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Forex Day Trading Guide: How to Trade to Earn Money?

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If you're interested in Forex day trading, then it's important to bear in mind that it requires a substantial amount of time to monitor trading charts and analyze markets all day long. You'll also need to react actively to all the possible short-term price fluctuations of currency pairs. Therefore, you'll need to have the ability, discipline, focus, and control to stick to this trading style.

The most important factor to consider while Forex day trading is to choose the best trading platform. You need to make sure that it offers effective drawing tools, technical indicators, and sufficient educational material that will help you to determine the right entry and exit point with great potential. That’s why we’ve come up with this informative guide that contains all the important things that you need to know about Forex day trading.

What Is Forex Day Trading?

Forex is the short form of foreign exchange, which is a market where currencies are traded. On the other hand, day trading is a practice of opening the trades and closing them within 24 hours. So, Forex day trading is a trading strategy where traders buy and sell currency pairs on the same day. This short-term trading practice is especially popular among retail forex traders. It’s undoubtedly one of the quickest ways to experience returns on your investments.

Forex Day Trading Pros and Cons

Just like any other trading style, Forex day trading comes with its own advantages as well as downsides. Understanding these pros and cons will allow you to understand if this is the right trading style for you depending upon your unique trading goals and needs.

? Pros

• Low Cost: Forex trading usually has very low brokerage fees and commissions. In a real sense, there are no commissions because almost all the Forex brokers earn money with the help of spreads between currency pairs.

• High Liquidity: The Forex market offers the most market participants as compared to any other financial market. It simply means that it offers the highest liquidity levels, and without any major price deviations, the large currency trades' orders are efficiently filled.

• No Central Regulator: Foreign exchange is an over-the-counter market that runs around the world. It means that there is no central regulator or exchange for the Forex market.

• Low Capital Requirements: You can easily start your Forex trading journey because of the tight spreads of currency pairs in terms of pips.

• Easy of Entry: there are literally tens of hundreds of technical indicators that you can use to analyze the Forex market. It creates opportunities for all traders, regardless of their experience and the level of expertise, to quickly jump into Forex day trading.

? Cons

• Complex Process for Price Determination: Multiple factors influence the Forex rates, such as global economics or politics. It makes it very difficult to analyze the current information to make an informed decision.

• Lack of Transparency: You’ll need to trade against the experts and professionals because of the nature of the Forex market, which is deregulated and dominated by the brokers. It means that it might not be completely transparent.

• High Leverage and High Risk: Your profit, as well as loss, can increase multiple times because of the high leverage.

• Lack of Assistance: Unlike the stock market, where you can easily seek assistance from professionals, you'll be on your own when it comes to Forex trading.

Useful Strategies to Day Trading Forex

If you want to capitalize on small yet frequent price movements, then approaching with a proper day trading Forex strategy is important. In order to expert the most probable future price movement, you'll need to understand and utilize the patterns, indicators, charts, detailed technical analysis, etcetera. An effective and consistent Forex day trading strategy allows you to achieve it efficiently. Here are some of the best strategies for Forex day trading.

  • 1

    Pivot Points

    You need a precise event (trigger) to identify the right time in order to perform a trade. In the following image, you can see different triggers taking place while the stock is in an uptrend.

    Pivot Points

  • 2

    Scalping

    Scalping is also one of the most commonly used strategies among Forex day traders. It helps you to earn money on price changes taking place within a minute where the driving force is the considered quantity. The basic idea of this strategy is simple where you look for opportunities to sell quickly once the trade becomes profitable. It's an exciting and fast-paced forex day trading method. However, just like any other trading style and strategy, it can be risky as well.

    You’ll need a high trading potential to even out the ratio between reward and low risk. Moreover, in scalping, you want to close your losing trades as quickly as possible without waiting for the market.

    Scalping

    Learn 10 Best Scalping Forex Brokers in 2021
  • 3

    Momentum

    If you're a beginner and interested in forex day trading, then this strategy can suit you the best. It basically revolves around identifying substantial trending moves and acting on the news sources with the help of high volume. It comes with an ample opportunity because you only need to stick to your position, and you get out of it right away as soon as you observe the signs of reversal.

    This strategy is fairly simple yet efficient and effective only if you follow it correctly. However, it’s important that you keep track of earnings announcements and upcoming news.

    Momentum

  • 4

    Reversal

    This strategy is best for professionals and seasonal traders because it can be a little tricky as well as dangerous for beginners. It’s one of the most used day trading strategies around the world. It is also known and mean reversion strategy, pull back tending, and trend trading. In this strategy, a forex day trader aims to trade against the trend by accurately predicting the strengths and accurately identifying possible pullbacks. That’s why it requires comprehensive and detailed market experience and knowledge.

    Reversal

Can I Earn Money by Day Trading in Forex?

