Forex Day Trading Strategies Have To Take Account Of Particular Market Movements

Posted at by ifydcat on category Finance

Participants in the foreign exchange market are always advised to develop a strategy that works for them, and to stick to it in a disciplined way. Forex day trading may be thought of as a strategy in itself. However the strategy needs to be more complex than simply sticking to normal daily routines and thinking in terms of the morning as being eight o’clock and the evening five o’clock.

There are swing traders, long term investors and day traders all active in the market. The first step in a strategy is to decide which kind of player one is. If one’s preference is for being the latter kind of trader then it will be necessary to resist the temptation of suddenly become a long term investor. Day traders have to stick with the philosophy that a bird in the hand is worth two in the bush.

The foreign exchange market is open day and night. This adds considerably to its liquidity but means that a day does not necessarily start at eight in the morning and end at five in the evening for all participants. Although trading is continuous there are patterns of volatility.

Eastern markets in Hong Kong, Korea and Japan wake up whilst America and Britain are still asleep. When London awakes America is still asleep and when the USA awakes Tokyo has gone to sleep. Although trading never stops there are naturally periods of volatility coinciding with the daily routines of participants.

A day according to the World Wide Web may be regulated by events on the web, so traders cannot afford to stick to routines that have ruled their lives since birth if they are to stay abreast of the game. For some this may constitute a problem but for others it is all part of the new and exciting world.

If a strategy involves taking many small profits and losses over a restricted time period the foreign exchange market with its high liquidity and volumes is ideal. However, the periods of maximum volatility may not be convenient. In such cases some people invest in a robot that will trade automatically for them In many cases a machine might to a better job and stick more rigidly to a system than a human being.

Forex day trading may involve a large number of trades with tight stop losses and take profit limits. Hopefully the profits will outweigh the losses, resulting in a total profit at the end of the day. As part of such a strategy a participant may decide the he needs to key into the financial news flow. Announcements of employment and interest rate changes may cause sharp market movements. These may be exploited for quick profits within a few minutes. Some strategists remain glued to the news channels on Fridays when these news items come out. For many people, late Friday afternoons may be the busiest time of the week.

Thankfully, very informative and direct to the point trading news can be accessed anytime online. The fast uprise of forex brokers review sites in numbers helps a lot in determining reputable ones.




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