Nowadays, many individuals are dabbling in forex trade to make real money as there are so many forex brokers, both retail and institutional, who are providing online coaching and really going out of the way to help a greenhorn or a neophyte to learn the ropes and get established in this business. But amongst the newcomers, there is a sizeable section that takes up forex as a calling with the sole objective of becoming an expert or a specialist in the forex trade and markets. They will be working as day traders on some reputed and well known forex system or platform someday-at least what they are working at.
This brings us to the aspect of day trading and day trading vis-à-vis forex trade. For starters, day trading stands for trading in securities, commodities, stocks, currencies, and futures especially in the stock and forex markets. All such trading positions are valid for single day i.e. trading positions that are taken during opening of a market are valid till they close. A trader who partakes of such trading is called a day trader. The day trader is distinct from an investor who invests heavily in markets. In this article, focus will be laid on the role of a day trader in forex markets and what qualities one needs to have or develop to become a successful day trader in the long run.
Day trading, in forex trade and markets, is essentially speculating in various financial instruments, especially currencies on any given day. The underlying motive of course is to earn profits and help other new traders make profits by giving valuable inputs and tips. Day traders usually happen to be professional speculators working in financial establishments and firms, investment firm employees, bank employees, and so on. They are specialists when it comes to managing equity funds and investments in forex business. Since, all retail brokerage and institutional establishments employing day traders have web-based platforms, there are many day traders who work from home and are known as online day traders.
Basically, a typical day trader happens to be someone who is very erudite and also has access to big funds or is quite well-to-do. Day traders speculate in very risky conditions and more often than not, have to take decisions within split seconds. For this purpose, they operate on high leverages with minimum margins and have to correctly predict on sensitive reversals and subtle price fluctuations of currency pairs which are immensely liquid. So, day traders apart from keeping the markets in a state of buoyancy, also fuel the liquidity aspect via their sagacious and arbitrary speculations.
As mentioned before, there are two types of day traders in terms of job profile and description. Institutional day traders are those who work in banks, non-banking financial institutions, and large brokerage firms. The other primary group is the self-established or individual home trader who is not as resourceful as the institutional day trader as he does not have access to many amenities that the institutional trader enjoys: like a cubicle with a trading lectern that has a live line, sufficient disposable capital and good leverage spread, the state-of-the-art software and so on.
Individual traders, on the other hand tend to be more savvy and street smart. They also have good access to a brokerage firm and tend to take greater risks. They have sound knowledge of technical analysis and know how to use the tools for technical analysis that results in timely profits for their clientele whose resources they use. Day traders need to have a trading desk, must update themselves regularly on relevant information and need to have access to trading software for technical pointers or swing trade. They need to make prolific use of Elliott Wave Patterns, and technical indicators like flags or channels. For making precise forecasts of short and long term price movements, genetic algorithms are also harnessed.