As market conditions vary on a day-to-day basis, traders should be prepared to adapt their strategy, such as during times of high market liquidity. Before you start to day trade forex, it’s important to outline exactly what you’re hoping to achieve and be realistic about the targets that you’re setting yourself. If you expect to make lots of money straight away, you might be sorely disappointed as there forex day trading could be a steep learning curve involved. While trend traders seek to take advantage of long-term market trends, swing traders tend to be more interested in the small reversals in a market’s price movement. They attempt to spot these reversals ahead of time, and trade to make profits from smaller market movements. The foreign exchange market is considered more opaque than other financial markets.

forex day trading

Many forex brokers allow you to open a forex trading account with as little as $50. The low minimum balance requirement allows even undercapitalized traders to start

Minimizing risk capital

First, there’s no need for a huge amount of capital – indeed, a demo account lets you practice trading the real markets for free. The reversal scalping strategy involves identifying and capitalizing on reversal or retracements in short-term price trends. Because predicting troughs and peaks accurately are quite difficult, traders try to find short-term pullbacks and trade them to make small, quick profits.

forex day trading

The relationship between the two is important for establishing your minimum amount. While you can use leverage to fund your trades and be successful, the risks are so high that the best way to manage the risks involved is not to use leverage-based trading. Forex brokers often don’t charge a commission, but rather increase the spread between the bid and ask, thus making it more difficult to day trade profitably. ECN brokers offer a very small spread, making it easier to trade profitably, but they typically charge about $2.50 for every $100,000 traded ($5 round turn). It’s also important to consider exactly how you’re going to create a methodology for entering and exiting the market, and whether this will be based on fundamental or technical analysis. Most scalpers will close positions before the end of the day, because the smaller profit margins from each trade will quickly get eroded by overnight funding charges.

Profitability and risks

Mean reversion, on the other hand, is based on the theory that markets have an average level they will return to after a significant price forex day trading move. If you can identify a market that has had an extreme fluctuation from its mean, you can then trade its return to normality.

  • When submitting your tax return, you can reduce your tax bills on day trading by deducting your losses and costs and applying for any tax relief for which you may be eligible.
  • Choosing a time frame that suits your trading style is very important.
  • For example, they may put up $100 for every $1 that you put up for trading, meaning that you will only need to use $10 from your own funds to trade currencies worth $1,000.
  • To do so, they’ll often use banded momentum indicators such as the stochastic oscillator and RSI to identify overbought and oversold conditions.
  • Conversely, if you sell the EUR/USD currency pair, you sell the base currency, the euro, and buy the quote currency, the USD.

Unlike other breakout trading strategies, however, grid trading eliminates the need to know what direction the trend will take. News traders rely on economic calendars and indexes such as the consumer confidence index to anticipate when a change will occur and in what direction price will move.

How do I start day trading?

Assuming a net profit of $1,650, the return on the account for the month is 33% ($1,650 divided by $5,000). Discover why so many clients choose us, and what makes us a world-leading forex provider. Forex markets lack instruments that provide regular income, such as regular dividend payments, which might make them attractive to investors who are not interested in exponential returns.

What this translates to is going after targets which are consistently hit on any given day. Ideally you are choosing forex pairs which are most correlated with your region and time of day. So USD and European currencies if you are in the UK/Europe/North America. For Asia/Australia/New Zealand, I’d suggest at least 2 currencies from your region and minimally one USD pair. Because of the time sensitive nature of day trading, every calculation, analysis and decision you make must be done faster. This increased speed of processing in your brain also taxes your working memory and thus increases your cognitive load.


Day traders looking to maximize intraday profits often use one or multiple of the following day trading strategies. The people who create the illusion you can make money can never present a long term track record of real profits – that’s real dollars made in the market by them. Although using Fibonacci retracements can help you determine when to enter and exit a trade and what position to take, they should never be used in isolation. The most successful retracement traders confirm breakout and reversal signals using other technical indicators such as moving averages, trend lines, momentum oscillators, and price candlestick patterns.

A reading of 80 or higher indicates overbought conditions and is a signal for the trader to sell. Whereas a reading of 20 or below indicates oversold market conditions and is a signal to buy.

Once the overall trend is established, you move to a smaller time frame chart and look for trading opportunities in the direction of that trend. Determine significant support and resistance levels with the help of pivot points.