Day trading is a term that is reserved for Forex traders who book their profits and complete the transaction within the day. This is a strategy that is similar to investors buying stocks and selling them by the end of the day and not holding on to them for longer duration’s. Often there is little movement in the values of currencies in normal circumstances. However, because of the high leverage provided by the brokers, intra-day trading can be profitable even with little movements of currencies. Despite this fact, many of the investors who choose day trading are disappointed because of losses they accumulate in their trading account.
There are many different strategies that can be used by an investor who is interested in intra-day trading at the Forex markets. Out of these, three common ones that are also easy to understand and implement are described below.
This is an intra-day technique that lasts a few minutes where the investor exits from a trade as soon as it turns profitable. This is a strategy that aims to give the investor small profits. With the slightest of movement of the price of a currency, an investor can book a profit and exit from the trade. Skimming allows traders to make small profits of 5-10 pips with every trade but they amount to a significant sum of money by the end of the day. Do make sure that you have a broker with small brokerage commissions otherwise you may lose money using this strategy as the brokerage commissions may exceed the profits made per trade (if your capital amount is small).
This is another intra-day trading technique that is good for beginners who want to book their profits every day. This requires the traders to successfully identify a shift in the momentum of the currency pair on a daily basis. To understand momentum, you can use the analogy of a ball rolling down from the peak of a mountain when it starts slow but picks up dull speed after gaining momentum and then slowing down as it reaches the ground and strikes an object. The most common indicator used for this would be the Moving Average Convergence-Divergence (MACD) indicator.
This is a common day trading method that allows investors to make profits daily in Forex markets. Pivot points are the low of the day (LOD) and the high of the day (HOD) and require the trader to buy at LOD and sell at HOD. The basis for this method of trading originated in the trading pits in the US where traders would have a card with the lowest and their anticipated highest price that they would trade. This causes traders in the US then to have an idea of a lower and higher pivot point. This pivot trading strategy is quite an important one to learn and master to profit from swings in the currency pairs.