What Is Intra-Day Trading?
Intra-day trading is when you jump into the Forex market, buy and sell currencies, and get out within 24 hours. It's not for the faint of heart, but it does come with handsome rewards if you can pull it off. Unlike long-term trading, intra-day trading relies on using data mining and complex mathematical algorithms to tease apart patterns, construct charts, and determine buy and sell levels.
With intra-day trading, your whole purpose is to use a small amount of capital, massive leverage, and cunning skill to buy a currency, ride the existing trend, and then cash out - leaving the marketplace before anyone ever knew you were there. Of course, your broker knows when you buy and sell, but the market will likely not even notice you as a small-time trader.
Why Intra-Day Trading?
The reason you would consider intra-day trading over traditional "buy and hold" investing is because you want the potential for massive profits now, not later. You're comfortable taking a lot of risk in the market, you realize that 95 percent of the people who try to do this fail, and you're willing to work your butt off to rank in the top 5 percent (i.e. the "elite") who make a comfortable living trading Forex.
How Do I Trade?
Most traders who do intra-day trading use software. The Forex market is blindingly fast, so software is a must. Trading software, sometimes called algorithmic software, sets up a mathematical formula that you use to trade. It gives you buy and sell signals, and also shows you potential "what if" scenarios.
All you have to do is enter the buy and sell levels on your trading platform and watch the market do its thing. It's that simple. There's just one thing: you don't know what algorithm will work in advance. Most of the danger in intra-day trading comes from the fact that you are trying to guess what type of formula will work best. If you aren't using a formula, then you're manually watching the market, waiting for a trend to develop in a particular currency pair.
If you notice a bull market somewhere in the marketplace, you'll buy and sell the appropriate currency. If you notice a bear market, you'll sell short (called "shorting") a currency.
Every trader sets daily goals. This is part of the trading process. These goals dictate when a trader will buy into a market and when he will sell. Of particular importance is the stop loss goal and profit target. Stop loss refers to an amount of money, calculated as a percentage, you're willing to lose before you sell your position. The profit target is just that: a target you must hit before selling off your position and calling it a day. When you hit either goal, you stop trading. It doesn't matter how "hot" or "cold" the market is. Get in, get out. Just like a ninja. You're not doing this for glory, or to prove anything. You're doing this for one reason and one reason only: to make money.
Precautions
When you're flinging throwing stars, and wielding nunchucks, there's always the risk that something will go wrong and you won't make it out of the battle alive. This type of risk exists in Forex. An overly emotional trader who tries to "get revenge" on the market after a losing trade is especially susceptible to suffering an even greater loss on the second round of trading. Don't be that kind of trader.
Finally, limit your losses by using only 1 percent of your total savings at any given time. One percent sounds small, but it's what most traders use as a trading guideline. So, if you had $100,000 in savings, you would only trade with $1,000. Now, go forth and scalp some money from the largest financial market in the world.
Victoria contributed this guest post. She is a freelance Forex and strategy writer who enjoys helping readers learn more about Forex trading.
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