Forex Day Trading 2019 – Tutorial and Brokers
Forex trading is a huge market. Billions are traded in foreign exchange on a daily basis. Whether you are an experienced trader or an absolute beginner, finding the best forex broker and a profitable forex day trading strategy or system is complex. So learn the fundamentals before choosing the best path for you.
With this introduction, you will learn the general forex trading tips and strategies applicable to currency trading. It will also highlight potential pitfalls and useful indicators to ensure you know the facts. Lastly, use the trusted broker list to compare the best forex brokers for day trading 2019.
Read on to discover the A-Z of forex, how to start trading, and how to judge the best platform…
Why Trade Forex?
The forex market offers the day trader the ability to speculate on movements in foreign exchange markets and particular economies or regions. Furthermore, with no central market, forex offers trading opportunities around the clock.
- Liquidity – In the forex market there is an average volume of over $3.2 trillion dollars traded per day. So, there is an abundance of trades and moves you can make.
- Diversity – Firstly, you have the pairs stemming from the eight major global currencies. On top of that, many regional currency pairings are also available for trade. More options, more opportunities to turn a profit.
- Accessibility – The forex market is readily accessible, open twenty-four hours a day, five days a week. As a result, you decide when to trade and how to trade.
- Leverage – A significant amount of forex currency pairings are traded on margin. This is because leverage can be used to help you both buy and sell large quantities of currency. The greater the quantity, the greater the potential profit – or loss.
- Low commissions – Forex offer relatively low costs and fees compared to other markets. In fact, some firms don’t charge any commission at all, you pay just the bid/ask spreads. True ECN firms may also offer 0 spread!
Currencies Traded In Forex
In the international forex day trading world, the vast majority of people focus on the seven most liquid currency pairs on earth, which are firstly the four ‘majors’:
- EUR/USD (euro/dollar)
- USD/JPY (dollar/Japanese yen)
- GBP/USD (British pound/dollar)
- USD/CHF (dollar/Swiss franc)
In addition, there are three emerging pairs:
- AUD/USD (Australian dollar/dollar)
- USD/CAD (dollar/Canadian dollar)
- NZD/USD (New Zealand dollar/dollar)
These currency pairs, in addition to a variety of other combinations, account for over 95% of all speculative trading in the forex market. However, you will probably have noticed the US dollar is prevalent in the major currency pairings. This is because it’s the world’s leading reserve currency, playing a part in approximately 88% of currency trades.
If a currency pairing doesn’t include the US dollar, it’s known as a ‘minor currency pair’ or a ‘cross-currency pair’. Hence the most popularly traded minor currency pairs include the British pound, Euro, or Japanese yen, such as:
- EUR/GBP (euro/British pound)
- EUR/AUD (euro/Australian dollar)
- GBP/JPY (British pound/Japanese yen)
- CHF/JPY (Swiss franc/Japanese yen)
You can also delve into the trade of exotic currencies such as the Thai Baht and Norwegian or Swedish krone. However, these exotic extras bring with them a greater degree of risk and volatility.
Finding The Best Forex Broker
The “best” forex broker will often be a matter of individual preference. It may come down to the pairs you need to trade, the platform, trading using spot markets or per point or simple ease of use requirements.
Below are a list of comparison factors, some will be more important to you than others but all are worth considering. Details on all these elements for each brand can be found in the individual reviews.
Lowest Trading Costs
Spreads, commission, overnight fees – everything that reduces your profit on a single trade needs to be considered. High frequency trading means these costs can ratchet up quickly, so comparing fees will be a huge part of your broker choice. Inactivity or withdrawal fees are also noteworthy as they can be another drain on your balance.
Best Trading Platform
The trading platform needs to suit you. Whether you want a simple cut down interface, or multiple built in features, widgets and tools – your best option may not be the same as someone else’s.
Demo accounts are a great way to try out multiple platforms and see which works best for you. Remember also, that many platforms are configurable, so you are not stuck with a default view.
