What is a Day Trader?
A day trader is a person who buys and sells currencies throughout the period of a day, which is also known as an Intraday Trader. Any open positions they hold will not be brought forward to the next day or same day square off. Any buy or sell positions of the currency pair will be settled prior to the closing of the market on any given trading day.
When it comes to day trading, any Forex trader looking to enter this form of trading will need to become expert in the practice of trading within these parameters. Therefore, when it comes to how to day trade, an investor who is not used to make fast decisions will be at a disadvantage.
What It Takes to Become a Day Trader?
There are few things to consider before moving into intraday trading. An investor must be in a position where they can be honest with how much they can allow for intraday trading. Without the time to commit for long time and pay close attention to the global markets, it is unlikely that success will follow.
Aside from simply having the time to commit, in order to become an expert in day trading, investors will be required to:
Plan a structured trading plan -
Without a suitable trading plan, there is no direction. A plan will provide a set of principles to obey to in order to make a considerable profit and protect against rash moves in Forex market.
Have Sufficient capital -
Profits are far from guaranteed. Swallowing losses are a part of Forex trading, so having enough capital to make background and keep them in the game.
Deep Understanding of the market -
Without basic knowledge of the markets and how it functions, a trader is effectively operating without any direction. Profits are unlikely to just fall into a trader’s lap without knowing how to trade effectively in the market.
Know how and what to trade in the FX market -
There is a notable difference in how stocks, futures and options, EFT’s, mutual funds, and more trade. This mixes the requirement for a trading plan and strategy. Without any idea of not just how these operate, but how they can impact trading capital, is a bad idea.
Learn how to manage capital and plan for any unforeseen events -
It requires deep knowledge of what to expect. The psychological and sentimental aspect of trading is very important and day trading is no different.
Additional Checklist for Day Traders
Also, to become a day trader, make sure you have the following:
A very solid, back-tested and proven Forex strategy. It needs to be written down and it must have well-defined rules and guidelines. Specifications such as times of entry, exists, take-profits and cutting losses are mandatory.
A Forex trading platform is obviously required which is provided cost-free by the broker. A trader can use the popular MT4 trading terminal or Forex4you’ full featured trading platforms.
A trustworthy source of reliable and accurate information. This will also help the trader to learn about upcoming events, which might affect his daily trading.
Patience and Discipline are the two important traits always need to be exercised. Wealth is not built in a day or a week; it is slowly accumulated with consistent Forex trading strategies.
In the next lesson, we will take a closer look at the different day trading strategies, which the Forex traders are using.