Forex Day Trading Guide for Beginner

November 3, 2023

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It is better always to have a strategy for forex trading. One of the most common forex trading strategies is day trading. What is day trading forex?

Day trading is one of the ways that traders make money from the volatile market of cryptocurrencies. There are different methods and strategies for trading in the financial markets. Considering the characteristics of each strategy, each person can choose one of these trading methods based on his preferences.

Due to price fluctuations, financial markets can always provide good opportunities for traders. Meanwhile, day traders try to use these opportunities favorably. According to traders’ expectations, they can trade at different intervals. In day trading, traders do not keep their trading positions for the next day. Therefore, the various tools that traders use for analysis in daily trading are all used in order to achieve the trading goal in this short period.

What is Forex Day trading?

Have you ever heard of day trading or intraday forex trading? Forex day trading is a trading system where the opening and closing of the trade occur both on the same day. This type of trading is done in any market, mostly in the stock market and forex.

A forex day trader uses small price movements in a day or session. In fact, the trader opens positions during the day or session and closes them before the end of the day. The trader uses the market movements during the daily trading session. As a result, traders with this strategy prefer liquid markets such as currency markets, stocks, or index markets.

The prerequisite for success in day trading forex is to have sufficient knowledge of the market. If you are new to trading, you may ask yourself, “Is Forex good for day trading?” As you know, due to the high liquidity of this market, many new traders start day trading in forex. If you are interested in learning how to day trade forex, you can find all the information in this article.

Daily trading of digital currency

Traders in the digital currency market can also do day trading. The day trading strategy in digital currencies is the same as in other financial markets. This means that the trader completes a trade in one day. Therefore, in daily digital currency trading, the trader does not keep his trading position open for the next day. Of course, it should be mentioned that in the daily trading of digital currency, the trader must follow the news and events related to the cryptocurrency. News and events affecting the price of digital currencies can cause the trader to face problems in his trade by causing price fluctuations.

Day trading in forex

The forex market is one of the financial markets where traders buy and sell the currencies of different countries. Traders can also use daily trading in this market. One of the characteristics of the forex market is that there is no central market for it, and all these purchases and sales are done electronically and through computer networks.

In the forex market, trades are carried out in the main financial markets of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich. For example, when the trading hours in the American market are over, the forex market in Tokyo and Hong Kong starts.

Except on Saturdays and Sundays when the forex market is closed, traders can trade in this market at different hours of the day and night. When important economic news and reports are published, the market reacts and experiences severe fluctuations and so-called goes out of analysis. Traders usually do not trade during these hours.

Gold day trading

Since ancient times, gold has been of great value in human societies. In the United States, until 1971, gold was used as a backing for printing dollars. Today, central banks around the world have kept a lot of gold reserves for emergencies.

On the one hand, gold is widely used like common currencies such as the dollar and euro. On the other hand, it is like commodities such as oil that is extracted from the ground and has special physical characteristics.

Unlike other commodities, the price of gold fluctuates independently of its supply and industrial demand.

Meanwhile, it is interesting to know that only 10% of the world’s gold is used for industrial purposes, and the rest is used in the production of jewelry or for investment purposes.

Gold and US interest rates

One of the factors that determine the price of gold is the interest rate. Interest rate changes force investors to make different decisions. When interest rates are low, investments in bonds or money deposits pay very little. Therefore, investors turn to investing in gold to preserve the value of their assets. On the other hand, when the interest rate increases, the profit from buying bonds and monetary deposits becomes significant. In this case, the desire of investors to buy and keep gold decreases.

The relationship between gold and the dollar

The dollar index chart shows the value and strength of the dollar in global markets. This chart has an inverse correlation with the price of gold in many cases. In simple terms, many times, when the dollar index chart is bullish, the gold chart is bearish, and vice versa.

Logically, given that the value of gold is measured in dollars. Therefore, strengthening one of them will decrease the value of the other.

In simpler words, when the value of the dollar index increases, you need fewer dollars to buy an ounce of gold, and on the contrary, when the value of the dollar index decreases, you need more dollars to buy an ounce of gold. But this explanation is not true about the correlation between the dollar index and gold at all times.

Day trading strategy for gold

People who use various technical analysis tools to fluctuate in the financial markets can also get help from this tool to fluctuate gold. For traders who day trade gold, finding the main trend in the market is of utmost importance. The first step in day trading gold is to find this general trend in the market.

How does day trading work?

There is no set formula for guaranteed success as a forex trader. Adequate knowledge of the market and having a trading plan are both essential but do not guarantee success. Risk increases when prices fluctuate wildly throughout the day.

Commissions and fees for keeping positions open overnight – commonly called swaps – do not apply to day trading. Using day trading strategies makes you not exposed to the risks of large price movements or price gaps.

