Day Trading – Knowing What’s Involved With Day Trading

Day Trading

It goes without saying that at the mention of the word Forex or day trading as its commonly known, the first thing that comes to mind is making huge money by trading currency. But what exactly is Forex or day trading? Of course it is not as simple as guessing on how or where the price of a currency pair moves, but involves a lot of application, thought and strategy.

The term Forex exchange trading or usually referred to as Forex primarily involves exchanging or trading of one currency to another. There are no limitations to the possibilities of making money with Forex and currencies always tend to fluctuate, even in the smallest of decimals thus making way to potentially making lots of money by trading the currencies. Of the many currency pairs available for trading, the EURO, USD, Japanese Yen form the major part as these are majorly traded in everyday transactions. The people who engage in such transactions are referred to as Forex traders or investors.

It must be noted that day trading Forex is quite versatile therefore attracting many investors who look to alternate means of making money besides their regular investments in perhaps stocks and bonds.

Did you know that every day, the Forex transactions amount to between 1 to 1.5 trillion dollars?

It is little wonder then as to why day trading is so popular among both veteran traders as well as completely new beginners.

Before you jump the gun and sign up with one of the many Forex brokers and dream of making profits, there are some factors that need to be considered.

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Firstly, making use of a Forex marginal account helps. Using a Forex marginal account is one that allows Forex traders to trade large positions in the markets without having to make a large deposit. A marginal account helps the trader to fund their account with just 0.05% of the necessary amount for example. This is also known as leverage in Forex terms. In other words, a trader with an investment of just $500 investment when making use of a marginal account could trade $100,000 worth of positions. While leverage or using a Forex marginal account helps in trading higher volumes, the risks associated are equally high as losses could result in losing a lot of money.

The second aspect to trading Forex is to understand the two most common methods or strategies in order to trade Forex more efficiently. These are known as Forex fundamental analysis and Forex technical analysis. In most cases, the technical and fundamental analysis are usually sent out via daily alerts by most Forex brokers.

Fundamental analysis is the most simplest of the strategies that traders can apply in order to have a better understanding of the markets. The Fundamental analysis takes into account the various aspects that determine the direction or value of a currency, or in other words, the country whose currency you are interested to trade. Economy plays a major role in determining the value of a currency against other currencies, besides trade and other factors such as interest rates, and political stability. By properly analyzing the Forex fundamentals, it helps the trader to determine whether to take an aggressive or a subdued position based on the factors mentioned above. Fundamental analysis is easy because most of the information can be easy to access. This includes the various reports that a country would release such as quarterly trade data, monthly unemployment rate and so on.

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Technical Analysis in Forex is widely used and is a bit more complex than fundamental analysis. Technical analysis is used widely by Forex traders that takes into account the various factors that affect the currency during a period of time thus able to predict the future price movements. The principle in which Forex technical analysis operates is that if a currency was trading on the higher side, then it would in most cases continue trading on the higher side. Technical analysis does not help to predict the future price movements accurately but instead focuses on aggregating data based on the relative short-term past performance thus giving a platform to predict the future trends.

Day trading has grown to be quite popular and even a beginner to Forex can learn to trade the markets efficiently largely thanks to the many Forex brokers available in the markets today. This is made possible by the Forex brokers who offer free demo accounts to trade with. Although, while common knowledge dictates that trading the demo accounts is different to the real or live account, the experience of buying and selling remains the same. Using a demo or a free practice account helps the beginners to get familiar with the systems.

While the term relates to foreign exchange currency trading, Forex is not just limited to currencies, but also involves precious metals trading such as Gold, Silver, Platinum, commodities such as Natural Gas, Crude Oil, Coffee, Cotton and stock indices such as the FTSE, DJI or NASDAQ. The advantage being that traders do not have to leave the comfort of their desk in order to trade the markets.

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If the financial markets are something that piques your interest or if you simply love keeping a track on the world’s economy, Forex day trading would be the ideal way to make your passion start earning money for you.

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Day Trading – Knowing What’s Involved With Day Trading

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