Ins and Outs of Forex Day Trading Strategies

021, Apr 2022

 

Let's be a little honest here, what comes to mind when you think of forex day trading strategies?

Well, from the perspective of a non Forex persona, I can think of a few things as... 

- Create trading strategies only for the day? 

- Trade during the day and create strategies at night?

- Strategies that can be generated only in the daytime?

Or, how about all of these?

Theoretically speaking, Forex day trading strategies are short-term speculations that are often seen as a quick way to conquer the trading markets.

Anyways, from all of these misconceptions stated above, we can probably relate to one thing: there's a gigantic possibility that the following perceptions would match any non-market traders. But what about those actual market traders who are comparably more interested in taking naps than creating actual day trading strategies? 

And...We get that creating trading strategies might often feel like pulling a trigger on our very own self-consciousness. But it's also 1000% true that you won't find the ray of success until you come up with a solid trading strategy whether it's for day trading or scalping.

Having an efficient strategy pays off! Henry Mintzberg also lives by what he said himself, “Strategy is a pattern in a stream of decisions”

So, you get the idea, right?

Moving on, the term "day trading" can often create several uncertainties among the novice market folks; therefore keeping that in essence,

Let's break down everything about "day trading strategies", and for that, we'll be looking at different factors (including real stats and user overview) which eventually will lead to a best-case scenario.




Let’s get right into the data…


 Highlighting The Primary Aspects 


Along with these characteristics, I'm also going to share with you my very own POV regarding day trading and all its strategies (including some valuable tips on how to start day trading fruitfully). Also sharing a quick infographic regarding the topic - "Forex Day Trading Strategies". Go Top

 

 

What Is Forex Day Trading?

Theoretically, Forex day trading simply implies both opening and closing specific trades within a particular day, and that's why it's called day trading, after all, as we can guess from the term "day trading" itself. Besides, these trading styles can be implemented in the diverse trading markets, but it's been getting used on Forex, stocks - index markets more frequently in recent days. 

Wondering why exactly?

While using day trading strategies a trader can bring out immersive trading opportunities due to the short market movements and sudden fluctuations. 

Traders basically open trade at a short position and close the trade before the end of the day. Due to the IMMENSE liquidity that Forex and the stock market possess, day trading often turns out to be a jackpot for retail market traders. Go Top

 

Numbers And Figures

Forex day trading strategies ( in short, absolute strategies which are solely made for day trading) are without a doubt one of the most efficient and transparent trading strategies but it might often sound a bit tricky especially if you're relatively new in the Foreign exchange industry.  

That being said, we've analyzed over a thousand blog posts and books and came up with some decisive numbers and percentages. Specifically, we've focused more on the diverse factors ( including chart formats and user overviews) so that nothing remains in the dark.   

And... you would be surprised to learn what we found out!

via GIPHY

Since 2012, a few myths have been still ongoing that day trading is a total failure 68% of the time, but legal sources and experienced traders of that exact time stated otherwise. As per Wikipedia,

The number of day trading strategies users has grown drastically (more than 55%) over the past nine years. The success rate is almost 81.23% which is OBVIOUSLY pretty impressive if you look at the odds.

Not only that, the profits that were made executing day trading strategies might also come in handy as SOLID proof. 

Furthermore, as per several logistic Forex media companies, day trading strategies users had a profit ratio of 78.30%, whereas on the other hand scalpers had a profit ratio of only 43% and just to be clear these speculations are judged using the info from early 2010 to 2018. So, it goes without saying that, due to the evolution of technology and other trading opportunities, day trading strategies are now even more accurate and profitable than before. Go Top

Is Forex Day Trading Profitable?

To be honest, Forex day trading can be quite effective if a trader can pull the proper execution of the day trading strategies.

While staying in a day trade, he or she will have to be SUPER patient with all the tools and trading charts since a single error can cost them all of their capital. 

Note: Before using day trading strategies you should always stay at wit since there are a lot of risks involved.

However, it's better to spit out that Forex day trading comes with a lot of risks and vulnerable factors that shouldn't be ignored at any cost since all of us trading in the online market are quite familiar with the fact that narrow time frames can often expose us to uncertain trading risks. 