Day trades that do not carry over to the next day require opening a few trades, holding them for short periods, and making small profits. Forex day trading positions form an integral part of trading volume and provide market liquidity.

Trend trading strategies

Trend trading techniques are usually popular among novice traders. Following trading opportunities in the direction of the general trend is usually considered the easiest and most reliable approach. In applying trend trading strategies, the trader looks for sharp growth. It means that it trades in large volumes that follow the direction of the trend.

In this regard, an old saying related to forex can be mentioned: “The trend is your friend.”

What is day trading forex?

Day trading is often the fastest way to make money in the market, so it has gained a lot of attention in recent years. What is typically not mentioned is that this particular style of trading is complex and requires constant market monitoring. Forex day trading can be very profitable, but it is also high-risk and not suitable for every trader.

The best daily trading indicator

A day trader can use different trading indicators. Which indicators can be the best indicators for Forex Day trading largely depends on the trader’s style, chosen trading instrument, and personal preferences. Combining different tools and techniques can improve the generated signals. An example of a popular combination of Forex Day trading indicators is as follows:

Fibonacci Indicator:The Fibonacci tool shows more profitable areas for the next trading session.
MACD indicator – can be a good complementary indicator.

The best time to day-trade in forex

The level of volatility can be very different during different trading sessions and at certain times of the day. It is important to know the characteristics of the times and sessions during which you will trade and plan your strategy accordingly. Some useful guidelines for finding the best day trading time:

Monday is a quiet day in the market. Day trading in forex requires sufficient price movement over a short period. If the trading volume is low, there may not be enough price movement to execute the mentioned trading strategies. In addition, a lack of liquidity can lead to extreme movements.

The opening of the London trading session is generally a good time for short-term trading because we usually see a lot of activity during this period.

The last hour of trading (in the London session) often shows how strong a trend actually is. How a trading day ends is believed to indicate the continuation of the current move.
Also, the end of the London trading hour coincides with the start of the American trading hour, and trends are usually stronger at this time.

A breakout strategy can be used when a new high or low has been reached. Buy on the first pullback after a new high or sell on the first pullback after a new low.

Do not trade on official holidays or late on Friday.
Consider the price range of the first hour of the market as the range in which the price moves for the rest of the trading day.

Why to use a day trading strategy

The main reason for using day trading in financial markets is to take advantage of fluctuations in short periods. Asset and stock prices in financial markets are always changing. These asset price changes in different markets provide traders with many opportunities to profit from this market by analyzing and predicting the price. Therefore, the smaller the time frame in daily trading, the trader can use more volatility opportunities and trade more.

Of course, it is important to note that trading in shorter timeframes is associated with more risk, and the trader must have enough experience and skill to use these short timeframes. Therefore, by using the daily trading strategy, the trader can make several transactions in one day and take advantage of the opportunities available in the market.

Day trading strategy

The currency market is one of the most profitable markets for day trading due to its high volatility during the day. In daily trading, the trader tries to take advantage of the small fluctuations of the market in shorter periods. When traders choose a cryptocurrency to day trade, they always pay attention to its price volatility. The more the currency price fluctuations are, the more the corresponding currency can give the trader more profit in daily trading.

Of course, using the opportunities that the price fluctuations of currencies provide to traders is only profitable for the trader when he can have a correct analysis of the price trend of the relevant cryptocurrency in the desired time period. It should be noted that the high volatility of some cryptocurrencies, on the other hand, makes their analysis more difficult and complicated. Therefore, in using a daily trading strategy for currencies, in addition to using risk management in transactions, traders should also pay enough attention to the chosen cryptocurrency for trading.

Types of daily trading strategies

There are also different strategies for day trading currency. Some of these strategies focus on the number of transactions in time frames, and others create a special strategy by using certain patterns and indicators in technical analysis. In some other strategies in daily trading, transactions are based on the impact of news and economic reports. Important things are done. Each of these factors can lead to the formation of a special strategy that will ultimately help the trader in his trading.

Scalping strategy in day trading

In scalping, the trader makes numerous trades in the daily trade. In this method, the trader is not looking for high profits and only wants to have profitable trades in total. Some of these trades that are done in short periods may be unprofitable. But the important thing in the scalping strategy is that the trader can get a positive result from his transactions with proper risk and capital management.

Day trading strategies with the help of technical tools

All the tools that exist in technical analysis can be used in daily trading. To choose the best trading strategy, we should try different tools according to our goals and abilities. In the daily trading strategy, we can check the past behavior of the chart in different time frames according to the relevant asset or stock. Then, according to the price reaction in the price patterns, we can predict the future behavior of the price in the daily trade. We can divide these tools into two general sections.

