When we first hear about Forex and the extreme liquidity, volatility, the fact that it is open 24 hours a day and that there are no commission fees whatsoever, we automatically think about day trading. Why? Simple… We associate day trading with the easy profits with no work at all. Well, this is a very simplistic way to put it, not to say that is a wrong way to put it…
Day Trading is a strategy where you buy and sell a currency pair in the same day. One of the great advantages is that by holding the currency pair the lowest time possible, the lower are the risks you take. This is specially an advantage in Forex since you can have a news release that brings a huge and sudden volatility to the market. And, adding the fact that you can have a high leverage (even a 400:1 leverage with some brokers, which means you can trade $400,000 for every $1,000 you have in your account), this guides us toward the day trading.
But, as everything in life, day trading is not only roses. Day trading requires a mental state of complete rationality that only a few can achieve. Being able to put all emotions aside is not easy and it may take years for you to be able to do it. And day trading also requires a lot of work. You need to understand very well the currency pair you’re trading, you need to know the reactions before they happen.
As you can see, day trading Forex has advantages and disadvantages. The best way to find out if you’re tailored to day trading or not is to ask yourself the following questions:
- How do you react to a quick move in prices? Are your reactions quick or are you slow?
- Do you usually get anxious or nervous when you’re trying to enter or exit a trade?
- Do you have the necessary time to dedicate to day trading in order to get to know the currency pair so that you can recognize what it’s going to do next?
Don’t forget that all Forex strategies can be profitable if well-executed and if they fit your own trading personality. If you decide to go against your personality, you’ll only be wasting time and money. Answer the questions posted above with honesty and you’ll find the right path for you to succeed in the Forex market, even if it doesn’t mean day trading.
