The asking price is always higher than the bid price because brokers or market makers will always sell at a higher price (ask price) and buy from you at a lower price (bid price). Average spreads on the most liquid, major currency pairs such as the EUR/USD, and GBP/USD are very low, while they are higher for comparatively less liquid currency pairs. The prices of currency pairs are quoted in the bid and ask prices.

A Forex Trade In Action

Forex day traders can make anywhere from 1-5% of the total account each day. We have a great article on risk you can find here if you want to find the best risk management strategy. These books are particularly good if you are planning to start day trading in the UK, US, Canada and Europe.

What you should know before you start day trading forex

Yes – the foreign exchange market is arguably the best asset class to target as a day trader. Not only can you trade 24/7 at industry-leading fees, but forex attracts trillions of dollars worth of volume each and every day. Plus, when trading major forex pairs, you will benefit from super-low volatility levels.

• As a rule of thumb, you want to target the same amount of pips that makes up your determined range.
• Of course, nobody is immune to pressure and sharp market fluctuations can be stressful.
• This will help you analyze your performance and update your day trading strategy as needed.
• I also focus on features like fast trade execution and access to crypto markets.
• A mean reversion strategy tends to function best in choppy and volatile market conditions where swings in exchange rates occur around a central level.

Some of the best forex brokers offer a large variety of pairs, such as IG, Saxo, and CMC Markets. CMC Markets offers nearly 160 currencies and can even quote them both ways, allowing you to trade the EUR/USD and the USD/EUR. FOREX.com gives you direct access to global forex markets with low spreads, lightning-fast execution and powerful trading platforms—all under the regulation of the CFTC. Yes, it is possible to day trade forex, as the forex market operates 24 hours a day, allowing for frequent trades within a single day. Doing this analysis will help you set stop-losses and take-profit levels on each trade. If traders can identify a currency pair with a significant price change compared to its mean, they could take advantage of the market’s return to its average level.

Traders could implement strategically placed stop-loss orders to protect their positions if the price moves against them. A stop-loss order is placed at a predetermined level away from the current market price, which, once reached, automatically closes the position, limiting any further losses to a trader’s accounts. Range trading, sometimes referred to as channel trading, is a day trading strategy that starts with an understanding of the recent price action. It is a popular trading strategy where you buy and sell over a time frame of a single day’s trading with the intention of profiting from small price movements. Forex day trading can be profitable, but it is important to remember that it is also a risky activity.

How do I Choose the Best Broker for Day Trading Forex?

• I’ve traded stocks, like those on the TSX Venture Exchange, and they can be powerful tools.
• This means that there will often be wilder pricing spikes, so you might need to close a trade at a less favourable level.
• If you are S&P 500 day trading, you will be buying and selling the shares of companies, such as Meta and Apple.
• If a foreign currency is overbought, this means that there is too much upside pressure on the price of a pair, thus – a temporary market correction is likely.
• This allows you to boost the value of your stake, which in turn, can turn this little profitability into lucrative gains.

With that said, regulated brokers are capped in how much leverage they can offer retail clients. The good news is that major forex pairs attract much higher limits than other asset classes. With this in mind, the best time to trade forex is during standard market hours – which runs from 5 p.m. This takes into account the global nature of the forex trading arena, with the Asian markets opening proceedings and the week closing in the US.

Understanding the Basics of Day Trading

That said, even in the best conditions and with the most sophisticated technical analysis, sometimes the market will just move against you. Knowing when not to trade is often more important than knowing when to trade. In this situation, the exchange rate can snap back to its average level quite quickly. This movement provides a mean reversion trader with numerous opportunities for profitable trading during an active day. Some forex scalpers also employ forex robots to fully automate their trading plans. These levels could be seen as potential support and resistance levels, as well as possible entry and exit points where the market could reverse once reached.

Step #2 Start With Major Currency Pairs

The first type of professional day trader includes those who work for a hedge fund or the proprietary trading desks of large financial institutions, and they tend to trade forex profitably. After all, this often sees day traders place multiple positions throughout the day, and thus – not all will return a profit. On the contrary, losing a trade is just part and parcel of this industry. But, those that are experienced in the forex day trading scene know how to handle losses and move on. Opportunities for day traders can arise from any currency pair, regardless of whether they are a major or minor pair.

There are times when the markets are thin and liquidity is low – that can be a sign of uncertainty if the market is moving sideways and indecisive. Other times, it can be a precursor to a liquidity squeeze or abrupt move if large volumes suddenly start pouring in. If there is not enough liquidity to fill orders, the market will move to fill orders that may be resting above or below the current price. Top stories, top movers, and trade ideas delivered to your inbox every weekday before and after the market closes.

Major pairs

Depending on the day trading strategy you select, you might also find that the best conditions for trading tend to occur during certain time frames. Choosing the appropriate time frame or forex trading session to operate in can make a big difference in the day trading opportunities you can take advantage of as a forex trader. News trading is one of the most traditional, predominantly short-term focused trading strategies used by day traders. Fortunately, free courses for intraday traders starting out are frequently uploaded to YouTube. It involves exploiting small price gaps created by the bid-ask spread.

The platform – which is used by over 20 million traders, offers dozens of forex markets. This covers all major and minor currency pairs, alongside a huge selection of exotics. When day trading forex at this broker, you will not be charged any commission.

Many professionals recommend only actively trading for between two and three hours each day. Staying calm keeps my crypto trading focused and profitable without unnecessary risks or costs. Sticking to a trading plan takes Day trading forex discipline, but it protects your funds. I’ve felt those moments myself—refreshing charts, hoping for a bounce back that never came. For example, if I set a stop-loss at $10 below my entry price, I look for a target profit of $20 or more. Short-term gains add up when done right, but only with careful planning and tight stop-loss orders set beforehand.