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Learn Forex Trading / Currency Trading Tips
Forex:
Day Trading
Day trading – no, it’s not something that
Bill Murray wished he had in Groundhog Day. It’s a
style of trading on the foreign currency exchange market in
which a
trader completes all his trades within a single day. In other
words, he may make a few dozen – or more – trades in a day
with the objective of buying and selling quickly and making
a profit from the fluctuations in a currency exchange rate
over the course of the day.
Sound
complicated? Depending on the method or system that
you use to pick your trades it can be. The idea behind day
trading is that currency exchange rates are subject to fluctuations
over the course of the day – they go up and down depending
on who’s buying, who’s selling and what rumors are floating
around. In fact, day trading in the foreign currency market
is probably the single segment of any type of stocks, currency
or futures trading market most affected by rumors and real-time,
real-world happenings. A savvy trader who is quick on his feet
can roll up the profits by paying attention to what the current
news is doing to the currency exchange rates.
The currency market, commonly referred to as the forex (short
for Foreign Exchange), is the most liquid market in
the world.
The latest statistics say that daily trading on forex is in
excess of $1.3 trillion U.S. dollars. That makes forex the
world’s largest, most efficient market. A major part of the
reason for the liquidity and volume of trade is the practice
of day trading. The difference between day trading and other
types of trading is in how long you hold your stocks (or in
this case, your currency). In day trading, you hold nothing
beyond the close of the day’s market. Think of it as a game
in which the object is to keep trading cards back and forth,
increasing the value of your cards – but have no cards in your
hand at the end of the day.
Of course, since the currency market is a 24 hour market,
there really IS no market closing – so the rules change slightly.
The currency market is open from Sunday afternoon to Friday
afternoon, with trading going on all the time, so you can pick
your times to trade rather than being locked into the Stock
Exchange timetable.
How You Make Money in Day Trading
People will tell you that the difference between a day trader
and an investor is the length of time that each holds onto
their stocks. That’s a superficial difference. The real difference
is in the mindset of short-term vs. long-term and liquidity.
An investor buys something that he believes will steadily increase
in value, and holds onto it for the long haul. A day trader
rides the minute fluctuations in the currency market minute
by minute the way a surfer rides a wave. Because you’re trading
in lots of 100,000, a tiny fluctuation can mean a big profit
– or a huge loss.
Limiting Loss in Day Trading
One of the hardest concepts for new traders to grasp is that
of limiting loss. Let’s say you make a trade for a currency
that is heading down because you believe that it’s near its
support point – the point where it will rebound and start heading
back up. Instead, it breaks the point and keeps heading down
– you’re losing money instead of making it. You have two choices
– hold onto it because you KNOW it will start heading back
up soon, or get rid of it and limit the amount of money you’re
going to lose. In day trading, the name of the game is limiting
your losses and maximizing your wins – decide ahead of time
just how much you’ll allow each trade to lose before you sell
it, and then STICK TO YOUR LIMIT. By the same token, decide
how much profit you want to make, set a sell order for when
the currency reaches that point – and sell when it hits the
mark.
Know
what you’re doing
Day trading on the forex is like any other business. The people
who make money are the ones who take the time to learn the
market and understand the ins and outs of the trades that they
make. Those who jump in feet first without learning the terms,
rules and trends of the forex market are priming themselves
to lose – and lose big. Remember, there’s no such thing as
high profit potential without equivalent risk. Before you jump
in, take a course in trading, or read read read all that you
can.
# # # # # SolveYourProblem.com : 2007
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