eToro – Forex Trading Forum

[Tropezienne]

The short answer is NO.

The long answer : there are many examples of people who do make a lot of money as Day Traders on the forex. But if you want to set up a successful forex business this is not the way forward. It will not regularly make money over time.

What is day trading? Well, there are two methods of day trading and day traders probably use a combination of both of them. One is actually called DAY TRADING the other is called SCALPING;
Day Trading involves opening several trading positions over the course of a day each of which may last from a few minutes to a few hours.

Scalping involves opening many very short term positions – as short as a minute even – in response to sudden changes in volatility. The aim is capture numerous very small changes during the course of the day, it requires a lot of skills and is highly speculative.

[Tropezienne]

I have tried both techniques – they are both very stressful and both involve sitting in front of the computer for most of the day. This time commitment is essential in order to see and (hopefully) capture the minute changes in the exchange rates. The stress is compounded by the need to be able to make instant decisions about the direction of any volatility that you might see.

Day Traders intensely look for movements

It doesn't work. All short term volatility is random, making it impossible to get the odds on your side. You will lose. You may have some winning positions – but you will have more losing positions.

Remember how the forex market works : it consists of millions of traders, all watching the market and trading their own methods, all with different motivations, goals and mindsets. It is impossible to make a judgement about the effect of all these millions of interventions into the market within a short space of time.

[Tropezienne]

There is another danger inherent in Day Trading – and especially if you are an inexperienced trader – that is that tere is often a huge temptation to Revenge Trade in an attempt to gain back the dollars you just lost on a rash scalping position.

Finally, it is expensive to day trade – even if you do have more winning trades than losers. You will be paying the spread on each of those trades. It is far better to make one or two trades a day than tens or dozens.

I have learned that Day Trading may generate occasional financial gains but these gains will not be consistent and will not build your trading capital.

Forex trading has a simple logic – but do not be deceived, it is not simple. Get yourself a proper forex education – don't buy a course, simply use your practice account and learn from other traders on forums like this one. Also read the eToro blog – accessible via the tab at the top of this page. With patience and over time you will no longer depend upon making short term gains with over-speculative day trading techniques – you will begin to make a good, regular income from the forex as a professional trader.

[joseajm]

Dear Tropezienne,
Day trading may mean different things to different traders. Day trading is very tight to the trading rules and processes that each trader has. While one trader may expect to be glued to the computer the whole day expecting the precise moment to enter the market, other trader may have a different approach, maybe trading the news, spike trading, morning trading, evening trading, etc., and all of those are day trading. Day trading does not mean whole-day-trading in all cases, and does not always mean opening many many positions during the day. So, it depends.

One approach can be, for example, setting daily goals in terms of how many pips the trader expect to make during his trading session (for example, 80 pips daily), which of course should be set according to his/her available time, so making a disciplined schedule to trade and get his/her daily goals (by of course, following his/her rules without hesitation). This may be achieved by opening 3 or 4 trades only (depending on the day, the market conditions and the time of the day), and this is also an example of day trading. Now, 80 pips may be low income or high income, depending on how many lots or units we are buying/selling per trade, so, I do think a disciplined and educated trader can make vast amounts of money as day trader.
My question is: how do you think a trader can make good amounts of money then?

[Tropezienne]

hello joseajm - thanks for joining in my discussion and opening it up. When I say 'Day Trader' in my posts above I am referring to a style of trading that is known among forex traders as 'Day Trading' as opposed to Swing Trading for example.

It is a question of semantics I suppose - the type of trading that I was discussing is what is traditoinally recognised as Day Trading.

I do take your point that many traders trades each day - and do not necessarily trade in the way I have decribed here. They are not what is known as 'Day Traders' - in fact I think that they are much wiser than Day Traders - yes, the may trade each day and so could be called "day traders"

In my posts here I am speaking to the new traders who often get caught into bad practices - and the many stories out there about Day Trading can lead them to lose a lot of money.

Your second paragraph sums up perfectly how a trader should trade each day. I agree especially with your statement about how a trader should stick to his own rules in conjunction with having a disciplined scedule and a clear target. I would add that, if the daily target is not met - remember the rules! Because the temptation to 'revenge trade' to make up the target or to recuperate losses can be very strong even in the most disciplined trader who trades to his rules and schedule each day.

I think the best way to make money - it starts slowly, but grows exponentially - is to compound upon your trading capital - and to trade no more than 5% of that capital. In addition, a small target of, say 10 or 15 pips a week can soon grow your trdaing capital into a very nice sum if you compound.