Currency Day Trading
Currency day trading or scalping is the most popular way for new traders to seek bigger currency profits and the idea is to trade for small regular profits and keep risk to a minimum.
While the idea sounds great there is a problem which causes traders to lose money and the problem is simple – all volatility in short term time frames is random and this means, support and resistance levels are not valid, the trader can't get the odds on their side and this causes losses. Let's look at why in more detail.
The Rise of Internet Currency Trading and the Impact on Day Traders
Before the rise of internet currency trading, some traders had an advantage in that they had the price before the vast majority of traders.
There are many famous floor traders who used this small time window to gain an advantage to make a quick profit but this advantage has now gone. Today, all traders around the globe have instant price information if they have an internet connection and the time window for day traders to make big gains has gone.
The Rise of the Internet and Day Trading Systems
While the rise of Internet currency trading has seen day traders start to lose money, there has at the same time, been a huge rise in vendors selling currency day trading strategies and systems.
These vendors look to take advantage of naïve traders who are attracted by the concept of making small regular profits with low risk. Vendors feed on the greed of these naïve traders and each week sees yet another strategy or day trading robot up for sale, traders buy them and of course they lose. None of these systems have an audited track record of real gains and are so cheap because they don't work – not because they do!
If you think about it, if a day trading or scalping system costing a $100.00 could really make the gains presented which are normally huge (hundreds or even thousands of percent per annum) then, there would be no recessions, no poverty because everyone would be buying the good life for a small initial outlay. But don't just think its system sellers who promote the message that scalping and day trading is away to make consistent profits - Forex brokers do it as well.
Why would a broker encourage traders to lose money trading currencies? The answer is simple they make profits from client losses. Most FX brokers and I have worked at several, will encourage day trading and promote it, as a great way to make money so they can increase the income they make from pip spreads and dealing commissions. They know its a losing strategy butݬݬݬ encourage it in several ways they will offer daily research, signal services by text, promote robots that don't work and the opportunity to follow other traders as a route to profit. All these services are used to get the trader to execute more trading signals and encourage the view that its the way pro traders make money but no real pro traders would bother trading so short term. On this site, we have a lot of info on How to Trade Currencies Successfully and why, you need to avoid day trading and scalping and also a lot of info on trading techniques and strategies which do work so check them out.
If you look at technical analysis you will see the same chart patterns on hourly and weekly charts as you do on daily and weekly charts so if you can trade with the odds in your favour on longer term charts why can't you when you are trading within minute our hourly time frames?
The answer is these chart patterns can only be traded for profits going backwards. If you are trading to say make 30 pips with a 10 pip stop loss and have a range in the currency, of over a 100 pips per day, you will get hit on stop all the time and as one day trader told me there were no big losing trades it was more like death by a thousand cuts small loss after loss with the odd winning trade until the trading account equity was completely gone. Its been proven in numerous studies that the volatility which occurs in very short time frames is simply of a random nature. You are trading within random price action and this means, you will eventually lose your trading capital to the market.
Trading the Odds
There are many people who say that in short term time frames there is an order to currency trading but this is not so. Currency prices move to the odds not certainties and you will never get the odds in your favour when trying to trade within a daily time frame and FX scalping strategies simply don't work.
Trading within daily time frames sees numerous losses and if the trader is lucky enough to hit a winning trade, it gets closed out before the end of the day and is never big enough to cover the numerous losses taken.
How to Make Profits in Currency Trading
Currency day trading strategies require a lot of work and effort but they simply lose money. If you are looking to make money, you need to trade longer term and this means either using Forex swing trading or trend following strategies which mean you trade longer time frames where you can get the odds on your side.
So forget about using FX day trading strategies, focus on the longer term moves and you will make a lot more profit and also spend less time on your trading.
Day trading is simply a lot of effort and most traders lose instead check out Forex trading Strategies that Work and also the best strategy in our view which is the best of all Long Term trend following the big trends for profit