Trading forex on the move will be crucial to some people, less so for others. Most brands offer a mobile app, normally compatible across iOS, Android and Windows.
If this is key for you, then check the app is a full version of the website and does not miss out any important features. The download of these apps is generally quick and easy – brokers want you trading.
Is customer service available in the language you prefer? Is there live chat, email and telephone support? When are they available? How high a priority this is, only you can know, but it is worth checking out.
Does the broker offer the markets or currency pairs you want to trade? A pretty fundamental check, this one. If you are trading major pairs, then all brokers will cater for you. If you want to trade Thai Bahts or Swedish Krone you will need to double check the asset lists and tradable currencies.
Do you want a broker regulated by a particular body – the FCA, SEC or ASIC perhaps? Remember European regulation might impact some of your leverage options, so this may impact more than just your peace of mind. We cover regulation in more detail below.
Spreads Or Commission
Partly covered in trading costs, but the spreads are often a comparison factor on their own.
This is because you are not tied down to one broker. If you trade 3 or 4 different currency pairs, and no single broker has the tightest spread for all of them, then shop around. There is nothing wrong with having multiple accounts to take advantage of the best spreads on each trade. Beware of slippage ‘hiding’ wider spreads too often.
Deposit method options at a certain forex broker might interest you. Do you want to use Paypal, Skrill or Neteller? Are you happy using credit or debit cards knowing this is where withdrawals will be paid too?
Some forex brokers now accept deposits in Bitcoin or a range of other crypto’s too.
Most brands will follow regulatory demands to separate client and company funds, and offer certain levels of user data security. Some brands might give you more confidence than others, and this is often linked to the regulator or where the brand is licensed. A worthy consideration.
Try before you buy. Most credible brokers are willing to let you see their platforms risk free. Trading on a demo account or simulator is a great way to test strategy, back test or learn a platforms nuances. Try as many as you need to before making a choice – and remember having multiple accounts is fine (even recommended).
From cash, margin or PAMM accounts, to Bronze, Silver, Gold and VIP levels, account types can vary. The differences can be reflected in costs, reduced spreads, access to Level II data, settlement or different leverage. Micro accounts might provide lower trade size limits for example.
Retail and professional accounts will be treated very differently by both brokers and regulators for example. An ECN account will give you direct access to the forex contracts markets. So research what you need, and what you are getting.
For European forex traders this can have a big impact. Forex leverage is capped at 1:30 by the majority of brokers regulated in Europe. Assets such as Gold, Oil or stocks are capped separately.
In Australia however, traders can utilise leverage of 1:500. That makes a huge difference to deposit and margin requirements. Australian brands are open to traders from across the globe, so some users will have a choice between regulatory protection or more freedom to trade as they wish.
Just note that higher leverage increases potential losses, just as it does potential profits.
Tools Or Features
From charting to futures pricing or bespoke trading robots, brokers offer a range of tools to enhance the trading experience. Again, the availability of these as a deciding factor on opening account will be down to the individual. Level 2 data is one such tool, where preference might be given to a brand delivering it.
Forex trading beginners in particular, may be interested in the tutorials offered by a brand. These can be in the form of e-books, pdf documents, live webinars, expert advisors (ea), courses or a full academy program – whatever the source, it is worth judging the quality before opening an account. Bear in mind forex companies want you to trade, so will encourage trading frequently.
MetaTrader 4 or 5
Integration with popular software packages like Metatrader 4 or 5 (MT4 or MT5) might be crucial for some traders. Many brands offer automated trading or integration into related software, but if you are going to rely on it, you need to make sure.
From cashback, to a no deposit bonus, free trades or deposit matches, brokers used to offer loads of promotions. Regulatory pressure has changed all that. Bonuses are now few and far between. Our directory will list them where offered, but they should rarely be a deciding factor in your forex trading choice. Also always check the terms and conditions and make sure they will not cause you to over-trade.
Desktop platforms will normally deliver excellent speed of execution for trades. But mobile apps may not. While this will not always be the fault of the broker or application itself, it is worth testing.
