Market Peculiarities Have To Be Taken Into Account In Forex Day Trading

December 24, 2011 by Leo D. Endo  
Filed under Finance

Participants in the foreign exchange market are always advised to develop a strategy that works for them, and to stick to it in a disciplined way. Forex day trading may be thought of as a strategy in itself. However the strategy needs to be more complex than simply sticking to normal daily routines and thinking in terms of the morning as being eight o’clock and the evening five o’clock.

An individual may decide that he wishes to be a swing trader, a long term investor or a day trader. Whichever is his strategy he should stick to it. Therefore it must be important for day traders to stick to the strategy of closing trades by the end of a day. They should not be tempted to veer into swing trading or long term trades if that is not their strategy.

The foreign exchange market is open day and night. This adds considerably to its liquidity but means that a day does not necessarily start at eight in the morning and end at five in the evening for all participants. Although trading is continuous there are patterns of volatility.

The far Eastern markets open when New Yorkers are still asleep. A few hours later London opens and that may be the occasion for another surge in volatility. However, America is still asleep and Tokyo is closing up for the day. When it is afternoon in London America is preparing for another day.

What may be termed the World Wide Web day is therefore not quite the same as an Australian or Italian day. A trader cannot afford to ignore the various opening and closing times in financial centres. They impact on the movement of prices.

Especially if a strategy involves taking small profits on a number trades as they occur periods of maximum volatility need to be exploited. A participant may decide to play the market at his local time that fits with one of the main opening times and regulate his day accordingly. This could involve working at odd hours, and play havoc with family life. It is possible to invest in a robot which can watch the market without getting sleepy.

Alertness and quick responses are part of the fun of forex day trading. News of interest rate changes or unemployment statistics can have immediate and significant effects on prices and provide good opportunities for quick profits. Participants need to be alert to news casts and react quickly. Important announcements are often made on Friday mornings in America, resulting in radical rises or falls. For someone in Africa this means remaining stuck fast to a TV screen on Friday afternoon when others are setting out for the week-end break. However, opportunities may be too great too miss and so trading takes over normal lifestyle routines.

It can be annoying to study live forex news that seem to be a bit overhyped, thus bringing fear. Even though forex broker reviews may be available everywhere, it is wise to stick with your trusted.


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