Big Money Forum >> Forex >> Forex Tutorials
Forex Currency Day Trading
Forex Day Trading - The Basics
Day trading is a type of trading in forex when you make a trade in a single day. By a trade, that means buying a currency and selling a currency on the same day. This is a very risky and short term style of investment and trading. Forex by the way is alot like the stock market, only you are trading foreign currency against the USD and you may day trade this way as you would in the normal stock market. Not only can you trade foreign currency, you are also allowed to day trade gold, silver and other commodities as well.
In this guide, there are a few points that need to be taken care of. Easy forex allows you to make live currency trades. When dealing with this forex platform, you may set up a trade and if it goesn't go through, it will roll over into the next day and will continue until the buy order is canceled or the deal does through. You will also be charged a daily renewal fee if you decide to keep your trade order going through the next day. Other brokers and trading software such as scottrade and ameritrade will charge a daily fee as well if parts of the order get filled and the order continues into the next day and you are filled then. Luckily, Easy Forex doesn't charge a commission fee like most stock brokers do because Easy Forex is a Market Maker.
Trading a foreign currency for a forex day trade
OK, to the point. Let's begin an example of day trading with forex. How about we start with the USD (American Dollar) or (US Dollar) and try trading that against the EUR (Euro). If you think the US Dollar is going to increase against the Eueo, you may have $10000 to start with but want to start trading with a risk of $100. Using Easy forex trading, you could select a day trading deal by buying 10000 USD and selling EUR with an exchange set at 1.074 US dollars per 1 Euro.
Now view the diagram below and follow these steps. First, select a currency you want to buy, which would be the US Dollar. Second, select a currency you would like to sell. Usually you are going to be selling a foreign currency against the USD. After you have done this, a currency rate will appear. This is the ratio of US dollars to the foreign currency you want to trade.
Amount of money used in forex currency trade
This is where you can set up a safety net for your currency trade. You may set up a stop loss here so you may limit how much money you can lose. First choose how much money you want to trade with. In this example, we will use $10000 as your amount. You will use US dollars for this amount. Next you will select a stop loss, which will be the value of money in Euros. Lets use 100 Euros, which is the maximum amount of money you can possibly loss in a bad trade.
After the trade value has been chosen, you may then choose a limit stop loss at which to sell your investment if you are to start losing. In this example, we will choose a stop loss rate of 1.0850.
Automatic credit card confirmation for forex
After you have a trade set, you will receive a confirmation message which will comment on 1 of 3 topics. First, Easy forex will let you know that you have a credit balance that you may use for your trade transaction. All this is telling you is if you choose to accept the trade, the money will be automatically taken from your balance and used to process your foreign currency trade. Everything is set to go!
The second message regarding your trade would let you know that you have funds in your trading account, but it doesn't meet the requirement of the trade. Usually you may be a few dollars short when selecting your currency rates or amounts. This is still no problem because if you choose to accept the trade, the extra funds would be backed up by your credit card. This is very handy as you may need to do a trade at a certain important moment and being a few dollars short could make you miss great trading opportunities.
The last message will let you know that you don't have credit card details filed with easy forex. If you don't have a credit card registered for forex trading here, you will be taken to another screen where you will be able to register your credit card and deposit funds into your account before making your trade.
Next, Freeze your foreign currency rate
Once your credit card is confirmed, you will be asked to accept your trading details. When you are ready to execute your forex day trade with the following foreign currencies selected and the currency rate, you may then press Freeze Rate button. When this is done, your rate will be frozen.
Once your rate is frozen, you will be given only a couple of seconds in which the currency rate will freeze and be locked in. During this time, you should accept the rate and complete the trade if you feel the time is right. If you have second thoughts, you may cancel the order as well and choose a different rate. It's that simple. Forex is safe to use and easy to handle, which is why they call it Easy Forex!
After a forex currency trade is complete
Once you completed your trade, the following actions will happen using your currency exchange rates. Let's say the currency ratio for EUR/USD is now 1.10. In the above example, your trade has ended above your selected stop loss rate, which was 1.0850. This means you have lost the 100 Euros, which was the selected risk of trade you chose to risk. This stop loss is what protects you from losing your entire $10000 investment or anything more than 100. It basically sells your entire investment once you have lost your stop loss amount.
Now assume the foreign currency rate ended up at 1.0795 instead. This was below the 1.0850 rate, so you didn't lose the maximum amount of $100 stop loss so you will lose only 51 Euros.
Now let's say the rate is now lower than the exchange rate you selected when you first bought. For example, lets say the rate ends at 1.05. This means you made a profit on investment of 229 Euros. Forex is great about this because it lets you set your own limit to losing, but you have an unlimited limit of gaining. Many people have become rich doing this type of day trading. Even better, Forex doesn't charge a commission on each trade so you can trade all you want and never have to worry about commission charges. This is one reason forex is so different, it doesn't charge commissions like the big stock brokers like Scottrade, Ameritrade and Etrade. For some, this is the hidden "secret" to trading.
If you would like to learn and read more articles about forex, view virtual tours and demonstrations or read the details or would like to register an account, please visit Easy Forex. Don't forget, you can sign up and start trading with as little as $50!. So if you have a paypal account or credit card and would like to try it out for yourself or would like to trade in a practice session with practice money, then click here.