Our reviews have already filtered out the scams, but if you are considering a different brand, avoid getting caught out with these checks;
- Were you ‘cold called’? Reputable firms will not call you out of the blue (This includes emails, or facebook or Instagram channels)
- Are they offering unrealistic profits? Just stop and consider for a minute – if they could make the money they are claiming, why are they cold calling or advertising on social media?
- Are they offering to trade on your behalf or use their own managed or automated trades? Do not give anyone else control of your money.
If you have any doubts, simply move on. There are plenty of legitimate, legal brokers.
With all these comparison factors covered in our reviews, you can now shortlist your top forex brokers, take each for a test drive with a demo account, and select the best one for you. We have ranked brokers based on our own opinion and offered ratings in our tables, but only you can award ‘5 stars’ to your favourite!
Read who won the DayTrading.com ‘Best Forex Broker 2019‘ on the Awards page.
Forex Broker Reviews
Use this table with reviews of the top forex brokers to compare all the FX brokers we have ever reviewed. Note that some of these forex brokers might not accept trading accounts being opened from your country. If we can determine that a broker would not accept your location, it is marked in grey in the table.
|CMC Markets||Yes||$/€/£ 0||Yes||No|
|ZuluTrade||Yes||$1 to $300 (Broker choice dependent)||Yes||No|
Regulated Forex Brokers
Regulation should be an important consideration. Whether the regulator is inside, or outside, of Europe is going to have serious consequences on your trading. ESMA (the European Securities and Markets Authority) have imposed strict rules on forex firms regulated in Europe. This includes the following regulators:
- CySec (Cyprus Securities and Exchange Commission)
- FCA (Financial Conduct Authority)
- BaFin – (Bundesanstalt für Finanzdienstleistungsaufsicht)
- Swiss Financial Market Supervisory Authority (Switzerland)
ESMA have jurisdiction over all regulators within the EEA
The rules include caps or limits on leverage, and varies on financial products. Forex leverage is capped at 1:30 (Or x30). Outside of Europe, leverage can reach 1:500 (x500).
Traders in Europe can apply for Professional status. This removes their regulatory protection, and allows brokers to offer higher levels of leverage (among other things).
Outside of Europe, the largest regulators are:
- SEC – Securities and Exchange Commission (US)
- CFTC – Commodity Futures Trading Commission (US)
- CSA – Canadian Securities Administration
- ASIC – Australian Securities and Investments Commission
These cover the bulk of countries outside Europe. Forex brokers catering for India, Hong Kong, Qatar etc are likely to have regulation in one of the above, rather than every country they support. Some brands are regulated across the globe (one is even regulated in 5 continents). Some bodies issue licenses, and others have a register of legal firms.
So to reiterate, an ASIC forex broker can offer higher leverage to a trader in Europe.
Which Currencies Should You Trade?
Investors should stick to the major and minor pairs in the beginning. This is because it will be easier to find trades, and lower spreads, making scalping viable. Exotic pairs, however, have much more illiquidity and higher spreads. In fact, because they are riskier, you can make serious cash with exotic pairs, just be prepared to lose big in a single session too.
How Is Forex Traded?
The logistics of forex day trading are almost identical to every other market. However, there is one crucial difference worth highlighting. When you’re day trading in forex you’re buying a currency, while selling another at the same time. Hence that is why the currencies are marketed in pairs. So, the exchange rate pricing you see from your forex trading account represents the purchase price between the two currencies.
For example – the rate you find for GBP/USD represents the number of US dollars one British pound will buy you. So, if you have reason to believe the pound will increase in value versus the US dollar, you’d look to purchase pounds with US dollars. However, if the exchange rate climbs, you’d sell your pounds back and make a profit. Likewise with Euros, Yen etc
Forex contracts come in a range of types:
- Spot forex contracts
- The conventional contract. Delivery and settlement is immediate.
