Forex Day Trading- Two Things You Must Consider

The widespread ways to make money with Fx day trading is trading the news. That is, opening short term trades according to the latest forex trading reports. However, as most traders recognize, this is a highly risky trading method and it is easy to get trapped into a losing position. You could use a good forex trading robot like FAP Turbo or the new IvyBot for normal trading. But the day trading according to fx news is different. In this guide we look at three essential factors that you must take into account if you need to gain from day fx tradingforeign exchange trading according to foreign exchange news.

1. Market Sentiments
Failing to consider market hope into account is a very regular fault in reports based day trades. Let me explain this with an illustration. Imagine there is an forthcoming notice of US trade statistics. You are expecting this announcement to be beneficial for the US dollar, so you open a trade just before the broadcast goes live.

But you forgot to take into account the fact that the currency trading market by and large was expecting this announcement to strengthen the dollar, thus in fact, the price movement has already been happening little by little in the days leading up to the announcement. When the report is made, there will only be a big price movement if the announcement is significantly changed from expectations.

That means that your trades will be profitable only if the announcement is a lot more positive than everyone expected. If the report statistics are good but not as advantageous as expected, the US dollar might plunge because the market expectations in advance of the report were too high. As a result you possibly will in fact lose out.

2. Slippage
Slippage is the variation between the price you wanted to get while placing the trade and actual price that your order gets filled at. Of course slippage depends on currency trading broker to certain level, but during an announcement everyone can get affected merely because the price varies so frequently.

For instance if you are not sure of how a significant fiscal report will go but you are doing in foreign exchange day trading and you are hoping a breakout one way or the other, you might put in an order to open a long trade if the price goes up to a certain point, say 1.2010, along with a corresponding order for a short trade if the price falls.

But, you could be in problem if the price suddenly jumps ahead of your trigger. Say it goes up to 1.2050 . In such a circumstances you will perhaps realize that your order has been placed at a higher price than you premeditated, say 1.2030. If the price drops after this, as it frequently does after a spike, it might stay back at 1.2020. If your order had been placed at 1.2010 that would be fine, but at 1.2030 it is not. Hence slippage is an extra factor that can can cause losses in day trading if you are not watchful.
You can see a more detailed guide on forex trading here.

Tagged as: term trades