Day Trading Strategies for Beginners

Introduction:

A day trader is a trader that buys and sells currencies many times a day and does not leave an overnight position. This means that a day trader usually trades within one time zone and does not cross into other time zones except maybe a trader in Europe where the afternoon session coincides with the American morning session. The concept of a day trader is to generate income on a daily basis using technical and fundamental analysis to facilitate this money making process.

Day trading Strategies for Beginners:

When starting out as a day trader a beginner needs to develop a simple trading strategy that enables the trader to have the opportunity to generate profits with a viable risk/reward ratio. To develop a strategy which meets these requirements the trader needs to learn about self-discipline, price charts, volume and price movements, technical analysis and fundamental analysis. In addition the day trader needs to learn about different candlestick chart patterns, volume movements and trend lines, all of which provide tools which enable the trader successfully day trade.

So the first pillar of a day trading strategy for a new forex trader is knowledge. The second pillar of a day trading strategy is an understanding of how the markets function. Elements such as when the highest volumes are traded, what type of economic data has the strongest impact on the market, what time frames are good for certain currency pairs, and the best time of day to trade?

The third pillar of a day trading strategy is to do with deciding how much loss you are comfortable with taking on individual trades. To do this you must establish the maximum loss you are willing to bear. This is something that must be done in advance and not on the fly as you trade. Before you actually make the trade you should decide on the risk/reward ratio for the trade and your loss limit. As soon as you reach your loss limit you should exit the trade. Never fall into the trap of not keeping to your strategy and stay in the trade hoping the market will turn. It invariably does not.

The next important pillar of a day trader’s strategy is the maintenance of documentation which record the day’s trades and the results of those trades. In this way you can gauge how effective your day trading strategy is and amend it accordingly. Documenting your daily trading will also enable you to repeat your successes.

The final pillar of your day trading strategy is hedging. Hedging is the act of selling and buying the same currency pair or the act of buying one currency pair and buying another currency pair which is historically inversely correlated to the original currency pair. Hedging in this way does not produce high profits but it does produce profits and reduces the likelihood of losses.

The above simple day trading strategy will enable day trading beginners to start a successful day trading career.

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Eur/usd: sell

Eur/usd: sell at 1.2686, tp 1.2645, 1.2600
stop: 1.2732
USD/CHF: buy at 0.9492, tp 0.9530, 0.9568
stop: 0.9455

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Forex Trader

Forex is an international bank-to-bank currency market. Forex trade assumes purchasing or selling the currencies. Due to ever-changing currency rate, buying a currency at lower price and selling it at higher one you can gain profit catching its further movement correctly (for example: correctly determine the news).

Forex market partakers are: banks (central and commercial), pension funds, insurance companies, brokers, dealers and private investors. Because of a great participants number and similar trades volume a lot of transactions are executed in a few seconds.

A huge capital is not required for trading on Forex, as broker gives a loan - leverage. Its size is equal to hundredfold amount of deposit, it means that a trader (participant playing on Forex) enters the market with a sum exceeding the amount for trades execution hundredfold.

Trade execution on Forex consists of 2 parts. First: trader opens position with a certain currency pair. Second: he closes position with this pair. Trades on Forex are closed automatically during several seconds. However, even such a big trades quantity accomplished by traders cannot put a substantial effect on price.

Position opening in Forex trading is a process of requesting one currency from a broker for a certain quantity of another. The cost of a base currency in the first pair is called quote displayed in the quoted currency unit. It has 2 figures: Bid - the cost of base currency sold for quoted one and Ask - the price at which it is bought. A difference between them is called spread (it is the main income source for a broker), and point is the minimal price movement which can be accepted. Currency rate information is always available for those who operate on Forex market.

Forex trading is carried out in three ways. These methods involve several trading strategies. Traders with big trading experience on Forex develop their own strategies for several years, but there are some approved and really beneficial strategies:

- Day trading (intraday short term trading) is opening of short term trades by a trader for 1 or 2 minute period up to a couple of hours. Such trades are usually closed in the same trading day and almost never carried over night.