- Futures forex contracts
- Delivery and settlement takes place on a future date. Prices are agreed directly, but the actual exchange is in the future.
- Currency swaps
- Where two parties can ‘swap’ currency, often in the form of loans, or loan payments in differing currencies.
- Options forex contracts
- An option gives a trader, the option (but not the obligation) to exchange currencies at a certain price on a date in the future.
There are a range of forex orders. Some common, others less so. Using the correct one can be crucial.
The two main types of forex orders are:
1. Instant order or Market order
2. Pending orders
Instant Order / Market Orders
These are executed immediately at market prices.
A Buy is an instruction to ‘go long’ or profit from rising markets. A Sell means opening a short position with an expectation of falling values.
A Stop loss is a preset level where the trader would like the trade closed (stopped out) if the price moves against them. It is an important risk management tool. It instructs the broker to close the trade at that level. A guaranteed stop means the firm guarantee to close the trade at the requested price.
A stop loss that is not guaranteed may ‘slip’ in volatile market conditions, and a trade closed, close to, but not on, the stop level. The shock of the Swiss Franc (CHF) being ‘unpegged’ was one such event.
A Trailing Stop requests that the broker moves the stop loss level alongside the actual price – but only in one direction. So a long position will move the stop up in a rising market, but it will stay where it is if prices are falling. It allows traders to reduce potential losses in good times, and ‘lock in’ profits, whilst retaining a safety net.
A take profit or Limit order is a point at which the trader wants the trade closed, in profit. It is a good tool for discipline (closing trades as planned) and key for certain strategies. It is also very useful for traders who cannot watch and monitor trades all the time.
One Cancels Other
A One Cancels the Other (OCO) Order is a combination of a Stop and Limit order, but if one is triggered, the other order is removed or cancelled. It is an important strategic trade type.
Leading Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Ripple (XRP) are often traded as a currency pair against the US dollar. These can be traded just as other FX pairs. Their exchange values versus each other are also sometimes offered, e.g. BTC/ETH or ETH/LTC etc.
Charts will play an essential role in your technical analysis. So you will need to find a time frame that allows you to easily identify opportunities. In fact, the right chart will paint a picture of where the price might be heading going forwards. For example, day trading forex with intraday candlestick price patterns is particularly popular.
See our charts page for further guidance.
Any effective forex strategy will need to focus on two key factors, liquidity and volatility. These are two of the best indicators for any forex trader, but the short-term trader is particularly reliant on them.
Intraday trading with forex is very specific. While your average long-term futures trader may be able to afford to throw in 12 pips hedging (smallest price movement is usually 1%) here and cut 12 there, a day trader simply cannot. This is because those 12 pips could be the entirety of the anticipated profit on the trade.
Precision in forex comes from the trader, but liquidity is also important. Illiquidity will mean the order won’t close at the ideal price, regardless of how good a trader you are. As a result, this limits day traders to specific trading instruments and times.
Volatility is the size of markets movements. So, firm volatility for a trader will reduce the selection of instruments to the currency pairs, dependant on the sessions. As volatility is session dependent, it also brings us to an important component outlined below – when to trade.
When To Trade
Despite being able to trade 24 hours a day, 5 days a week, you shouldn’t (Forex trading is not quite 24.7). You should only trade a forex pair when it’s active, and when you’ve got enough volume. Trading forex at weekends will see small volume. Take GBP/USD for example, there are specific hours where you have enough volatility to create profits that are likely to negate the bid price spread and commission costs.
The forex market is alive 24 hours a day because there’s always a global market open somewhere, as a result of differing time zones. Despite that, not every market actively trades all currencies. As a result, different forex pairs are actively traded at differing times of the day.
For example, when the UK and Europe are opening, pairs consisting of the euro and pound are alight with trading activity. However, when New York (the U.S and Canada) are at their desks, pairs that involve the US dollar and Canadian dollar are actively traded.
So, if you were trading EUR/USD pairs, you’ll find the most trading activity when New York and London are open, or Tokyo for JPY and Sydney for the AUD.
