Many people are attracted to FX trading as they see it as just another get-rich-quick scheme. They invest much less time in learning than it is really needed and start trading off short term charts at the beginning. However, a lot of traders actually find Forex trading a hard nut to crack as they cannot make profits consistently by trading the short-term charts. Why is day trading so difficult for FX traders, even the seasoned ones? Here’s the answer.
If you study the short-term charts minutely, you will find a whole lot of random price movements during the day. In FX trading parlance, this is called ‘noise’. This ‘noise’ is created when many short-term traders undo their trades. You need to clear the clutter to analyse the real trades, which is difficult for new traders.
Another big reason why many people find it confusing is that the price does not go far enough in any single direction and they cannot really guesstimate the profit probabilities. While price may move up to 100-300 points to any direction in a matter of few days in case you are trading off the short-term chart, the price will move very less during intraday trading.
Many traders fail to get the whole picture even after using a couple of trading indicators. The breakout gets terminated after less than 15-20 points and you may get confused after a while. So when you are counting on spreads, ranging between 1 and 4 points, it can be extremely difficult for you to break even. Forget about making some profit.
To fix this, you need to keep an eye on economic data updates that are scheduled for release on all weekdays and weekends. These figures directly impact the currency pairs that they closely pertain to. For example the US GDP report would directly impact USD based currency pairs.
Therefore, even if your indicators point to a direction which seemingly can yield great profits, this could potentially be turning into a losing position as economic data plays a major role in money market fluctuations. Some of the news releases are quite important, so you need to base your trades around these releases, particularly if you are trading off short-term charts.
However, focusing on the long-term charts can out you in an advantage position almost always. For example, daily charts and four-hour charts can be your best bet if you are new into FX trading. This is because the trends are quite clearer and you will get much less ‘noise’ compared to the short-term trading. In addition to that, trends last longer, which means you can get more profit along the way.
If you are really interested in day trading, you should first look at the long-term charts to get accustomed with the trading scenario and then pick a direction. This is will help you understand the bigger picture quite easily, which is important for day trading. Gaining profit from Forex trading is not rocket science; it’s just that you need to exercise some patience.
If you want to know more about day trading, gather expert tips and advices from CMC markets.