This article looks at whether or not you should be using day trading forex strategies.
There are a lot of traders who look at using day trading forex strategies. While this may seem like the best idea you need to carefully consider this. There are some traders who do well with these forex strategies and others who do not. There are a number of points that you have to consider when you look at the suitability of day trading forex strategies. These points will include the timeframe of the strategy, the experience of the trader and the risk capacity you have.
The Timeframe of Day Trading Forex Strategies
Most traders assume that day trading forex strategies simply fall under the timeframe of short-term. While this is true you have to consider the different levels of short-term trading. There are some day trading strategies that cover hours of trading and there are others that are extreme short-term lasting only a few minutes.
When you look at the different forex strategies that fall into the category of day trading you need to consider the timeframe. There are some traders who are able to handle the stress of very short-term trading and other who cannot. You need to look at the personality and temperament that you need for the different day trading strategies.
The Experience that You Have
When you look at any type of trading you have to consider the experience that you have on the market. If you are a new trader then you should not be looking at day trading strategies. These trading strategies are best left to the more experienced traders. This is due to the fast-paced nature of the trading and the higher levels of stress that you will face.
Of course, this does not mean that once you have experience on the market that you need to look at short-term trading. Once you have experience you can still use the longer term trading strategies that you are comfortable with.
The Risk Capacity
There are many traders who assume that day trading requires a lower risk capacity and this is false. The truth is that the risks you take with day trading are actually greater than the risk you will be taking with longer term trading. This is due to the fact that the higher risks will increase the profits that you can make. As you are looking for a smaller amount of profit with short-term trading you will need to increase the profits through risk.
The risk capacity that you have will be a combination of the risk tolerance you have and the capital that you are going to be using. The higher your risk tolerance and capital the higher your risk capacity is going to be. There risk capacity that you need for day trading should be a high one.
A mistake that many people make when they look at day trading is assuming that they need low levels of capital. This is not true as you need to have enough capital to buffer the risks you are going to take and the number of trades that you are going to complete. The lower capital will also lower your risk capacity which is important to day trading.