Utilise forex daily charts to see major market hours in your own timezone. The below image highlights opening hours of markets (and end of session times) for London, New York, Sydney and Tokyo. Crossover periods represent the sessions with most activity, volume and price action.
Forex Trading Sessions
Each session has a unique ‘feel’:
- Asian Session: Made up of the Asian markets, opening in New Zealand and Australia and moving west. This session generates lower volume and smaller ranges. The JPY, NZD and AUD are popular markets and news events can move prices significantly.
- The London (‘European’ Session): Actually kicks off in Frankfurt, and London an hour later. The UK opening sees larger volume in the Forex markets, plus volatility will peak during this session. European institutions, banks and account managers will be active and macro-economic data is released.
- The New York (US) Session: This opens at 9.30am New York time, but US fundamental data can be released at 8.30am. This can create early volume before the ‘official’ 9:30 opening.
The London and New York ‘crossover’ sees the most volatility and liquidity. Key fundamental data is released, financial institutions trigger forex contracts and ‘smart money’ is involved.
Trading Alerts Or Signals
Forex alerts or signals are delivered in an assortment of ways. User generated alerts can be created to ‘pop up’ via simple broker trading platform tools, or more complex 3rd party signal providers can send traders alerts via SMS, email or direct messages. Whatever the mechanism the aim is the same, to trigger trades as soon as certain criteria are met.
These criterion usually rely on chart patterns and/or candlestick formations. Our charting and patterns pages will cover these themes in more detail and are a great starting point. Paying for signal services, without understanding the technical analysis driving them, is high risk. It is impossible to judge a service, if you do not understand it.
Traders who understand indicators such as Bollinger bands or MACD will be more than capable of setting up their own alerts. But for the time poor, a paid service might prove fruitful. You would of course, need enough time to actually place the trades, and you need to be confident in the supplier. It is unlikely that someone with a profitable signal strategy is willing to share it cheaply (or at all). Beware of any promises that seem too good to be true.
50 Pips A Day
If you download a pdf with forex trading strategies, this will probably be one of the first you see. Beginners can also benefit from this simple yet robust technique since it’s by no means an advanced trading strategy. However, before venturing into any exotic pairs, it’s worth putting it through its paces with the major pairs.
So, when the 07:00 (GMT) candlestick closes, you need to place two contrasting pending orders. Firstly, place a buy stop order 2 pips above the high. Then place a sell stop order 2 pips below the low of the candlestick. As soon as price activates one of the orders, cancel the one that hasn’t been activated.
In addition, make sure you place a stop-loss order anywhere between 5-10 pips above the 07:00 high/low. This will help you keep a handle on your trading risk. Now set your profit target at 50 pips. At this point, you can kick back and relax whilst the market gets to work.
If the trade reaches or exceeds the profit target by the end of the day then all has gone to plan and you can repeat the next day. However, if the trade has a floating loss, wait until the end of the day before exiting the trade.
But for more detailed examples, see our strategies page on intraday trading techniques.
Get access to an IQ Option demo account here.
Forex Trading Software
There is a massive choice of software for forex traders. Costs and benefits will be the main considerations, and we do look at a few software platforms in detail on this website:
These platforms cater for Mac or Windows users, and there is even specific applications for Linux.
Social trading (or ‘Copy trading’) platforms are another variety of software associated with forex trading. The leading pioneers of that kind of service are:
We expand on the choices for software trading platforms on our Software page.
If you want to increase that forex day trading salary, you will also need to utilise a range of educational resources:
- Books – You can get profitable strategies books, books on scalping, regulations, price action, technical indicators, and more. In addition, there are plenty of niche books. So, you can find the best books on strategies for beginners or two-step trend analysis, for example.
- Chat rooms & forums – Day trading forex live forums are a fantastic way to learn from experienced traders. Some will even share their best free trading systems. Just beware the quality of advice.
- Blogs – If you want to hear success stories from forex millionaires, then day trading forex blogs might be the place to go. Again, tread carefully with any advice offered.
