Forex Day Trading 2018 – Tutorial and Brokers

Forex day 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 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 broker list to compare the best forex brokers for day trading 2018.

Forex Brokers

IB Boast a huge market share of global trading. With a minimum deposit of $10,000 however, they remain an option for larger traders only.
Zulutrade provide multiple automation and copy trading options across forex, indices, stocks and commodities markets
The leading US trading Exchange. Nadex offer genuine exchange trading to US clients on Binary Options. Fully regulated by the CFTC.
New Forex broker Videforex can accept US clients and accounts can be funded in a range of cryptocurrencies.
One of the largest discount brokers in the US, with a fixed trading commission and access to a large array of trading products and securities
Show All Brokers ⇩

Market Rates

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 margin.
  • 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.

Currencies Traded In Forex

Major

In the 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.

Minor

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 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, Japanese yen and Norwegian or Swedish krone. However, these exotic extras bring with them a greater degree of risk and volatility.

As will be explained below, it’s also worth noting your forex inside day trading strategy will need to be tweaked depending on the currency pair you choose to trade.

Day Trading forex

Which Currencies Should You Trade?

As you will quickly learn from forex day trading, you should stick to the major and minor pairs in the beginning. This is because it will be easier to find trades, plus you’ll benefit from lower spreads. Exotic spreads, 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 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 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.

Strategy

The intelligent forex trader will have a smart strategy. Furthermore, that 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 trader may be able to afford to throw in 12 pips (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.

Charts

This wouldn’t be an accurate day trading forex live review without talking about charts. This is because 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. For example, day trading forex with intraday candlestick patterns is particularly popular.

So, getting the right set up to start day trading forex with price patterns is essential.

See our charts page for further guidance.

When To Trade

Despite being able to day trade for 24/7, you shouldn’t. For forex day trading profit, you should only trade a forex pair when it’s active, and when you’ve got enough volume. Take GBP/USD for example, there are specific hours where you have enough volatility to create profits that are likely to negate the spread and commission costs. So, if you want to be accurate, you’ll hone in to catch the largest moves of the day.

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 open for business, 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. As a result, you’ll want to be glued to your screen between 0800-2200 (GMT).

Also, when you’re day trading, utilise forex daily charts to see major market hours in your own timezone.

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.

Video Demonstration

Get access to an IQ Option demo account here.

Education

If you want to increase that forex day trading salary, you will also need to utilise a range of educational resources:

  • BooksYou 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. Get help finding the best time frames, as well as advice on currency day trading software. Not to mention, some will even share their best free trading systems.
  • Blogs – If you want to hear success stories from real forex day trader millionaires, then day trading forex blogs are the place to go. You never know, they may also reveal the best methods they used to boost their income. Besides, if nothing else, forex day trader blogs are a great source of inspiration.
  • Forex websites – There are a number of specific forex day trading websites. These are another fantastic tool to add to your trading arsenal. This is because you can benefit from free signals, techniques for spotting trend lines and setting up your platform.
  • PDFs – Online you will find a number of forex day trading system PDFs. Unlike live chat rooms, charts will often be provided to support written evidence. In fact, due to their ease of use, they can often be the ideal place to go for those after forex guidance for dummies. Having said that, more experienced traders can also find MACD settings for their charts, plus details of sophisticated forex end of day trading systems.

All of the resources above can help you understand regulations and requirements while providing you with free strategies to increase your returns.

Tips

Money Management

The most profitable forex day trading 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. So, unsurprisingly, this is a sensible method to employ if you want to increase that forex day trader income.

Automation

Forex automated day trading 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 a forex day trading business from home should probably wait until they have honed an effective strategy first.

For further guidance, see our automated trading page.

Taxes

When you read a blog about forex traders, such as ‘a day in the life’, they often leave out the careful consideration that taxes that will be given. In fact, it is vital you check the rules and regulations where you are trading. Failure to do so could lead to inaccurate income calculations.

See our taxes page for further guidance.

Webinars & Training Videos

They are the perfect place to go for help from experienced traders. This is because day trading 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 – when forex day trading, wait for the volatility to subside and until you can verify the trend. In fact, remember this rule and you’ll never be that one guy on every forex day trading forum that’s lost everything.

3. Days of Interest

It’s great having an effective once a day, end of the day forex trading method and system. However, even a consistent strategy can seriously go wrong when confronted with the unusual volume and volatility seen on specific days. For example, forex trading on a memorial day, Christmas Day and New Year’s Day can open you up to unpredictable price fluctuations.

In addition, forex news trading days can also cause periods of significant volatility. As a result, intraday traders must prepare and anticipate for these unusual market conditions.

Forex Day Trading; Is It Profitable?

Many people question what a forex day 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 is it possible to turn a profit but that you can also make huge returns.

However, if you want to join that exclusive club, you will need to use this page as your guide to profitable forex day trading.

Bottom Line

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 live by day trading forex.

Unfortunately, there is no universal best strategy for day trading forex. However, trade at the right time and keep volatility and liquidity at the forefront of your decision-making process. Also note that while this is by no means a forex day trading course, follow these general rules for day trading currency and you’ll be on the right path to handsome profits.

Further Reading