Are you looking for tips on how to become a forex trader? If so, day trading may be the most effective way to get started.
First things first: what is day trading? Much like scalping, day trading is another short-term trading style. Most of the time, you’re taking one trade at a time and closing it out within 24 hours.
Now, day trading is not for everyone. This is usually a high-leverage game that requires you to track, analyze and execute your trades patiently. If you’re short on time or have a day job, you should look into other trading styles.
That said, day trading is the fastest way to learn how to trade forex successfully. If this is something that tickles your fancy, here are 4 tips for you to consider.
1. Avoid Averaging Down
Many traders find themselves averaging down in short trades. Most of the time, you should be doing your best to avoid this practice.
See, averaging down places you in a losing position. If you lose the initial trade, you need a larger return to retrieve any lost capital. This usually leads to forex trader salary losses, as traders can’t stay liquid forever.
Due to the short time frame for trades, day traders are quite vulnerable to averaging down. What can you do about it? Simple: if a trade goes awry too fast, use the opportunity to make a quick exit.
2. Wait For the News
As experienced traders know, major news events will always influence the market.
That said, short-term market movements will usually appear illogical. As volatility surges, all sorts of orders will start hitting the market. Until a real trend emerges, you should expect to see a lot of whip-saw action.
In other words, you shouldn’t try to predict how the market will react to new trends. Instead, wait for additional figures, statements, and forward-looking indicators.
3. Don’t Risk Too Much
Want to protect your currency trader salary? Don’t take on excessive risks.
In day trading, this means implementing a daily risk maximum. That can be 1% of your capital or your average daily profit over the last month. If you have $50,000 on your account, you shouldn’t lose more than $500 a day.
Why is this important? Well, this method ensures that no single trade will have a significant impact on your account. Keep in mind that professional traders usually risk far less than 1% of their capital.
4. Have Realistic Expectations
Unrealistic expectations are the bane of many inexperienced forex traders.
Here’s a simple truth: the market doesn’t care about our individual desires. Finding a reliable method for profiting from each move in isolation is impossible. Believing in these methods will only lead to errors in judgment.
Instead, try to take what the market provides at its various intervals. For example, most trading days are volatile at the start. As long as you’re aware of this fact, you can try to exploit it by using a specific set of strategies.
More on How to Become a Forex Trader
Developing a trading plan can help you put these tips into action. If the plan yields steady profits, don’t change it. With enough forex leverage, even small gains can become large.
Want to know more about how to become a forex trader? Your first move should be to find the right broker. Here are 9 tips that can help you out in that regard.