairs, the size of these is quite significant and can significantly affect the outcome of a transaction.
2. Control – the ability to monitor the status of a trade throughout its entire lifespan. With long-term trading, you'll inevitably have to step away from the trading terminal.
3. High leverage – due to the short duration of trades, you can use high leverage, which allows you to make a decent profit even with a small deposit.
It's no wonder that the most impressive earnings records were achieved using strategies that utilize intraday trading.
4. The ability to trade against the trend – trading on pullbacks is quite risky, but can bring guaranteed profits with a well-developed strategy.
This strategy works great if you trade within a price channel and know the exact size of the correction on your time frame.
Disadvantages of day trading.
1. It's more difficult to determine the trend – as many analysts claim, there is only one trend direction, and it can only be identified over the long term. All other price fluctuations are merely reversals.
2. Large spread amount – in relation to the profit received, it is necessary to take into account the size of the profit from one transaction and the size of the spread for this pair.
3. Lack of access to trading instruments – it's virtually impossible to use currency pairs with large spreads during intraday trading; the trend movement during the day may not cover the difference, and the trade will remain a loss.
For example, when trading gold, the commission can sometimes reach up to 100 points, although it's not every day that the price of the metal travels that distance in 24 hours.
4. Time – constantly opening and closing orders requires a significant amount of time, which creates a significant burden on the trader, and conducting analysis also requires additional time.
Overall, day trading forex is an excellent training ground for practicing and mastering basic trading skills.
Most popular strategies are available—breakout strategies, news strategies, price channels, levels, and more. Finding entry points and forecasting short-term trend movements takes minimal time. The ability to quickly achieve a trade's outcome has always appealed to traders.
In my opinion, the most optimal timeframes for trading are M30 and H1, but everyone has their own preferences.
For those who enjoy risk and big profits, the shortest time intervals of M5 and M1 are suitable; they allow you to use maximum leverage. Read more about scalping in the section - http://time-forex.com/skalping