Read: How To Get Rid Off From Forex Trading Scams Or Frauds



Moreover, certain spread bets or CFD trading also invites unnecessary risks for the market traders. So, as you can see, using day trading strategies comes with greater risks and there's no denying that. 
Besides, unexpected news events can often cause unstable volatility in the Foreign exchange market. Therefore, you should avoid using aggressive leverage to stay intact from substantial losses.

Moving on, you should also bear something straight in your head that using stop-loss orders won't guarantee that your orders will get closed on the exact market point where you want them to be and the primary cause behind this is the unstable market volatility which also goes by the name "slippage". 

In any case, whether day trading strategies are profitable or not entirely depends on the proper execution of it. If it's pulled off accordingly then without a doubt it'll bring fruitful outcomes otherwise all of your capital will be at stake. Go Top

Rules to Follow In Day Trading

When it comes to the rules and regulations of forex day trading strategies, the first thing that all the market traders should check out is to know better about the order types. If I present it more simply, then order types are the essential thing that helps us to get in and out of the trading market. 

As a reason, if a trader isn't quite familiar with the order types, it'll comparably get more challenging for him to forge a fruitful trading career. So, the best move for a trader is to gain a vast amount of insights regarding execution and order types, SLs, and limit orders.

Having said that, choosing an ideal broker is also SUPER crucial while trading in the online FX market. And for that, it's also essential to find out whether the brokerage which you're opting to work with is tightly regulated or not.

Apart from that, also check if your broker can adapt to the latest trading technologies or not since most of the brokers of current times are providing an ultra-wide range of trading accessories.  

Forex Day Trading Strategies

Being a market trader, it's pretty essential to stay up to date with diverse trading strategies such as day trading, scalping, trend trading, news trading, and the list goes on. Besides, if you're wondering how strategies get fabricated, you'll be surprised.

Most of the trading strategies are the ultimate result of the combination of accurate trading analysis and forex fundamental analysis. Furthermore, day traders use technical and fundamental analysis to place orders on the market points. 

Note: In day trading, traders will definitely require more than one strategy in order to attain decent results. Also, they'll have to be always ready at wit since day trading requires quick adaptation and strategies.

Now, let’s get you knacked with some of the BEST day trading strategies. Go Top

News Trading Strategy

While trading in the Foreign exchange market, you should always keep your eyes and ears open and stay up to date with all the latest financial and political news.

Are you wondering why exactly? 

Since the Forex market mainly deals with currencies, every political and economic factor plays a vital role in the price fluctuation of the currency pairs. 

Therefore, it's even more important for the traders to keep their eyes and ears open while trading in the FX market as well as act upon all the uncertain circumstances accordingly. 

Specifically, you should stay updated with economic indicators, interest rates fluctuations, pair prices, and swift political news.

So, you know what to do, right?

Trend Trading Strategies 

While engaging in day trading, one of the most common yet efficient trading strategies that traders love to approach is trend trending. And when it comes to following trends there is a specific saying that many traders abide by. What exactly is that?

Well, it simply goes like this, " while trading, remember that trend is your friend!"

This is something I also live by in terms of professional trading. Moving on, let's get back to where we left over regarding trend trading strategies. In trend trading strategies, a trader often needs to look at longer time frames than usual.

Which basically helps to identify certain trends over time. Ultimately, when an overall trend gets proper settlement traders will be able to look at smaller time frames to figure out the direction where the trend is rumbling through. Go Top

Momentum Trading Strategies

Trend trading strategies might be considered as go-to by a vast majority of traders but it's also quite debatable that momentum trading strategies are also HUGELY popular among the rising online market traders.

While being in the midst of momentum trading, all you have to do is find out the solid yet reliable market price points that are packed with comparably high trading volume.  To be precise, the primary motto of using momentum trading strategies is to have patience and wait for the perfect moment to place an order (in your desired position). 

Note: In order to thrive in day trading, I'll strongly suggest you make implementation of specialized momentum trading indicator. Go Top

Pursuing Strategies Identifying Breakouts

If I start to name the most basic and ordinary day trading strategies, "Identifying breakouts" will be on top of them. Since using this strategy you're required to utilize the BIG market moves. 