- Forex websites – There are a number of specific forex websites. Some offer free signals, techniques for spotting trend lines and setting up your platform.
- PDFs – Online you will find a number of forex trading system PDFs. Unlike live chat rooms, charts will often be provided to support written evidence.
The most profitable forex strategy will require an effective money management system. One technique that many suggest is never trading more than 1-2% of your account on a single trade. So, if you have $10,000 in your account, you wouldn’t risk more than $100 to $200 on an individual trade. As a result, a temporary string of bad results won’t blow all your capital.
Then once you have developed a consistent strategy, you can increase your risk parameters. The Kelly Criterion is a specific staking plan worth researching.
Automated Forex trades could enhance your returns if you have developed a consistently effective strategy. This is because instead of manually entering a trade, an algorithm or bot will automatically enter and exit positions once pre-determined criteria have been met. In addition, there is often no minimum account balance required to set up an automated system.
However, those looking at how to start trading from home should probably wait until they have honed an effective strategy first.
For further guidance, see our automated trading page.
When you read a blog about forex traders, such as ‘a day in the life’, they often leave out the impact of tax. In fact, it is vital you check the rules and regulations where you are trading. Failure to do so could lead to legal issues.
See our taxes page for details.
Webinars & Training Videos
They are the perfect place to go for help from experienced traders. This is because forex webinars can walk you through setups, price action analysis, plus the best signals and charts for your strategy. In fact, in many ways, webinars are the best place to go for a direct guide on currency day trading basics.
3 Mistakes To Avoid
1. Averaging Down
While you may not initially intend on doing so, many traders end up falling into this trap at some point. The biggest problem is that you are holding a losing position, sacrificing both money and time. Whilst it may come off a few times, eventually, it will lead to a margin call, as a trend can sustain itself longer than you can stay liquid.
This is particularly a problem for the day trader because the limited time frame means you must capitalise on opportunities when they come up and exit bad trades swiftly.
2. Trading Too Soon After the News
Big news comes in and then the market starts to spike or plummets rapidly. At this point it may be tempting to jump on the easy-money train, however, doing so without a disciplined trading plan behind you can be just as damaging as gambling before the news comes out. This is because illiquidity and sharp price movements mean a trade can quickly translate into significant losses as large swings take place or ‘whipsaw’.
The solution – wait for the volatility to subside and you can verify the trend.
3. Days of Interest
It’s great having an effective once a day trading method and system. However, even a consistent strategy can go wrong when confronted with the unusual volume and volatility seen on specific days. For example, public holidays such as Christmas and New Year, or days with significant breaking news events, can open you up to unpredictable price fluctuations.
The country or region you trade forex in may present certain issues. For example, forex traders in the USA and Canada will need to read up on pattern trading rules (Canadian traders have it slightly easier).
Trading in South Africa might be safest with an FSA regulated (or registered) brand. The regions classed as ‘unregulated’ by European brokers see way less ‘default’ protection. So a local regulator can give additional confidence. This is similar in Singapore, the Philippines or Hong Kong. The choice of ‘best forex broker’ will therefore differ region by region.
Trading forex in less well regulated nations, such as Nigeria and Pakistan, means leaning towards the more established European or Australian regulated brands.
Forex Trading; Is It Profitable?
Many people question what a trader’s salary is. However, the truth is it varies hugely. The majority of people will struggle to turn a profit and eventually give up. On the other hand, a small minority prove not only that it is possible to turn a profit, but that you can also make huge returns. So it is possible to make money trading forex, but there are no guarantees. 75-80% of retail traders lose money.
Currency is a larger and more liquid market than both the U.S stock and bond markets combined. In fact, a surplus of opportunities and financial leverage make it attractive for anyone looking to make a living day trading forex.
Unfortunately, there is no universal best strategy for trading forex. However, trade at the right time and keep volatility and liquidity at the forefront of your decision-making process. Follow these general rules for FX day trading and you’ll be on the right path.