Day Trading Systems, Strategies and Tips
Forex Day Trading Systems
This article will provide traders with definitions of day trading and intraday trading, it will explore different day trading systems, how traders make profits with day trading systems, some suggestions for the best Forex day trading systems, and some useful tips for you to use in your daily trading.
Intra-day trading is a set of Forex day trading strategies that demands professional traders to open and close trades on the same day. Considering that markets can only move so far within one day, intra-day traders use relatively riskier trading techniques to accumulate their desired profits.
Day trading Forex strategies are more action packed and require traders to be present at the trading station throughout the session. It's widely accepted that the narrower a time frame a trader works within, the more risk they are likely to be exposed to. That's why day trading can be described as one of the riskiest approaches to the currency markets.
It's not really the different Forex trading strategies that day traders have to use that increases the risk. In fact, the overall logic is the same for almost any interval out there. Rather, it is that Forex day trading rules tend to be more harsh and unforgiving to those who don't follow them.
The two factors that no intra-day trader can do without – irrelevant of the Forex day trading strategy they intend to use – are volatility and liquidity. It might seem like a good thing for any kind of trader, but short-term traders are far more dependent on them. Volatility is the magnitude of market movements. When trading short-term, solid volatility is a must.
This basically reduces the selection of instruments to the major currency pairs and a few cross pairs, depending on the sessions. Speaking of sessions, since volatility is session dependant, knowing when to trade is as important as knowing what to trade. Liquidity is equally important. Intra-day trading is very precise. A long-term trader can afford to throw in 10 pips here and cut 10 pips there. A short-term trader can't, because 10 pips could be the whole profit projected for a trade.
This precision in Forex comes from the trader's skill of course, but rich liquidity is important too. If there is no liquidity, the orders will simply not close at the desired price, no matter how good the trader is. This once again limits intraday traders to a particular set of trading instruments and trading times.
Scalping is a day trading Forex strategy that aims to achieve many small profits based on the minimal price changes that may occur. Scalpers go for quantity trades, opening almost 'on a hunch', because there is no other way to navigate through the market noise. Scalping can be exciting and at the same time very risky. Scalpers must achieve high trading probability to balance out the low risk to reward ratio. Probably the hardest part of scalping is closing losing trades in time.
A scalper simply can't afford to wait for the market to come back.
If you are aiming to become a scalper, consider developing a sixth market sense – look for volatile instruments, good liquidity, and perfect execution speed. If mastered, scalping is potentially the most profitable strategy in any financial market. It is only the adjacent risks that prevent it from being the best Forex day trading strategy.
Reverse trading is also known as pull back trading, counter trend trading, and fading.
The risk comes from the basic principle of trading against the trend. A reverse trader has to be able to identify potential pullbacks with a high probability, as well as to be able to predict their strength. Although not impossible, it does require a lot of market knowledge and practice. The 'Daily Pivots' strategy can be considered a special case of the reverse trading strategy, as it specialises in trading the daily low and daily high pullbacks and reverses.
This is a pretty simple day trading Forex strategy that specialises in searching for strong price moves paired with high volumes and trading in the direction of the move. A high level of trading discipline is required in momentum trading, to be able to wait for the best opportunity to enter a position, and maintain solid control to keep focus and spot the exit signal.
Day trading is often advertised as the quickest way to make a return on your investment in Forex trading. However, what the the adverts fail to mention is that it's the most difficult strategy to master. As a result, many beginner traders try and fail. Through years of learning and gaining experience, a professional trader may develop a personal strategy for Forex day trading.
Forex Day Trading Systems
A Background of the Forex Day Trading System
Forex day trading is strictly carried out within one day, and trades are always closed before the market closes on that same day. Those who trade in this way are referred to as day traders. A Forex day trading system is usually comprised of a set of technical signals, which affect the decisions made by the trader concerning buying or selling on each of their daily sessions. The system can help traders to navigate the market much more efficiently and confidently, with the aim of allowing them to gain more profit.
In the past, the activity of Forex day trading was limited to financial organisations and professional speculators. The majority of day traders were the employees of banks or investment firms, who specialised in equity investment and fund management. However, with the introduction of electronic trading and margin trading systems, the day trading system has now gained popularity amongst 'at-home traders'.
With easy access to Forex trading, now almost anyone can trade Forex from the comfort of their own homes. People choose to go into day trading for various reasons. However, a factor which is likely to have made this activity much more popular over recent years is the fact that day traders do not incur the 'Swap', which is a fee that is incurred when a position is kept open overnight.
How Do Forex Day Traders Make Profit?
Day traders leverage large sums of capital to make profits by benefiting from small price changes among the highly liquid indexes, stocks, or currencies. In other words, these traders are not looking for large dips and peaks in the prices. Instead, they are happy with small, moderate movements, but their trade sizes are bigger than the ones owned by traders that invest over longer periods. As a day trader, the main aim is to generate a substantial amount of pips within a particular day.
Ideally, you should generate returns on both the highs and lows of the assets. The entries in the different Forex day trading systems make use of similar kinds of tools which are utilised in normal trading - the only difference is in the timing and approach. With day trading, you generally expect to make less profit per trade, yet you expect to achieve far more trades.
