Monday, June 2, 2008

Forex Day Trading - An Overview

Day trading is defined as the buying and selling of a commodity within one day. The forex market is where people trade foreign currencies for profit.
Forex day traders are the elite of forex trading. They are usually the most educated in market movements and they are usually trading in significant amounts of money. They work at forex trading everyday, all day. Their benefit to the market is enormous, as they add that essential liquidity value. In other words, without day traders, it might be hard for the more casual, longer term holder, to find buyers at the moment they are needed.
But forex trading is not for the faint of heart anyway. First of all, you must have a thorough knowledge of the forex market and all its complexities. Remember, you’re competing with professionals who spend nearly all their waking hours analyzing and executing trades. Your knowledge level must be equal to theirs. Don’t be fooled by “systems” being sold that promise you enormous returns for a small investment in the book du jour. There is no “get rich quick” scheme hiding in those pages! You need to understand it all perfectly in order to succeed.
Secondly, you need a large amount of capital. Forex day traders are often institutional buyers. They can command large sums of money on a daily basis. With a small investment, you just don’t stand that much of a chance of big returns. The old saying, “it takes money to make money”, is very true when it comes to any forex trading. Large market swings in any 24-hour period are highly unusual, so large profits only come from large investments. If you go into the forex day trading market with your sights set on a fortune, you need to know that you’re much more likely to lose your shirt. As with all investments, you need to make sure that the amount you invest is what you can afford to lose. Money can accrue on a small-balance account, but the process is a slow one. You still need the knowledge and safety measures that a good forex broker can provide.
Thirdly, you need a plan. As you read the books and study the process, you will undoubtedly run into some “systems” that can be used successfully. In addition, you’ll come up with your own guidelines as you gain experience with trades, either real or in demo accounts. Some of the popular systems being used successfully and have proven histories are called swing trading, trading news and arbitrage.
The popularity of forex trading and especially day trading, has been rapid. This has raised some controversy. There are some who will steer you away from forex day trading at all costs. Others say that day trading is the only way to make a substantial income in the forex trading markets. Two things are certain: 1) Beginners/amateurs would be best off leaving the forex day trading market to the professionals and 2) Day traders provide the liquidity the forex needs to exist.
Be careful, become educated, or get professional advice before embarking on a forex day trading strategy.
Michael RussellYour Independent guide to Forex Trading
Article Source: http://EzineArticles.com/?expert=Michael_Russell

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