- News trading. Traders using this kind of trading can always have a stable profit, making the right analysis of published news. At the same time, wrong news analysis and position setup can result in serious losses.

- Midterm trading. With this kind of trading, trader opens long period trades (from 1-2 days up to 1-2 months). Getting a huge profit following this strategy is possible in case a trade remains opened for a few days at least. A good capital is needed for backing up such trades.

- Technical analysis in Forex trade implies an option to estimate and make right analysis of different chart types (bars, Japanese candlesticks, lines) with currency pairs and figures displayed on them that allows to forecast rate fluctuations of the currency pairs.

- Carry trade is gain acquisition from difference betweeen the interest rates of currency pairs.

Using this type of trade, trader's positions remain open for a long period of time (from 2-3 months to 1 year and more). Such trading requires a big capital. It is used for waiting when a trade becomes profitable not to bear losses until the price changes to the right direction.

Also one of the advantages of Forex trade is that the work does not stop 24 hours 7 days a week (from Monday to Friday), therefore, regardless of difference between the time zones and location you can continue taking part in trading. Such opportunity of trading on Forex is provided by the world financial centers managed by the national banks together with international banks where different countries capital is kept.

Major of them are located in: New York, London, Tokyo, Paris, Luxembourg, Singapore and Austria. They allow supporting the liquidity for trading on Forex during the whole day and night.

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The Features of Weekday Trading on Forex Market

Movement of currency pairs on Forex market has a direction, so called trend, which can be seen well in the end, but for more efficient work traders should know its direction at the beginning of trading week.

There are several factors forming a trend on Forex market:

1. Movement of currency pairs on Friday on the American stock exchange.
2. Opening of Gap (price gap by the end of the previous day and at beginning of the next one) at midnight on Monday (Asian trading session). The result is that the hit resistance levels of pairs very often become the support levels, and the pairs, having made a start from these levels, move in the given direction during the week.

Between the American trading session on Monday and the Asian one on Friday the channel of peak resistance levels (on fractals and zigzags) determines the start point for currency pairs, which break the resistance upwards or downwards and, as a rule, move in the given direction of a trend.

The first and the basic feature of currency pairs' behavior on Forex market is their movement on the American stock exchange on Friday. This is an original testing of trend force and direction through the weekend news.

If a negative news release does not influence the bounces of currency pairs on Friday, this means that brokers and banks were not ready for such surges and the movement should start on Monday.

If a currency has made a sharp trend leap, there are two possible scenarios:

1. A new wave of trend, for example 400 points, which the currency pairs had passed for the last week, will become a first wave, and the third wave in the same direction, which is equal at least 640 points, is by 60% longer.
2. Being at the start of mid-term trend from 4-hour to daily and weekly charts, the rollbacks reach from 23% to 62%. Movement follows the trend, a new week - a new trend jump.

If at the Friday American session the currency did not start its movement on the market, this means that brokers cannot determine the trend or moving direction for the next week, and this direction will be known only on Monday.

From everything mentioned above we can make a conclusion: depending on behavior of the Elliot Waves, Friday session determines the currency behavior for the next week beginning.

1. If potential force of a trend is very strong and there was a trend jump on Friday, then on Monday or Tuesday a correction or reversal can be expected, or a new trend wave.
2. If on Friday the currency went against the trend, then Friday movement will turn into correction or into the first wave of an opposite trend.
3. If the currency did not start its movement on Friday, then a movement formation can be expected on Monday or Tuesday.

One more important feature of the currency market Forex is the analysis of Forex economic calendar for next week. For this purpose it is necessary to mark the events, which can forecast a trend direction and all updates to it.

Besides, there is one more peculiarity, it is necessary to pay attention to the Gap, which appears at midnight on Monday, whether currency pairs of the allies are opened upwards or downwards and which direction the currency pair is to move in after this at the Asian trading session, as a rule, the currency moves in this direction next week.

In order to earn on market, it is necessary to understand that intraday trend does not exist by itself.

Every trader should come to the main conclusion: currency makes the most part of its movement until the news release and only a minor movement is observed when the news was officially confirmed.

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