Forex Daytrading - All the Facts you Need to Know

By: Sacha Tarkovsky

There are more e-books and advice on FOREX day trading than on perhaps day trading than any other method of trading currencies.

Can you become a successful day trader? Let's find out, by looking at the facts.

The answer is you probably won't make money FOREX day trading and if you don't believe me consider these facts

1. Getting the odds in your favor

Successful trading is all about getting the odds in your favor and it is impossible to predict what will happen in a day session.

Why?

Because currencies represent the underlying health of the economy and trend longer term and longer term trends are the ones to focus on.

Short term movements in a day are random, so it's simply like flipping a coin.

2. The fundamental rule of investing

Is run your profits and liquidate your losses quickly.

You can certainly liquidate your losses quickly by day trading, but you can never run your profits far enough to cover your inevitable loses, as you close your profits to quickly.

Your profits are simply not big enough to cover your loses, so its bye bye, to your account equity.

This is simple common sense!

It gets worse, here is another problem.

3. Transaction costs

If you FOREX day trade your transaction costs are high, they add to losses and restrict profits even more.

Why do people day trade then?

There are several reasons:

1. They think it's less risky.

But by trying to avoid risk they are actually creating it and give them no chance of winning.

2. Greed

Investors see e-books and guru's with convincing copy that appeals to their greed (mostly from book sellers who have never traded in their lives) and believe headlines such as "trade with 90% accuracy" and other stupid statements.

Humans are greedy and even though it's obvious no one would sell a system like the above as they wouldn't need to! They would keep quite, bank the profits and wouldn't need you.

Ask anyone selling advice, to produce a real track record, of real dollars and you won't get a reply.

3. Brokers

Day traders are great it means commission, less risk on their books and contrary to belief, no broker is reliant on traders making money for their balance sheets.

Most brokers assume that the trader will lose anyway, so why not make as much as they can? FOREX Day trading serves this purpose.

If you want to make FOREX Trading profits don't day trade.

The fact is the odds are against you and if you trade why not put the odds in your favor surely that makes more sense?

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