The nature of the Forex market makes it perfect for those who seek to make their living as day traders. It’s both larger and more liquid than the stock market. It’s open 24 hours a day so there is not crazy after hours moves that might turn a profitable position into a loser overnight. The Forex market allows for more leverage than stock or option trading which means those with a small amount of money can generate amazing real dollar returns each week.
These are amazing benefits and real advantages to day traders and that’s one reason the Forex market is so attractive to them. But these advantages can also work against day traders if they aren’t careful. It’s possible to make a lot of money but it’s also possible to lose a lot of money really quick if not careful.
Trading for a living is not like having an ordinary job. It never becomes routine. Those with smaller accounts who need to pull money out to live each month face an additional emotional burden and pressure to succeed which tends to mess with the mindset.
Day traders, like all traders, should have a system they’ve successfully tested and have confidence in which they follow assiduously on every trade regardless of the outcome of any individual trade.
More than other traders, day traders need to develop an emotional detachment to wins and losses in their trading. They may take dozens of trades a day and should therefore have a good way to deal with the natural emotional reactions they’ll face to individual trade outcomes. They need to be able to approach each trade as a new opportunity without any baggage from previous trades.
And finally, day traders need to match the money in their account with the number of signals their system gives. No system is right all the time and choosing only some of the total signals introduces a greater degree of uncertainty and chance for failure.
Below is a 1 minute chart of the EUR/USD.
A day trader following a system of getting into a trade on any cross through or bounce off the moving average would only be in a trade for just a few minutes before the next trade.
There is a great opportunity for day trading the Forex successfully and very profitably. But the day trader must develop the emotional fortitude and mental stamina required to successfully follow their system in a “wash, rinse, repeat” way.