Forex Day Trading 101 - Important Facts for Novice Traders

by : Monica Hendrix

This article is for novice traders and we are going to look at 3 facts which are all you need to know to decide whether day trading is right for you. So let's continue and review our forex trading 101 continues below...

Fact 1

All Short Term Volatility is Random

There is no order to short term volatility and prices can and do go anywhere in short time periods - Why?

Quite simply there are huge numbers of traders all with different levels of skills, systems and motivations for trading and you can tell what this mass diverse group of people will do in short periods of time - it's laughable that traders think you can measure human psychology of millions in just a few hours but they do and they lose for believing it.

Fact 2

Random Volatility = No Odds on Your Side

Forget the far out investment crowd who believe there scientific order and you can predict forex prices you can't ( if you could there would be no market as we would all know the answer in advance!), so those systems who tell you can make a regular income guaranteed are totally wrong. Forex trading is an odds game and to win you must be able to get the odds on your side. If volatility is random, you can't get the odds on your side and will lose - period.

Fact 3

Day Trading Breaks a Fundamental Rule of Trading

This is of course run your profits to cover your inevitable losses.

In forex day trading stops are close and losses are small and because you can get the odds on your side, you have a lot of them. Of course sometimes the forex day trader ends up with a profit when he's lucky - what does the trader do? Run it? Not a chance he cuts it!

It's pretty obvious that you would have to have luck constantly on your side to win and of course luck doesn't last forever. Eventually you have small losses and lots of them and the occasional small profit which leads to a decline and final wipe out of equity.

What about all the track records that claim to make money you may ask?

Well they all have the disclaimer / warning repeated below or a similar one and they mean nothing, as there just saying the track record has been made up and simulated on paper in hypothetical trading, read it carefully:

"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

You will NEVER see a day trading system sold online with a long term audited track record of gains - Why? If you have read this article you will already know the answer it doesn't work.

If you want to win you need to trade the odds and that means trading longer term.

So instead of day trading make longer term trading part of your forex education and you could enjoy currency trading success.