The currency market is one of the largest exchange markets in the world, and can be an exciting place for both new and experienced investors. Day trading currencies may take courage and patience to understand, but can become a lucrative career for some intrepid traders. Learning the basics of day trading currencies can help novices decide whether this action-packed market is the right place for them.
Before diving into day trading currencies, it is important to learn the basics and the lingo of the medium. There are dozens of books, online publications, and seminars that can help teach the basics of day trading currencies, and experts often recommend several months of study before beginning to trade. Some brokerages also offer online simulation programs that allow traders to test out their strategies through simulations that follow the market, but don't involve real money. If a person can consistently make a profit on real-market simulators, he or she may have a good chance of doing so day trading currencies for real.
One of the most important tips for day trading currencies is to find a good broker. Brokers arrange the transactions between buyers and sellers, and may offer other services such as market tracking devices, forecasting, expert advice, and even real-time trade updates. In addition to ensuring that a broker is reputable by checking review sites and business ratings, it is important for day traders to pay attention to the “spread” charged by a broker. The spread is essentially the commission that a broker gets on each trade to ensure the broker's profit; since day traders typically make many trades in a day, the larger the commission, the lower the daily profits. While the spread range may matter less in long-term trades where more money is at stake, in day trading currencies, it can be vital to maintaining profits.
Day trading currencies involves making trades on a small scale; investment holdings may change from day to day. Some experts say that paying attention to macroeconomic details may be less useful for day trading currencies than for longer-term trading strategies. Instead of knowing how the economy of Finland is doing on an annual scale, more useful information might be the current events in Finland are for a given week. If a large bank is about to close on Tuesday, or a major economic data release is scheduled for Thursday, day traders need to be prepared for erratic behavior in the currency market.
Though it is called “day trading” currencies, the global market is actually open 24 hours per day, most of the time. Day trading currencies successfully may require traders to adjust their sleeping and working schedules, depending on the trading strategy employed. As a trader develops her skills and portfolio, she may be better able to recognize the rhythm of market indicators and patterns in certain currency trades during certain times of the day or night.
