It is a little funny how the media and other self-acclaimed finance experts project Forex trading. It is presented like a lifesaver or a shortcut to fortune. Not only do they expect all people to believe that Forex investment can make them as rich as investors who have found fortunes on Wall Street, but they also make them believe that Forex trading is as easy as selling and buying potatoes in the market. They forget to point out that there are risks, and these risks are possibly so enormous that they can cause financial devastation.
First Things First
Before actually looking for a Forex day trading strategy, an interested investor must first ask himself, “Is it really for me?” Various advertisements have pointed out that even normal citizens with no background in finance or basic economics can make it big in currency trading. However, this is not always true. In fact, this is more of an exemption than a rule. Although we have heard a number of success stories about the average investor making it big in Forex trading, this only happens after getting a thorough Forex education and practice trading for several months (either paper trading or using a broker demo account). Therefore, the best Forex day trading strategy that you can receive is, “Don’t Jump!” Think First!”
There are several questions you need to ask yourself before risking real money:
- First, do you have a sufficient knowled
ge about the marketplace? Having knowledge about the basics of the Forex market such as what the currency pairs are, what are the major 4 currency pairs, what are the major and minor Forex exchanges, what time are they open (GMT times), what is a pip, how do you calculate a pip’s value, what are the various entry and exit orders you can enter, what distinguishes a good broker from a poor Forex broker, what is a dealing desk, what is the difference between a market maker and ECN broker, what are price chart patterns, what is money management strategy, etc., is critical to your profits. Lacking fundamental knowledge about this very complex investment area leads to disaster.
- Second, do you understand some of the basic strategies of trading? For example, do you know how arbitrage works? Do you need what scalping, swing trading and position trading are? If not, you should think twice before entering.
- Third, what are your intentions? Do you believe that Forex trading is a fast road to riches or do you understand the risk and that you must proceed cautiously? You must only invest an amount you can afford to lose. You must use prudent money management so that a few losses don’t wipe out your account.
These three things are some of the most basic questions that you have to ask yourself before actually thinking of Forex day trading, and then you still have to learn different Forex day trading strategies such as scalping and what Forex indicators you need to put on your charts to give you an edge on your buy and sell orders.