2Bull Forex Blog

Forex trading is a very appealing way to make money online. Trillions of dollars exchange hands every day, and entire fortunes are made and lost literally overnight.

Part of the attractiveness of the Forex market is the ability for retail traders to trade on margin. Margin trading essentially involves the ability to trade a large sum of currency using only a fraction of your own money.

For example, when trading on a margin of 1:100, you can control $10,000 worth of currency using only $100 of your own money. This is what lures many amateur traders to take part in this multi-trillion dollar market - the potential to make a lot of money, by risking only a little of your own.

Understanding The Risks Of Margin Trading

Although margin trading is indeed a great way to make big bucks, beginner traders would do well do remember that it’s actually a double-edged sword - it’s just as easy to lose money as it is to win. So even though one can make potentially $300 in an hour, it’s also equally likely for that person to lose the same amount within an hour (or even in a shorter time period!).

There Is No Central Governing Authority

The next thing beginner traders should know is that there is no official governing authority in the Forex trading industry. What this means is that unlike other financial trading exchanges where there is centralized control (such as the SEC for the stock market), the currency exchange market is not regulated by any organization at all.

This poses an extra risk for retail traders as it leaves the potential for scam ‘brokers’ to set up shop, take your money and basically run away with it.

That’s why retail traders will have to be extra careful when choosing a broker to work with. Where possible, do try to find reputable brokers such as big banks or other well-established trading houses.

You definitely wouldn’t want to risk having your money cheated by scammers who are looking to make a quick buck at your expense.

If you are looking at short term trading strategies in forex trading you really have two methods you can use forex scalping or day trading and on the other hand swing trading but which is best? Let’s tak a look…

Day trading or scalping is a method where traders seek to take advantage of intra- day moves of a few hours and use support and resistance levels in this period to determine when to execute their trading signals.

The problem is it doesn’t work. You have countless millions of traders trading with different forex trading strategies and methods, all with different motivations and to say what this group of traders will do in such a short time span, is laughable.

Of course, you see lots of short term trading strategies claim to make money but none them do. If you see a track record of profits, then you will see the disclaimer below as well - read it and you will see why the track records are meaningless:

“CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown”.

So there you have it - they have never been traded and are made up.

All moves in a day are random and that’s why you never see a real track record of gains - day trading is a mugs game - Avoid it!

Forex Swing Trading

The other short term trading strategies are based around swing trading which tries to catch the intermediate moves in trends or trading ranges and these moves normally last for between 2 days and a week.

This method works and is an excellent way for novice traders to trade, for the following reasons:

1. It’s easy to devise a swing trading system based around support and resistance, momentum and breakouts.

2. There are lots of opportunities - which is an advantage as most traders are impatient.

3. You take profits and losses quickly, normally within a few days - so you don’t need the discipline to sit on trades for long periods.

Swing trading is essentially taking advantage of trades that last anywhere from a few days to a week and taking advantage of over bought / oversold scenarios and these tend to occur all the time.

If you want short term trading strategies for profit, take a closer look at swing trading and you will find it a great way to trade especially if you’re new to forex trading and forget forex day trading all it means is guaranteed losses