The Best Forex Day Trading Systems
There are many different Forex day trading systems - it is important not to confuse them with trading strategies. The main difference between a system and a strategy is that a system mainly defines a style of a trading, while a strategy is more descriptive and provides more detailed information - namely entry and exit points, indicators and time-frames. A brief overview of some of the most commonly used systems is given below (Please note: scalping, fading, and momentum are also trading strategies as well):
- Scalping: In this system, the buying or selling takes place instantly after the trade achieves profitability. In this trading type, the target is to attain profitability when you are up by just a few pips. You can expect to trade a lot and generate quite a large volume. However, the income per trade is rather small.
- Fading: This system involves the shorting of stocks, an index or a currency pair, immediately after upward moves. In this form of day trading, the price target is set when buyers start to step in again. In other words, you are aiming to make pips on the market moves that try to restore the past price of an asset.
- Daily Pivots: In this system, the profit is gained through the volatility of the daily prices of assets. The buying or selling takes place during the low period of the day, and closing of the trade occurs at the high period of the day. The price target here has a similar pattern as mentioned above.
- Momentum: In this type of Forex day trading system, trading is usually performed on news releases, or by locating the strong moves which are trending, and which are supported by high volumes. The price target in this strategy is when the volume starts to diminish, and the appearance of bearish candles takes place. You are generally looking into acquiring an asset a few hours before news is released, and then subsequently getting rid of it after the market has moved enough into your direction.
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1. Open an account
To trade on oil prices with Plus500, you’ll need to open an account. It takes a matter of minutes, can be done entirely online, and there’s no obligation to fund once you’ve finished your application.
However, you will need to fund before you place your first trade. Funding a CFD trading account is simple – you can use your debit or credit card
If you’d like to try out oil trading without the risk of losing any capital, you can open a demo account instead.
2. Find your first opportunity
- You can use your Plus500 account to trade Brent Crude and WTI (Called US Light Crude on the platform), as well as Heating Oil, Natural Gas and No Lead Gasoline. And you can access a variety of tools to help you identify the right time to open your first position, including:
- Oil trading signals, which tell you when opportunities arise with details on how to take advantage
- Alerts, which notify you when certain conditions you’ve set have been fulfilled
- Technical indicators, including MACD, Bollinger Bands and RSI
- Find out more about the Plus500 Trading platform.
3. Open your position
Once you’ve decided the market you want to trade, you can open your position on Plus500 web platform, or one of our mobile trading apps.
Open the deal ticket to place your trade. First of all you’ll enter your stake, which dictates the profit or loss you’ll make when the market moves. You can also choose to add a stop or a limit here, which will automatically close your position once it hits a certain level.
Bear in mind, though, that a basic stop loss does not guarantee your position will close at the exact level you specify – if the market suddenly gaps beyond your stop level, it’s possible your position will be closed at a worse level than requested.
If you think oil is going up in value, then ‘buy’ your chosen market. If you think it’s headed down, then ‘sell’ it.
4. Monitor and close your position
Now your trade is open, you’ll want to keep a close eye on it – or use the appropriate monitoring tools – and decide when the right time is to either cut your losses or take your profits. You can also add, remove or amend any stops or limits once your position is open.
To close a trade, you just click on your position and trade in the opposite direction to when you opened it. So if you bought oil, then you’d sell it. If you’d sold oil, then you buy it.
Your profit or loss is determined by deducting the price at which you opened the position from the price at which you closed it, and multiplying the result by your position size. If you bought the market at the outset, then a positive figure indicates a profit and negative one a loss. If you sold it, then it's the opposite.
Step 1 – Open an Account
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Step 2 – Verify Your Account
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Plus500 offers CFD trading in Forex, stock indices, individual equities, commodities, cryptocurrencies, ETFs and options. Plus500 was the first broker to introduce a Bitcoin CFD (2013). The company does not charge commissions on any of its trades. All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500's WebTrader platform. Large volume traders do not get a trading discount at Plus500. The spread is the same whether you trade one lot or one thousand lots. There are no charges for normal withdrawals or terminating an account. Inactivity fees kick in after an account has been idle for three months. Beginning traders can open an account with as little as GBP 100.
WebTrader is simple and easy to use and the layouts will feel familiar. Traders can choose from among more than 2,000 instruments, analyze their selection on a customizable technical analysis chart and place their trade in just a few clicks, all within the same window. Traders can also set price-based alerts on instruments they are following, and WebTrader will notify them via email or SMS text once the price objective has been reached.
The mobile app includes all of the same functionality clients can use in the desktop version to analyze and research trading opportunities. Clients can use conditional orders, track their accounts and receive trading alerts. The dynamic charts can be expanded to full screen to provide better clarity during the technical analysis process. Clients can also deposit and withdraw money from within the mobile app.
Plus500 has been in the CFD business since 2008. They are registered in the UK and licensed by the Financial Conduct Authority (FRN 509902). The company offers CFD trading in Forex, stock indices, individual equities, commodities, cryptocurrencies, ETFs and options. Plus500 was the first broker to introduce a Bitcoin CFD (2013). The company does not charge commissions on any of its trades. All costs are contained within the spread for each of more than 2,000 trading instruments offered on Plus500's WebTrader platform. Plus500 Ltd. (PLUS.L) is a publicly traded company on the AIM section of the London Stock Exchange (since 2013) with a GBP 1.01 billion market capitalization and clients in more than 50 countries around the world.
Up to 80.6% of retail investor accounts lose money when trading CFDs with Plus500. You should take into account whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs, regardless of provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.