Many people enjoy trading in the Forex market because they need the least capital to start day trading. Forex is traded 24 hours a week, offering greater profit potential with the leverage provided by Forex brokers.
This article will give a review and some strategic suggestions to increase profitability through Forex Day trading.
Day Trading
Day Trading is a common strategy where no amount of investment is left overnight, and traders do not wait for more than one trading day. All the profit is calculated for a single trade day.
Forex Day Trading Strategy for profit
Strategies can have many elements, and profitability can be analyzed differently, but strategies are often ranked based on win rate and risk/reward ratio.
Win rate
Your win rate represents the number of transactions you win from the total given. Let’s say you win 55 out of 100 transactions. The winning percentage will be 55%. Win rates above 50% are ideal for most day traders, with 55% achievable.
Risk / Reward
Risk/reward indicates how much capital is at risk to achieve a particular benefit. If a trader loses 10 pips in a losing trade but earns 15 pips in a winning trade, he is a winner and earns more than a loser. This means that the trader is making a profit for him, even if he wins only 50% of his trades. Therefore, getting more from winning trades is also a strategic factor that many Forex Day traders strive for. A high win rate for a Trade means a high risk/reward flexibility, and a high risk/reward means that a low win rate can still be profitable.
Consider slippage
It is not always possible to find 5 good day trades every day, especially if the market moves very slowly over a long period.
Slippage is an inevitable part of a transaction. This results in higher-than-expected losses, even when using stop-loss orders. This is common in very fast-moving markets. Reduce net income by 10% to account for discrepancies when calculating potential profit. (This is a high deviation estimate, assuming we avoided sitting on the release of key economic data.)
Risks that reduce profitability
Forex trading is very volatile, and inexperienced traders can lose significant amounts. All successful Forex Day traders manage risk. This is one of the least important, if not continuous, elements of continuous profitability.
First, you need to keep the risk very low for each transaction, typically 1% or less. 3 This means that with a $ 3,000 account, you will not lose more than $ 30 in a single transaction. This may seem small, but the losses are summed up, and even a good day trading strategy will result in a series of losses. Risk is managed using the stop-loss orders described in the scenario section below.
Conclusion
This simple risk-managed strategy shows that you can get more than 20% monthly returns from Forex Day trading with a 55%-win rate and a win rate where you earn more with winners than you lose. Most traders shouldn’t expect to make so much. It sounds easy, but it’s more difficult. Here is our review about fbs account.