Geometric patterns

The patterns and geometric shapes that the price creates on the chart can be used as a tool for price analysis in day trading. A trader can create a suitable strategy for himself by using all kinds of patterns in technical analysis. Triangle patterns, flags, and ascending and descending angles are popular price patterns in technical analysis.

Technical analysis indicators

Indicators can actually help traders predict future prices by using mathematical calculations that they do on past and present prices. Moving averages and Bollinger bands are prominent indicators in technical analysis.

Trading with news

Important economic news and statistics always influence the prices of assets and stocks in the financial markets. Important indices such as “Dow Jones”, which represent the stock value of a set of large companies, are affected by the release of news and important economic statistics and react to them. In the meantime, traders open trading positions by using the effect that these news have on the price of some assets or stocks. Of course, it should be noted that trading with news requires high experience and skill, and only some people can use it correctly.

Different time frames in daily trading

Paying attention to the characteristics of each of the available timeframes in daily trading can help the trader in choosing the right timeframe. For example, the shorter the timeframes selected for daily trading of currency, the higher concentration the trader needs, and as a result, he may experience more mental pressure. On the other hand, in smaller timeframes, a larger number of transactions can be done in a certain period than in larger timeframes.

Day traders may use one timeframe or multiple timeframes in their trading. Considering that each of these timeframes has its characteristics, in the rest of this article, we will get to know the characteristics of some of these timeframes.

One-minute time frame

Some traders prefer to use short time frames, such as one minute in their daily trading, according to their experience and mood. In the one-minute time frame, the trader can see more details of price changes. Traders who use one-minute time frames in currency day trading plan their day trading strategies with this time frame. Trading in this timeframe requires high concentration and precision, and traders who use this timeframe in their transactions must always carefully follow the price changes in the chart.

Due to the fact that in the one-minute time frame, the price candles in the candlestick chart or the price bars in the bar chart are produced every minute, technical analysis buy or sell signals are produced more quickly in this time frame. This high speed in generating buy and sell signals, on the one hand, provides more opportunities to experienced traders, and on the other hand, it is very stressful for traders.

This timeframe can quickly destroy their assets for people who do not have a proper strategy. Therefore, using this timeframe requires high skill and experience.

5 minutes in daily trading

Each candle in the 5-minute time frame shows a larger time frame than the one-minute time frame. Day traders look for larger price trends than the one-minute time frame. For these traders, the details of price changes in one-minute intervals are less important. According to their trading strategy, these people tend to monitor the details of price changes within 5 minutes.

In order to be able to make successful trades in the 5-minute time frame, as with other time frames, you must first plan your trading strategy on this time frame and check its performance on the demo account before implementing it on the real account. By testing the trading strategy in the demo account, you can check the shortcomings of the strategy in the relevant timeframe and optimize it by applying gradual changes.

In the 5-minute timeframe, the trader faces less stress than the one-minute timeframe and needs less concentration than the one-minute timeframe. In the 5-minute timeframe, a candle is formed in the candlestick chart every 5 minutes. Therefore, buy and sell signals of technical analysis are formed in the 5-minute timeframe at a lower speed than in the one-minute timeframe.

15 minutes in daily trading of

Traders are looking for bigger trends in the 15-minute timeframe than in the 5-minute timeframe. In timeframes lower than 15 minutes, the trader tries to take advantage of every small price fluctuation. However, due to the fact that in this timeframe, a candle is formed every 15 minutes, therefore, the trading signals of buying and selling in technical analysis are less in the 15-minute timeframe compared to the lower timeframes during the day.

Traders may only be able to make one or two trades during the day in this timeframe. For example, in this timeframe, the trader may not be able to obtain a trading signal from chart analysis within two hours. Therefore, traders who choose this time frame should spend more time during the day to trade in order to find suitable trading positions.

The amount of profit received when the price reaches the target and the amount of loss that results from the activation of the loss limit in transactions is more in this time frame compared to the 5-minute time frame. In other words, in this timeframe, fewer transactions can be done during the day than in shorter timeframes.

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In the end

Day trading is one of the most popular strategies in forex. If you are planning to benefit from multiple trades Within a trading day, use the Aron Group’s demo account and experience the market before trading real money.

Day trading is a perfect way to gain small profits from multiple trades within a day, and it is a stressful strategy that is not a perfect choice for every trader. Before choosing to be a day trader, you need to understand your priorities and your risk tolerance. If you’re not patient enough to wait for a currency to rise over a long period, you can enjoy day trading. But if you have a problem making the fastest decisions and adopting your strategies, it might not be a good idea to start forex with day trading.

In this article, we have talked about everything you need to know about day trading in forex in detail. Still, training in real is another story, and you need experience and further knowledge to make solid trading decisions.