Forex day trading is full of possibilities, and it has a great potential to earn a good amount of money, but it also comes with some risks. Many people like Forex day trading because it doesn't need a large amount of money to start. Moreover, thanks to the leverage that brokerages offer, the day trading process can be very profitable as well. But the fact of the matter is that it can be immensely volatile, and inexperienced traders and beginners can lose a lot of money. That's why it's important to have a good strategy, and you also need to learn about Forex day trading.

You can start with a simple strategy to control risk with a decent risk/reward ratio and win rate. It can help you to earn a profit between 5 percent to 15 percent per month because of the leverage. You can even start your journey as a Forex day trader with 500 to 1000 US dollars.

Top 5 Skill Forex Day Trader Should Have

You need to focus on the basics and the essential skills that you need to become a successful Forex day trader before jumping into the world of highly technical and complicated indicators. Forex day trading seems simple, but there are some important skills that you need to develop, which are discussed below.

  • Day Trading Risk Management

    If you want to become a successful Forex day trader, you must know how to manage risk. It's one of the most (if not the most) critical factors regarding ongoing profitability. You need to keep your risk one percent or even less on every trade. For example, if you are ready to invest 1,000 US dollars, you must not lose more than 30 US dollars on each trade. It sounds small but bears in mind that your losses do add up very easily. Therefore, in such situations, even using the best of the Forex day trading strategies, you'll end up with a pile of losses. You should also utilize the power of stop-loss order in order to mitigate risk while you are day trading Forex.

  • Time Management

    Time Management is yet another important skill that you need to develop. It can make or break your day Trading Forex experience. You'll need to give at least a couple of hours daily to your trading, where you'll be monitoring the market carefully. It'll help you to find out the best trading opportunities.

    Bear in mind that the market gets volatile every day when it opens up. If you’re experienced and understand the indicators, you'll be able to read the profit opportunities and patterns. On the other hand, if you're a beginner, then consider biding your time to observe the market for about 15-30 minutes.

  • Education

    If you understand the market intricacies, then it certainly doesn't mean that you'll become a successful forex day trader. You'll also need to stay informed and up to date with the latest events happening in the market that can affect your trade. You'll need to analyze charts and perform detailed technical analysis if you want to maximize your earning in forex day trading. Other than that, it's also important to understand different Forex day trading strategies to manage each situation differently and more effectively.

  • Adaptability

    Regardless of the level of your experience, you’ll never experience two Forex day trading days that are exactly similar to each other. This constant change creates a big problem for the Forex day traders who only know the strategies and examples out of a textbook. In reality, everything seems different when it comes to the implementation because you need to deal with less/more volatility, stronger/weaker trends, etc.

    You must be able to apply your Forex day trading strategies in real-time, and that requires great adaptability skills. You must understand when to enter the market and when to stay away. Otherwise, you’ll end up with a quick capital drawdown.

  • Consistency

    Trading is all about logic and understanding the market on the basis of calculations. That’s why it’s important to keep your psychological element as well as emotions at bay. It’ll allow your strategy and math to guide you to make informed decisions. Moreover, you must also stay consistent with your logical behavior by keeping your greed, fear, and nerves aside.

Top 6 Brokers for Day Trading Forex

  • Forex.com
    EUR/USD typical spread: 0.77pips
    Minimal deposit: 100 Dollars
    Permitted strategies (For example, Scalping, Algorithmic trading) : Scalping, Hedging, Algorithmic Trading
  • IG Markets
    EUR/USD typical spread: 1.04 pips
    Minimal deposit: 0 Dollars
    Permitted strategies (For example, Scalping, Algorithmic trading) : Scalping, Hedging, Algorithmic Trading
  • XM
    EUR/USD typical spread: 1.7 pips
    Minimal deposit: 100 Dollars
    Permitted strategies (For example, Scalping, Algorithmic trading) : Scalping, Hedging, Algorithmic Trading
  • AvaTrade
    EUR/USD typical spread: 0.9 pips
    Minimal deposit: 100 Dollars
    Permitted strategies (For example, Scalping, Algorithmic trading) : Scalping, Hedging, Algorithmic Trading
  • FXTM
    EUR/USD typical spread: 1.3 pips = Standard MT4 Account
    0.1 pips on the ECN MT4, MT5 accounts
    Minimal deposit: 10 Dollars
    Permitted strategies (For example, Scalping, Algorithmic trading) : Scalping, Hedging, Algorithmic Trading

1

Forex.com

Forex.com is one of the best platforms out there for active day traders, and it has topped our list for several reasons. First of all, it’s regulated by multiple regulatory authorities such as (FCA), (ASIC), (CFTC) etc. The platform offers a great number of currency pairs as well as the tools for quick technical analysis for the day traders.

2

IG Markets

IG Markets is the best choice for Forex day traders when it comes to the least cost pricing. You don't need any minimum deposit to open an account on this broker, and it allows you to speculate on a range of markets, including Forex, futures, stocks, and commodities. Regardless of your expertise, you can start your Forex day trading journey on this platform because it comes with a great set of research and educational features.

