Forex traders have the option of trading in multiple time-frames. But, which style is best suited for those who want to trade within a day? Day trading is exactly that style. It involves short-term trading in one day to earn profits in the financial market.
Those who are venturing in the forex jungle need to know certain basic ideas and styles about trading that will let them profit quickly. One of these includes day trading, which lets traders trade currencies over shorter time frames.
Those who are pressed for time will find day trading most suitable to their needs. One starts analyzing the market at the start of the day and monitors it until the day is over.On the other hand, those who like trading on any other time-frame should look towards either scalping or swing trading. Let’s go through the concept in detail to know what it is all about.
Types of Day Trading
Those who like to day trade often utilize one or many strategies to maximize profits. These are as follows:
This type of trading involves determining the overarching trend by observing the charts with a longer time frame. Once you know what the trend is, you can move to the smaller time-frame chart and find out opportunities that are there in the direction of the trend. On the shorter time frame chart, you use indicators to find out when to enter a trade.
This is similar to trend trading but once the trader has ascertained the overarching direction, s/he trades in the other direction. The main concept is to look for when a trend ends and get in quickly as the trend is reversing. Although it does constitute higher risks, the payoffs are better.
Those who implement this strategy should be quick on their feet once they find that the trend is reversing so as to open the position at the ideal point. This strategy is favorable to those who understand the movement of price and are confident when they have to bet against it.
This strategy is ideal when one understands the current price action. While inspecting the chart patterns, one looks at the highs and lows that occur in the day and also keeps an eye on how big the difference is between them.
Every time it hits a high point, it drops down, and the same is true the other way around. The trader may look to trade based on his/her idea of where the market is headed. This is called range trading. Those going long will buy at the low price point and sell at the high point. On the other hand, those going short will buy at the low point and sell at the high.
In this strategy, one observes the range that a pair is making during a particular number of hours in the day and places a trade on either side of the range in the hope that one gets hold of a breakout in one of the two.
When a pair has been moving in a tight range, this strategy comes in handy as it indicates that there is about to be a big move.
Day trading is of particular importance to traders who take a trade with a time-frame of a day. Within it, a trader can utilize one or many strategies to maximize profits. Those mentioned herein are some of the fundamental day trading strategies that a trader must know about.