And in terms of "BIG moves," we all know how they exactly take place in the first place, right? 

And... I know what you're thinking at this point. So, let me assure you that you're not exactly wrong!


These so-called BIG market moves are preliminarily caused by sudden economic data that gets leaked in the middle of the day or maybe impulsive political decisions that bring the tore on a country's economic aspect. 

Besides, if we talk about a more theoretical definition of the breakout strategy then it's gonna sound a bit like this:

"Where traders put their butt but on the damn chair and look for market breaking points while listening to political rubbish!"

That didn't sound too bad, or did it?

It can be referred to as an ideal trading strategy for those who are always up to date with what's happening around the world. Go Top

GO-TO Trading Indicators For Day Trading

Before anything, you have an excellent comprehension of primary and fundamental trading indicators is SUPER essential no matter which trading strategy you want to implement. And same accords also goes with forex day trading strategies since while using day trading you'll need to think quickly and make haste decisions that too, more than a couple of times within a day. 

For a reason, it's essential that a trader contains all the basic skills and expertise of reading trading charts and time frames for bringing out immersive results at the end of the day. 

Here are some of the BEST trading indicators that have a proven track record when it comes to day trading. Go Top

Day Trading Indicator: Fibonacci Retracements

Fibonacci retracements are one of the most common as well as popular trading indicators that day traders prefer the most.

It basically gets derived from specific numbers which were introduced by Italian math genius Leonardo of Pisa back in the 13th century. 

Moving on, in a day trade, making the implementation of Fibonacci retracements is somewhat subjective since a lot of price points get wobbled around throughout the day!  Therefore try to execute all the essential price points with Fibonacci, which may ultimately bring better results. Go Top

Day Trading Indicator: Simple Moving Average

The SMA aka Simple Moving Average is widely known as the lagging trading indicator as it immensely depends on data filtered out from the past. Using that same continuation, the longer you'll use SMA, the more lag you'll get in return. Though it's undoubtedly a tremendous technical indicator tool, it only performs better with trend lines and volume analysis. 

In most day trading scenarios, SMA is found on a specific chart point along with EMA (Exceptional Moving Average). 

Despite having some resemblances and varies, they work more fluently if you mix them up while highlighting trends and momentum in day trading. Go Top

Day Trading Indicator: Bollinger Bands

Heartfelt thanks to John Bollinger for giving us one of the SUPER efficient trading indicators Bollinger bands. This technical indicator is widely known for fabricating channels around the market price movements based on moving averages and standard deviations. 

While staying in the midst of a day trade, BB (Bollinger Bands) helps to indicate rising and falling uptrends and downtrends so that market traders can attain a complete advantage and open profitable trading positions. Besides, if the indicators fail to identify the ongoing trend ( which is occurring at the exact time), then it's safe to assume that the market is losing its momentum.

Truth to be told, the price may drop over time even if there's a strong uptrend taking place, and if that happens, then, the price will appear above the SMA line (at the middle point). Go Top

Day Trading Indicator: RSI (Relative Signal Index)

Despite having a bunch of advantages, the RSI (Relative Strength Index) often gets stayed in the shadows since there are a lot of Forex newbies who don't exactly grasp the mechanism of RSI. 

As a result, it often gets recognized as the underappreciated one compared to other technical indicators. Anyways, against all of the odds, the RSI is pretty much helpful when it comes to day trading or intraday trading.

However, the base version of RSI indicators won't be much of a help in uncertain trading situations; instead, going for dynamic RSI indicators should be your trump card. By using appropriate trading indicators, it's relatively easier to find fruitful entry and exit points for the day traders, even in the most volatile situations. Go Top

Day Trading Mistakes You Should Avoid

The Foreign exchange market is the most accessible trading market across the globe. All you need is just a smart device ( computer/phone), an active internet connection, and you're set to go.

Honestly, all of these might sound too appealing but the truth states otherwise. Getting blind by greed a lot of traders often make mistakes, especially in day trading. 

Which you should DEFINITELY be avoiding!

