Day Trading Forex

Day trading Forex is typically the province of speculators in the currency markets. Traders use analysis of both fundamentals and technical factors to profit from hour by hour and minute by minute price changes of currency pairs. To the extent that a trader is at work at his trade station when substantial news hits the market he will be able to profit from the short term market inefficiency that occurs before a new market consensus is obtained. At most times day trading Forex currencies is most profitable in major currency pairs. These currencies trade at high volume and liquidity. Their fundamentals are clear. Technical analysis of major Forex currencies is typically more accurate that technical analysis of minor Forex currencies. Thus most active day traders stick with major currencies in day trading.

A Tool to Profits in Day Trading Forex

Fundamental analysis of Forex pairs is important in Forex trading. However, minute by minute market changes occur because of technical factors unless a single piece of news hit the market. Thus most traders rely on technical analysis of Forex pairs to gain day trading Forex profits. A time honored trading tool is the Japanese candlestick system. Long ago in ancient Japan rice traders discovered that trading patterns repeated themselves. These traders devised a pictorial system for representing these recurring and predictive patterns. A Japanese candlestick consists of a rectangle, the candle, and lines extending from the top and bottom of the candle. These are called shadows. The body of the candle is superimposed on a trading price chart. It represents the opening and closing prices for the day. The candle is white if it closed higher than it opened and black if it closed lower. The shadows show just how high or low the equity in question traded during the day. Although this system was devised for trading rice it is used today for stocks, commodities and Forex. When day trading Forex, traders can use the candlestick system with any time limit that they choose. Although it traditionally is based on a trading day it works for shorter time periods even down to an hour.

Making a Profit Day Trading Forex

The point of trading currencies is to hedge risk if you must convert currencies for business reasons. The point of trading currencies for speculators is to reliably find a profit in the currency markets. Profit and volatility go together. Thus many traders scan the market looking for activity. Some may pay for an alert service to help them spot the best currency pair to trade. Once the trader has chosen the best pair to trade he assesses the fundamentals that drive each currency. These can be balance of payments, monetary policy of the country, labor reports, or a host of political and social factors that may affect the value of a nation’s currency. Then he or she chooses a trading strategy that takes the best advantage of the situation. Technical analysis of gaps in Forex trading can be useful when news it’s the afterhours market. Whether he chooses trend trading, scalping, or trading within a channel depends upon price action of the currency pair in question. The point of making a profit in day trading Forex is to pick the right currencies to trade, hedge risk as able, and apply accurate analytic tools. Then it is simply a matter of trading to profits.