3

XM

XM is one of the most popular online trading platforms, which was established back in 2009. It offers more than 55 currency pairs, and the risk of trading Forex on this platform is considered to be lower. Not only can you find tools to understand the basic currency exchange concepts. But you can also find the most advanced fundamental and technical analysis tools on this platform.

4

FxPro

FXPro is known as a low-risk and reliable online brokerage, and it's best known for Forex trading. It offers more than 70 different currency pairs and real-time market news with sharp analytics, especially for active traders. You can also access the economic calendar, earnings calendar, market holidays, and technical analysis tools for effective Forex day trading.

5

AvaTrade

AvaTrade is a great platform, and it's known as the best online broker for beginners. That's because it offers free educational material that you can use without even opening an account. You can learn different Day trading strategies and techniques to become a successful trader. It offers 55 currency pairs that you can trade without suitable spreads.

6

FXTM

FXTM is a specialized forex broker where you only need 10 US dollars to open an account. Currently, the platform offers 57 currency pairs to choose from, and it provides you with the keys to access the Forex market anytime you want. If you're an experienced trader, then this platform can be your best choice.

Day Trading Software in Forex

If none of the top brokers for online Forex day trading mentioned above suits your needs and trading goals the best, then here’s a list of someday trading software in Forex that you can also consider.

TradingView: Best for Charting

TradingView is more of a social network of investors and traders on the Forex markets. You can find real-time quotes, Forex charts, and Forex trading ideas on TradingView. Moreover, the platform also offers a vast array of indicators that you can utilize to perform technical analysis on the basis of current market fundamental sentiments.

Tradespoon: Best for Beginners

If you're just starting out on Forex day trading, then you can consider Tradespoom. It offers great analysis tools that you can use to study quick price forecasts. It can also be a little costly as its fee is a little higher as compared to its competitors, but it comes with the most advanced features that can help you a great deal while day trading forex.

Interactive Brokers: Best for Advanced Traders and Professionals

Interactive Brokers offers a plethora of currency pairs as you can choose from more than 100 different pairs. It’s the best online broker for professional and experienced Forex day traders because the platform offers effective and easy market analysis access.

NinjaTrader: Best for Technical Information

NinjaTrader is an open-source system that is an ideal platform for forex day traders who need lots of customizable technical indicators, real-time analysis tools, excellent charting, and technical analysis tools. It can be a great choice if you’re looking forward to taking your technical market research game to the next level.

Summary

Currency is a more liquid as well as a larger market as compared to both bond and stock markets. That fact of the matter is that it’s more attractive as well because of its financial leverage and a wide range of opportunities. If you're looking to make a living in Forex day trading, then you need to learn better strategies and choose a brokerage that suits you the best.

It’s important to note that there’s not a universally known best strategy. You only need to make sure that you keep liquidity and volatility at the forefront and choose the right time while making a final decision. We hope that this guide will allow you to understand Forex day trading better and help you to make the best out of it.

Forex Day Trading Platforms Reviews

FXPro:

FXPro is a low-risk platform and provides you with the best Forex trading experience. I love the fact that it’s regulated by tier 1, tier 2, and tier 3 renowned regulators. Its floating rate model with variable spread also suits my Forex day trading style, which is available on both MT5 and MT4.

Edward Farmer, 32,

London


XM:

XM is one of the best online brokerages out there, and for me, it’s the best platform for Forex day trading. It’s regulated by a couple of tier 1 regulators, and according to my personal experience, it's a trustworthy platform. It offers an effective spread model, and I am completely satisfied with the tools and features that I can use.

Evan Turner, 44,

Sydney


IG Markets:

IG Markets is a trusted online broker which is also regulated by world-famous authorities. It offers an ultimate package of industry-leading education material, research tools, and competitive pricing. It’s the best overall brokerage for me that offers an excellent all-round experience with a great commission and fee structure.

Kim Alsopp, 28,

Kansas City


Forex.com:

In my opinion, Forex.com is not a discount broker but the features and tools that it offers live up to its pricing model. It's one of the most trusted brands out there for so many reasons, and the most important one is its outstanding Forex trading experience. If you're seeking a brokerage that offers an excellent set of tools and effective spreads that Forex.com can be a great choice.

Alex Gardner, 31,

New York

FAQs

Is Forex day trading a good idea?

If you follow a decent Forex day trading strategy correctly by utilizing the proper risk management techniques, you can earn from 5 to 15 percent profit each month. Therefore, Forex day trading can be a great trading experience.

How much can you earn per day with Forex day trading?

If you have 5000 US dollars of capital and you’re risking no more than one percent on each trade, with an effective Forex day trading strategy, you can make 100 US dollars per day. However, you should take into account that success is not guaranteed.

Can you start Forex Day Trading with 100 US dollars?

Yes, there are many online reputable and reliable brokerages that allow you to open an account with a minimum deposit of 100 US dollars. It means you can start your Forex day trading journey with 100 US dollars.

Can Forex day trading be a full-time job?

In its essence, Forex day trading is best for part-time traders. That’s because you can create your strategies for each session regardless of the time zone that you choose.