Forex Day Trading System – Five Essential Aspects In Day Trading

Day trading or intraday is a trading strategy where you put on a trade for a few minutes or hours. The particular characteristic of this strategy is you never go overnight, which means all your trades will be closed at the end of the trading day. If you use a forex day trading system to trade, you will have eliminated the additional risks of overnight trading such as overnight rates or foreign exchange risks.

If you implement a day trading strategy, you only need to analyze the market for the day, make quick decisions and make many trades in that day. Some of the trades will give you profits, while some others will end up being a loss. With a good system, you can minimize the loss and maximize the profits, so even if you have more losing trades than winning trades, you will still make profits at the end of the day. Your philosophy is “tomorrow is a whole new day”.

Here are several things that you need to know if you want to master a profitable forex day trading system:

1. Scalping is a bad idea when you’ve just started

Scalper is a trader who exploits every sharp movement in the market to create even the smallest chance to make profits. His aim is to make as many trades with small profits as possible. Often his entry and exit happen in only a few minutes.

There are too many chances to make mistakes with so many trades opened and closed. In addition, it also demanding continuous concentration and quite stressful; therefore, this forex day trading system is not recommended for beginners.

2. Don’t overlook fundamental analysis

These systems are usually based on short time frame charts such as 15 minutes or five minutes charts to make decisions. The technique is combined with various indicators, general and neural applications, and back testing features to make even better predictions. But technical analysis is not all that exploited in this system; a good day trader will also use fundamental analysis in order to make decisions.

Some traders believe that fundamental analysis only applies for long term trading, but in some cases there are news items that can give a huge impact to the market within minutes and that is where a day trader gains his share.

Example: Unemployment Claims, Existing Home Sales, and UK Retail Sales are some news that can cause high volatility in the market where a right entry will bring you high profits within minutes or hours.

3. Concentrate on once currency pair

It’s really important to develop a strong feeling for the trading action and the movement on a particular currency pair that you want to focus on. Watch only one pair at regular hours; that’s the key to master a currency pair in day trading.

4. Day Trading Methods: Continuation and Reversal

Regardless of tons of day trading systems out there, there are only 2 ways to trade in day trading: continuation and reversal.

Continuation; this method using breakouts and trends heavily. You might have heard that following the trend is the key to profit and this is what you do with this method. Trading during the most active hours is the best way to look for trends and breakouts.

Reversal; mainly concentrating on trading range at the edges. Trading at quiter hours is the best way to do this.

5. Risk vs Reward

Like all other type of trading systems, there is always chance that you get loss trades. Thus, it is very important to trade with good risk-reward ratio by placing your stop-loss and take-profit orders after you take a position.

Forex day trading system isn’t as complex as you might imagine. The most important thing is sticking to a method first, get better at it, and make it work for you. When you already good at one method at one currency pair, you can always scaling your strategy and currency pair range.

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