And... let's make it even better! Here are some of the most common forex day trading strategies mistakes that you should avoid no matter what:

Don't continue trading if luck isn't on your side: Most traders are victims of these trading mistakes since we humans get carried usually on sentimental things. 

While approaching dau trading, there are two contradicting factors on which you should keep your bottoms up, win rate ratio and risk-reward ratio. 


Latest: China Should Set Up Carbon 'Connect' Scheme To Woo Foreign Investors



Ignore Placing Stop Loss: Positioning stop loss can often be a lifesaver in terms of market volatility. It's one of those day-to-day things you don't want to ignore at any cost, or you'll pay BIG time! Theoretically, a stop loss is a termination ticket that gets you out of the market in a specific position that you can set up manually. So, are you going to forget about it ever again?

Risking More than You Can Afford: A reliable risk management strategy's first and foremost thing is to double-check what you can afford to lose and trade based on that mathematical figure. Taking unnecessary risks and losing more than you can afford to lose isn't something to follow. Therefore, try to be a little mature about it. 

Going Berserk ( Trying to recover what's lost): Despite having a full-proof risk management strategy, there will often be times when you'll lose a few trades and which is entirely normal in terms of online trading. And it's also true that your trading psychology will force you to get in there and win everything back. You'll be risking too much, which can lead to ultimate destruction. Therefore, it's better to avoid that dangerous circumstance. 

Selecting A Wrong Broker: Choosing an ideal Foreign exchange broker is an ABSOLUTE necessity if we're talking about Forex trading or online trading. If the broker you've teamed up with provides proper money management procedures, a wide range of trading tools, and efficient trading platforms, you should leave the broker ASAP! It's important to take quality time while choosing a reliable trading broker and for that tray to read as many online reviews as possible. Go Top

Conclusion

Lastly, if it's concluded one of the most anticipated topics, "day trading strategies", it won't sound complete since there are a lot of prospects that need actual uncovering. Point to be noted; there are countless fantasies about day trading that You'll be better at knowing. 

It usually goes like this: 

- Forex Day trading strategies ensure a 1000% success rate.

- Day trading is referred to as a scam in Forex trading. 

- Day trading strategies don't require any hard work while fabricating.

- Forex Day trading strategies are only consistent with the RSI indicator.


Guide: Three Best Forex Trading Indicators



Trust me, all of the facts stated above are delusions created to press down the significance of day trading and its glory.

Therefore, keep them in check, will you?

And it's also true that the learning process will most likely take some never wrecking time, but in the end, it's worth the effort.

Let's ready to challenge the odds of the financial industry while achieving mastery over day trading strategies? Well, you better be!

Frequently Asked Questions (FAQ)

Q.1 Which strategy is best for day trading?

- The best day trading strategy is the Market Opening Gap strategy. As its name indicates, day trading refers to a strategy in which a trader opens and closes positions in a particular trading vehicle during the day but generally doesn't hold any positions overnight.


Q.2
Is 1% a day good for day trading?

The 1% rule for day traders limits the risk on any given trade to no more than 1% of a trader's total account value. Traders can risk 1% of their account by trading either large positions with tight stop-losses or small positions with stop-losses placed far away from the entry price.

Q.3 Is day trading like gambling? 

It's fair to say that day trading and gambling are very similar. The dictionary definition of gambling is "the practice of risking money or other stakes in a game or bet." When you place a day trade, you're betting that the random price movements of a particular stock will trend in the direction that you want.

Q.4 How do you profit from forex compounds?

Having positive net pips is the key to compounding a forex account. The next requirement to make the system work is that your trade success rate has to be above 51%. You need to be successful from your entry to the exit rate at more than half the time.


Q.5
What happens if you get flagged as a pattern day trader?

If you day trade while marked as a pattern day trader, and ended the previous trading day below the $25,000 equity requirement, you will be issued a day trade violation and be restricted from purchasing for 90 days.


Q.6
How do I get rid of pattern day trader status?
  • Tap the Account icon in the bottom right corner.

  • Tap Account Summary.

  • Scroll down and tap Day Trade Settings.

  • Toggle Pattern Day Trade Protection on or off.