To start the Forex day trading it is not necessary to have a huge amount of capital and this is one of the major reasons for the popularity of Forex trading. Day traders can earn a lot of profit each trading with the help of the leverage provided by their Forex trader. But to earn a profit is not as easy as it sounds. You need to learn various strategies to make a remarkable profit. The more experience you have in this field, the more you have a chance to succeed.
The Forex trading being volatile, inexperienced traders don’t understand it well. As the new traders have less experience, they often make mistakes trading at the wrong time and losses money. A new trader should know the strategies well before starting their trading.
We will try to give some ideas about the earning procedure and strategies in day trading.
Risk management in the Forex day trading
Risk management is one of those strategies by which Forex traders reduce their possibility of loss. Without having a proper and clear idea about risk management, no day traders can become successful. Undoubtedly, in a short period, there is a lot of opportunity of making money in Forex day trading but in a proper way. When you will know the right way of getting profits, you will surely be successful as a day trader. Every successful trader knows how to manage their risks which is critical to understand properly during a short time.
At starting, on each trade, you should keep your risk very small, not more than 1%. If you think that the amount of loss is very small, then there is one reminder for you that the amount will increase with every loss. Even, an experienced day trader also faces a series of losses. So, you should set your stop loss wisely. If required, go to site of Saxo and download their demo trading platform. Use the free resources and learn to place the stop in the right place.
The win rate in the Forex trading shows the number of trades a trader win from his total trades. If a trader’s win rate is 52%, it means that he won 52 trades out of 100 trades. The win rate above 50% is considered as an ideal rate for most of the traders while the acceptance rate is 55%.
Risk vs. Reward
By risk/reward we mean the amount of the capital that is being risked to earn a certain profit. Forex day traders try to make more winning trades against their losing trades and it is another strategy of the day traders to attain their success. A high risk to reward ratio means that a trader’s win rate may be lower but he can make a profit.
Slippage is an unavoidable part of trading which results in a larger loss than expected. Instead of using a stop-loss order, slippage can happen. Sometimes the market movement becomes extremely slow for a long period, and at that time it is very hard to find five good trades each day. This sudden loss cannot be avoided even the experienced day trades. They can overcome the loss by adjusting the other aspects.
Some final words
We discussed the risk management, win rate, risk/reward, and slippage which will hopefully help you in your future trading. As a new trader you should keep in mind that if you try to earn money within a short period, you can be a failure in trading. Day trading is not an easy type of Forex trading. If you think that you can earn a lot instantly after entering in day trading, then you are wrong. First how the day traders work, what are their strategies and most importantly learn the basic terms and rules of Forex trading.