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Profitable Tips for Forex Day Trading
So you have decided to trade foreign currencies. You will have to decide which market in which to trade, which will in turn determine what hours of the day you work at the trade station. Which market you trade in, London, New York, or Tokyo, will also affect which currencies you choose to trade. You will need to choose hardware and software and develop the necessary skill sets in order to function as an online currency trader. You will need to learn how to do fundamental analysis of Forex pairs as well. With this in mind here are a few profitable tips for Forex day trading.
Choice of Trading Pair
The first of our profitable tips for Forex day trading has to do with picking a currency pair to trade. Traders make their money because of Forex market volatility. Forex traders control their risk because they understand the fundamentals that drive each of the currencies that they trade. Traders commonly choose currencies that trade in high volume and liquidity in order to most effectively use technical analysis tools such as candlestick patterns in Forex trading.
Majors versus Minors
The next of our profitable tips for Forex day trading relates to picking a major or minor Forex pair to trade. Technical analysis of major Forex currencies is commonly more accurate than for minor currencies. This is because of the high trading volume and liquidity of major currencies. Minor currencies can often be very volatile but they can also be very unpredictable. In trading minor currencies one should be well versed in their fundamentals. This may even require that you are a native to the country involved or live and do business there in order to understand the various factors that drive the currency.
When trading two minor currencies or trading a major versus in minor Forex currency, fundamentals are of upmost importance. This may be the most important of our profitable tips for Forex day trading. Although the major currency may trade in high volume it will trade in substantially lower volume versus any of the minor currencies. Thus there may be frequent gaps in trading such a currency pair. Trading gaps and anticipating them can be quite profitable if you are well verses in fundamentals but can be risky as well. Those trading a major versus minor currency will do well to trade in small amounts until they are comfortable and successful in predicting swing in currency prices, especially as relates to the minor currency.
Technical analysis is a mainstay of Forex day trading. The last of our profitable tips for Forex day trading has to do with a tried and true approach to technical analysis of Forex pairs. Centuries ago Japanese rice traders discovered that price patterns repeat themselves.