The Forex market has become one of the most popular and interesting financial markets in the world, which makes sense. The Forex market is a decentralised network of central banks, investment institutions, hedge funds, and other organisations that works around the clock and lets traders bet on how the exchange rates of different currencies will move. Most people who trade on the Forex like these things:
The Forex market is open 24 hours a day from Sunday afternoon to Friday afternoon, so there is always something going on.
- Huge leverage (can get 1:100 margins)
- Fewer issues with the gap down (when price starts out lower than its previous ending price due to factors that occurred when the markets were closed)
- Lots of noise
Trading in real time (most traders are connected to the Forex market via an Internet platform that provides them with real time exchange rates)
- Trades with no fees (But most brokers get the difference between the bid price and the ask price, which is usually between 3 and 5 tenths of a penny on most deals.)
All of these things are very appealing to investors, but the truth is that a lot of people who try day trading as an investment end up on the wrong side of a trend and in trouble when they least expect it. Day trading is a way to try to make money quickly by making a series of short, small trades. A good idea that rarely works out.
People can and do make a lot of money trading on the Forex market, but the most important thing that they all have in common is that they use a tried-and-true investment strategy, are patient, and use pre-set stops after doing their homework. Successful Forex traders are often able to use analysis to figure out where trends come from and where they are going.
Because day trading often involves making multiple trades quickly one after the other to make a profit, it is hard to analyse the day's events and your charts properly. Day traders are more likely to sell out of fear or panic and make other decisions that cost them money and make them less profitable.
Day trading is also not a good idea on the Forex market because trades are almost always done at the very edge of the margins (most investors only have 1/100, or $1,000, in a trade of $100,000 worth of currency, or one lot). Because of this, even small changes in the wrong direction can be very bad for day traders, and they often are.
There are day traders who say they make a good living trading Forex, and they do exist, but they are not common. Because of how volatile the market is, how little information is available, and how much margins are used in Forex, day trading may be a bad way to invest, period.
