Forex day trading strategy for beginners is a very real option. You may come across a lot of wins and losses during your forex day trading career. The truth is, no one can exactly predict how much money you’re going to win or lose. However, there are a few strategies that may help you outweigh your losses in the long run.
So, here are some tried and tested forex day trading strategy tips.
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Breakout
This strategy centers on clearing a specific level on your chart. Breakout traders enter into a long position after an asset or security breaks above resistance. The alternative to that is to short a position once the security breaks below support.
Once the security trades beyond the barrier that is marked, volatility increases with prices. Hence, trends go in the direction of a breakout. For this, you need the right instrument to trade with. However, make sure you know the asset’s support and resistance levels. The more frequently that a price hits the barriers, the more validated they become.
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Scalping
This is another very popular forex day trading strategy. Its basics lie in capitalizing on minute price changes. Quantity matters here. The game is to sell as soon as a trade becomes profitable. Here, you pick up as many shares as possible and sell at a profit. That way, the profits are always substantial.
While this may be a fast-paced and exciting way to trade, it’s also risky. You will need a high trading probability so the low risk to reward ratio evens out. Hence, it’s not so much a thinking man’s game. It’s basically like betting on all the horses in the race.
Attractive liquidity and timing should be your biggest concerns here. Volatile instruments and trading indexes should be your focus. You shouldn’t wait for the market here; you will need to close trades as soon as you get a confirmation.
Momentum
This strategy is quite popular among beginners. It centers on reacting to news in the quickest way possible. It requires making substantial trading moves with high volume when a story breaks. Considering the fact that some stocks may move 20-30% in one direction or another each day, this may be profitable. There’s ample opportunity for you to hold your position until signs of reversal begin to show.
However, you can also try to fade the price drop. Hence, as soon as the price target is hit, the volume begins to diminish. If used correctly, this process is quite profitable. However, this requires keeping a strict eye on the news and selecting the most up-to-date news sources. Each second matters on a new trade.
Reversal
This is a hotly debated and dangerous forex day trading strategy. It’s also popular among beginners and used the world over. This can be classified as trend trading. The strategy is debated because it defies logic since you aim to trade against the trends. You will need to find possible pull backs and predict strength here. For an effective stream of profit, you will need to have an in-depth knowledge of the market for this.
One of the most well-known strategies, it’s also called the daily pivot. It centers on buying and selling the daily highs and lows. Hence, the name given; reversal.
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Pivot Points
This is a fantastic strategy to identify and act on critical support. It’s partly useful in the forex market. You can use it to identify your entry and exit points very easily.
Using these equations you can calculate pivot points, resistance and support points, etc.
Central Pivot Point (P) = (High + Low + Close)/3
First Resistance (R1) = (2 x P) – Low
First Support (S1) = (2 x P) – High
Second Resistance (R2) = P + (R1-S1)
Second Support (S2) = P – (R1 – S1)
Using these trading strategies, you may be able to make some profits in the forex game. A Beginners Forex Day Trading Strategy Is Essential!