Day Trading Foreign Currency

Day Trading Foreign Currency

Foreign currency trading is a high risk and high reward business. You need to devise strategies to make profits in the market on a sustained basis. Always remember that day trading in foreign currency is not the ideal way if you really want to have a long-term perspective.

Day trading in foreign currency exchange is the same concept as day trading in securities markets. You take a short-term bet on the price movements of various currencies in your portfolio. Thus you gain or lose depending upon the intraday fluctuations in prices of these currencies. Whether you are long or short at a particular point of time in a day depends upon your assessment of the likelihood movement of prices later on during the day.

Foreign currency trading

Let us explain by a simple example. Suppose you are short on Yen in the morning session of trading (meaning that you have sold yen at a price). It means that you expect Yen to decline further in the day so that you would be able to buy back Yen at a lower price and make a profit in the process. Here you are taking a bearish outlook of the market.

Day trading foreign currency 

On the contrary, if you are long on Yen (meaning that you have bought Yen at a price), it means that you are bullish on Yen and expect it to rise further so that you will be able to sell it at a higher price and make money. Day trading foreign currency thus means taking a concise term view of the market and is fraught with risks and the possibility of huge capital losses.

Foreign currency market

It is always advisable to have a long term outlook, especially in the highly volatile foreign currency market. This way, you are not dependent on the vagaries of Intraday shocks and expect your capital to build over a period of time.

Foreign Currency

Have an assessment of the economy, performance on the inflation front, policies of central banks of the country, and then make an informed decision, without worrying about short terms movements. A large number of traders have lost slowly while betting on day trading foreign currency. There is still no foolproof strategy that can shield you from losses if you have an extremely short horizon.

Day Trading

If you really want to start in day trading, take smaller bets, just to have a feel of the market. Keep your stakes on a limited scale and closeout as soon as you get a chance. Do not forget to place a stop-loss position if you want to avoid carnage and scalp out at an opportune time. It is a high-risk proposition, and there are better ways to make money than day trading foreign currency.

When you get enamored by so-called success stories of day trading foreign currency, remember that Rome was not built in a day. It takes time to make your fortune. Never allow greed to overcome reason.

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