Day Trading

Short-term, or day, trading means that the trader generally does not hold positions overnight and trades a lower time frame chart such as a 15-minute or a 5-minute chart or a chart with an even lower time frame.

Day trading is popular for several reasons, especially its simplicity once the skill has been mastered. It is a business with very low start-up costs and a technically unlimited upside. Although there is the possibility that individuals can lose more than they fund an account with, brokerage houses have gotten much better at closing an account holder’s trades out for her rather than let her incur a debit balance, that is, let the account drop to less than zero, leaving a debt. There definitely is a dark side to trading, and to day trading in particular, as the exhilaration of the potential for fast money attracts addictive personalities the way gambling casinos do.

Discover Day Trading

For many beginners day trading is the way they were introduced to trading, and brokers and dealers rely on a steady flow of new account holders coming through their doors. Many forex brokers, unlike stock or commodities brokers, will accept credit cards to keep their clients trading.
Day traders generally trade more contracts than do position or swing traders because they trade smaller time frames and generally remain on the screen while in a position. The larger trade size means they can take smaller bites out of the market and make just as much as the higher time frame traders make, only over a shorter period.

The same techniques for distinguishing between trend and counter-trend setups and the use of stop placement that is based on percentage of the account and chart structure apply to day trading too.

Day trading is very much a microcosm of position trading and swing trading. The only difference is that in day trading one must be aware of scheduled economic releases and other world or financial market developments that can affect price movement over the short term or intermediate term.
In day trading, you always should exit your position 5 to 10 minutes ahead of major scheduled economic releases. We use Forex Factory Calendar and anything marked in red or orange to be a major release. After an important news release we do not enter trades until the candles on the charts with the shortest time frame stop showing dojis and start showing wider candle bodies. Remember that dojis show indecision and the wider bodies show that trade is being facilitated.

For day trading I recommend using the 15-minute chart for timing and patterns, the 60-minute chart for direction and confirmation, and 5-minute or 3-minute charts to help time entries and exits.