In the Forex market, all private traders are engaged in one thing – making a profit from movements in exchange rates. But all people are different, therefore, depending on their personal qualities, everyone chooses the particular trading style that is closest to him. Someone is preferable to work daily, another is more suitable for careful trading with a low frequency of transactions. You can understand this only in the process of practical activity, but it does not hinder to know in advance what features different styles and trading methods have. The most talked-about of them is intraday trading (intraday, day trading).
FOREX TRADING METHODS AND STYLES
The main parameter of the trading style is the holding time of the transaction. The methods for determining the entry point to the position may be the same or slightly different, but the duration of holding the position until closing determines the trading style. The most cautious and lengthy is considered positional trading. In this style, transactions are opened taking into account fundamental data and indicators on daily or weekly charts. Positions are held for several months, and profit is thousands of points. However, for positional trading, you need to have big capital and a lot of patience.
Medium-term trading involves holding transactions for several days or weeks. Fundamental Forex analysis here already plays a lesser role. Usually, regular monthly economic reports are taken into account. Charts from hour today are used to analyze the situation and open positions. Profit in medium-term trading is several hundred points. This style of trading is considered the most comfortable, as it does not take much time, and entry points are quite simple to determine.
The classic definition of intraday trading is the opening and closing of transactions during the day without transferring the position to the next day. For this style, working time frames of no more than one hour are used. Fundamental factors are almost not important for intraday trading, with the exception of news on the economic calendar. The intraday style involves several different strategies. This is mainly scalping, session trading and trading on the news. Depending on this, profits can range from a few points to tens.
THE BENEFITS OF INTRADAY TRADING
Most novice traders are technically and psychologically unprepared for intraday trading. However, almost everyone initially trades on small timeframes. Intraday trading has its advantages, in addition, it allows you to gain experience faster. Price movements, candlestick combinations, technical analysis figures are identical on different timeframes. And if a trader has learned to distinguish them on five-minute charts, then he will be able to trade on an hourly and daily basis in the same way. Periods of trend, consolidation, low or high volatility are repeated at different scales.
Trading throughout the day, the trader fully controls the situation. The peculiarity of this trading style is that it is required to constantly search for optimal levels for opening positions. Then you need to follow the quotes for the transaction and close as necessary. A mid-term trader may miss an important moment for opening a deal, and an intra-trader will earn dozens of points. This is especially noticeable during periods of the flat or weak trends. For medium-term trading, this is calm, and for intraday trading, daily profit. If you follow the rule of exit from the market at the end of the working day, then the possible losses will be small. It is advisable to study reliable forex forecasts every day.
THE DISADVANTAGES OF THE INTRADAY METHOD
Many criticize intraday trading, believing that it is too risky. However, it is not the trading style that determines riskiness, but the stop levels and transaction volumes. At all exchanges, intraday stock trading is practiced, when all positions are liquidated at any price half an hour before closing. Trading on the Forex market is much simpler, but for intraday trading, you need to choose highly liquid currency pairs with a small spread. And for scalping trading, high speed of order execution without requotes is also required. Not every broker provides such conditions.
For intraday trading, a trader needs special efforts – concentration of attention, quick reaction to events. This style of trading takes all the time, to combine with other work will not work. Although modern traders are facilitated by the opportunity to trade with portable devices and forex charts online. The number of currency pairs for intraday trading is limited to one to three. More tracking and analysis is simply unrealistic.
DAY TRADING STRATEGIES
Almost all strategies are suitable for intraday trading. For example, trading on the intersection of moving averages works on all timeframes, only you need to use the charts M15, M30, H1. You can enter by the signals of any indicators on these timeframes. Candlestick combinations quite accurately begin to work with a fifteen-minute chart. Before the start of the trading day, it is advisable to read the forecasts for the day. For this, analysts from Alpari, Forex Open, Fresh Forex, and other brokers who publish daily reviews are suitable.
In intraday trading, one has to take into account the opening time of world exchanges when an active movement begins. In fact, the day trading time is limited to the period from the opening of European exchanges in London and Frankfurt to the closure of American ones in New York and Chicago. It is better to open deals during the start of the work of these exchanges. The average movement size of most currency pairs during the day is 70-80 points. Therefore, a win of 40-50 points is considered sufficient. Of course, regardless of strategy, you need to set stops and comply with money management. Then intraday trading can be quite profitable.