No, Bill Murray didn't wish he could do day trading in Groundhog Day. It's a way to trade on the foreign exchange market where a trader finishes all of his trades in one day. In other words, he may make dozens or even hundreds of trades in a single day. His goal is to buy and sell quickly and make money from the changes in the exchange rate over the course of the day.
Sounds hard, right? It can be, depending on the method or system you use to choose your trades. Day trading is based on the idea that currency exchange rates change throughout the day. They go up and down depending on who is buying and selling and what rumours are going around. In fact, day trading on the foreign currency market is probably the part of any stock, currency, or futures market where rumours and real-world events have the most impact. A trader who is smart and quick on their feet can make a lot of money by keeping an eye on what the news is doing to the exchange rates.
The foreign exchange market, or forex, is the most active market in the world. The most recent numbers show that more than $1.3 trillion USD is traded every day on the forex market. This makes forex the biggest and most efficient market in the world. Day trading is a big part of the reason why there is so much money and so much trade. What makes day trading different from other types of trading is how long you keep your stocks (or in this case, your currency). In day trading, you don't hold anything past the end of the market day. Think of it as a game where the goal is to keep trading cards back and forth to make them more valuable, but at the end of the day, you can't have any cards left in your hand.
Since the currency market is open 24 hours a day, there is no real market close, so the rules are a little different. The currency market is open from Sunday afternoon to Friday afternoon, and trading goes on all the time. This means you don't have to trade at the same time as the Stock Exchange, but can choose when you want to.
How Day Trading Makes You Money
People will tell you that the difference between a day trader and an investor is how long they keep their stocks. That's a small difference on the surface. The real difference is in how people think about the short-term versus the long-term and about liquidity. A long-term investor buys something he thinks will steadily go up in price and keeps it for a long time. Like a surfer riding a wave, a day trader rides the minute-by-minute changes in the currency market. Because you trade in lots of 100,000, a small change can make you a lot of money or cost you a lot.
How to Limit Losses When Day Trading
Limiting loss is one of the hardest ideas for new traders to get their heads around. Let's say you buy a currency that is going down because you think it is close to its support point, which is where it will bounce back and start going up. Instead, it breaks and keeps going down, which means you lose money instead of making it. You can either keep it because you KNOW it will start going up again soon, or you can sell it and limit how much money you lose. In day trading, the goal is to keep your losses as low as possible and make as much money as possible. Before you sell a trade, decide how much you'll let it lose, and then STICK TO YOUR LIMIT. In the same way, decide how much money you want to make, set a sell order for when the currency reaches that point, and sell when the time comes.
Do what you need to do.
Forex day trading is like any other kind of business. People who make money are the ones who take the time to learn about the market and know how their trades work inside and out. People who jump into the forex market without first learning the terms, rules, and trends are setting themselves up to lose big. Always keep in mind that there is no such thing as a high profit potential without a high risk. Before you start trading, take a course or read as much as you can.
