become a forex trader

Want To Be A Forex Day Trader? Here’s How You Can Start

become a forex trader

Foreign exchange is one of the most fluid and lucrative markets globally. In April 2022, trading in OTC FX markets reached $7.5 trillion (₦5.7 quadrillion) per day—a 14.4% increase from the $6.6 trillion (₦5.1 quadrillion) reported three years earlier. If you’ve ever considered day trading, now’s the time to do it. However, keep in mind it’s not quite as simple as buying or selling currencies within the same day. Getting monthly returns from any investment is a challenge, but it forex, you must plan to succeed.

Here’s how you can start day trading in forex.

Determine your trading style and strategy

First and foremost, ask yourself what you want your overarching approach—your trading style—to be, examining the pace you want to transact, your currency pair selection, your trade rationale, and your risk appetite. This will set apart the methodologies you’re willing to use when forex trading. From that group, establish the toolkit of methods you actively want to practice—your trading strategy—with the added consideration of what data you wish to track when intuiting the right time to make a trade. Data tracking is especially important for day trades, as you must be precise about when you buy and sell and base your actions on the information you trust. Decide which strategy is right for you and work at sharpening relevant skills.

Choose the right platforms

Once you’ve determined your trading style and strategy, choose the right forex platforms that align with them. One of the most crucial decisions you make in your forex journey is selecting your broker, which facilitates your trading. In forex trading and in day trading, in particular, it is crucial to have a broker that offers reliable features. These can include trend forecasting software, dynamic requirements adaptable to market conditions, an economic calendar that provides you with high-impact news regarding your trades, and low spreads that can remain fixed for the majority of the trading day for maximum transparency and execution control. These tools will lay the groundwork for your forex success.

Set up risk management tactics

Depending on your methodology, you might be gearing towards a vast win/loss ratio or a more conservative approach. Either way, you’ll want to manage your risks, as day trading depends on quick price changes and the volatile elements that affect them. A great tactic for this that grants you both flexibility and a safe limitation is giving yourself a minimum capital of around $5000 (₦3.8 million), which is an excellent base to earn profits that can compensate your time, while taking into account the 1% rule—the principle of not risking more than 1% of what your account contains. In this case, you’ll be able to risk $50 (₦38,100) safely. Another tactic is picking a stop-loss point to avoid futile investments. Your stop-loss point is the price wherein you accept a loss on the trade and sell. Following these guidelines will help you prevent losses while taking reasonable risks to incur profit.

Monitor and evaluate your trades

In day trading, you only have a compact window of time to transact—therefore, it is essential you monitor the market effectively to enact your strategy. To do this, keep track of technical and fundamental indicators. Technical indicators utilize mathematical calculations to identify strong market entry and exit points. Some you can use are the Relative Strength Index and the Average True Range. On the other hand, fundamental indicators study the socio-political and economic forces altering currency prices, including the gross domestic product and inflation. By noting these factors as early as possible in your trading journey, you can better formulate a portfolio strategy to suit you.

Day trading requires a high level of commitment to engage with your trades—with the benefit of potential high rewards. Use the guide above to hit the ground running.

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