Day Trading Strategies For Beginners - Understanding The Market

A day trader is someone who makes all his/her Forex trades within the same day and does not leave an overnight position. The day trader makes many buys and sells each day and rarely trades across time zones except on the

occasions like when the American day trader's morning session coincides with the European afternoon trading session. This kind of traders operate on the concept of using fundamental and technical analysis to make many trades and generate income on a daily basis. For beginning day traders one should develop a simple strategy with a reasonable risk-reward ratio.

• Discipline
  One thing the beginner needs to understand is that successful Forex trading requires high levels of self discipline. They should learn about currency price charts, volume and price movements, fundamental analysis, and technical analysis. Additionally, the beginning day trader needs to familiarize themselves with different candlestick chart patterns, trend lines, and volume movements. This will influence how the trader chooses their trade entry and exit points and ultimately how profitable their trading strategy is.


• Forex Knowledge
  The most important factor for a day trader is knowledge. The trader should strive to gain and expand their knowledge base on everything to do with Forex trading. A second and equally important factor is to understand how the Forex market functions. Understanding basics such as which types of economic data bear any impact on the Forex market, the best time frames for particular currency pairs, or the best times to trade should be of paramount importance to the beginner day trader.


• Prepare for Loss
  A third factor for the beginner to take into account when formulating their Forex trading strategy is the determination of the loss one is prepared to endure on each individual trade. One should accept that they will once in a while make losses on their trades and should therefore, determine the maximum amount of loss they would be willing to bear. The value of this loss should be determined in advance, when formulating the strategy, and not decided as you trade. Therefore, every trader should decide in advance their loss limit and each trade's risk-reward ratio.


• Maintain Documentation
  Another important factor when formulating your Forex trade strategy is documentation. A shrewd trader will always maintain well-kept and updated records of each day's trades and the resulting outcome of each trade. This helps the trader in monitoring and determining the effectiveness and profitability of the trading strategy they have employed. Proper documentation also enables the day trader to avoid repeated mistakes while at the same time to duplicate the profitable and successful strategies.


• Hedging
  The final factor that a day trader should consider is hedging. Hedging is the purchasing of one currency pair plus another currency pair that is inversely correlated to the first currency pair. This may not produce high profits but it does provide profits and almost eliminates the probability of loss.

Shawn Sofo James has 7 years experience in the Financial Markets, for PRO Investment Bank as an Investment Analyst, before becoming a day trading expert.
Tip:
Be updated with the latest Forex News if you want become a successfull trader.

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