2Bull Forex Blog

This post is all about forex day trading for beginners and how to approach day trading on the face of it, day trading looks a great low risk form of trading that can make you a lot of money but as with all ways of making money, its not as straightforward as that…

Day traders don’t make money long term, the odds are stacked against them and without the odds on your side in any form of investment- your going to lose.

What about all the forex day trading systems that claim to make money?

Well there is a problem - they have never been traded and are not all they make themselves out to be. In the small print at the bottom of the track record you will normally find the statement below or a very similar one:

“CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading.”

and

“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“.

If you have read and understand the above, you will see that the track records have all been simulated on back data not real time data and that of course is easy.

Try and find one with a real time track record and you can get ready for a long search. The fact is forex day trading is a theory that sounds good but that’s all it is - a theory which doesn’t add up in practice, which appeals to greedy and naive traders. They buy automatic day trading systems in droves and really don’t think about the disclaimer or don’t even read it!

Why doesn’t day trading work?

It’s pretty obvious if you think about the logic its based on which is about determine what millions of traders are going to do to price in a very short time period.

You have millions of traders trading to make the price and they all have different systems, motivations, aims, skills and subject to their emotions - How can you tell what this vast diverse, mass of traders are going to do in just a few hours?

Answer -You can’t!

All short term volatility i random and prices move randomly in short time periods. Support and resistance levels simply cannot be used to time trading signals and get the odds on your side.

Forex day trading is sold on the fact that it keeps losses small and yes it does however you are going to get stopped out the majority of time. This means that by placing stops to close by trying to avoid risk you are actually creating it and guaranteeing a huge amount of losses, as your stop is to close and within daily volatility ranges.

When it comes to profits (and by the law of averages you are going to get some!) what do day traders do - do they run there profits to cover their inevitable losses?

Of course they don’t, they snatch or try and scalp a small profits which of course can never cover their vast amount of losses. Running profits and cutting losses, is one of the keys to successful investment and even the best trading systems are going to be stopped out the majority of the time.

If you believe the trade for “a regular income” or “make money on 70% of the trades” - then you are falling for the hype of advertising copy and that’s not the real world of trading. Anyone who believes these statements really needs to continue with their forex education and get a reality check.

Day trading is one of the most popular forms of trading for novice investors and if you have read and understood the enclosed the most important fact related to forex day trading for beginners is - don’t try it, unless of course you want to lose your equity!

If you want to make money in forex trading then you need to learn forex trend following and how to lock into the big trends and milk them for all there worth. The big trends last for months or even years and can offer fantastic profits, if you learn to follow them.

So how do forex trend follow correctly?

Let’s start with some basics:

The big trends in currencies last a long time, because they reflect economic cycles and they last for months or years, so currency trends do too.

Forex trend following does not mean trying to day trade or scalp this is a way to lose money, as all short term volatility is random so don’t try it.

How do you catch and follow forex trends? You need a robust, simple, forex trading system which is based on forex charts. Here are the basics of a system that will catch EVERY Big move.

Buy breakouts - FACT:

Most major forex trends start from new market HIGHS, so you need to buy breaks of resistance.

The more times a resistance level has been tested the more valid it is and if possible the time frames should be weeks or months apart. The more tests, in more time frames and the wider they are apart the better.

When you buy these breaks make sure price velocity is on your side.

You can find out by using some momentum indicators these are covered more fully in our other posts - but two great ones are the stochastic and RSI Indicators. If they support the break then you have a potential high odds trading signal.

The stop is then easy - right below the breakout point.

With this method you’re not interested in trading for the sake of trading, you need to be patient as the big high odds trades don’t come around every day and sometimes you need to wait weeks or even months for a high odds trade to present itself but they always do and when they do offer stellar profits.

Your not interested in trading for fun - your interested in trading for big gains so forget all the lows odds trades.

Once you have locked into a trend and it’s underway, you need to get ready for the hard part:

Following the trend and this takes a lot of discipline.

The bigger a profit becomes the more tempted a trader is to take it or lock in profits by moving his stop. The bigger the profit becomes the bigger the temptation is to take it, that’s human nature - but you must stand firm.

You are going to have to sit on open equity swings against you which eat your open equity however so long as the long term trend is intact, hold it.

Trail your stop very slowly and way outside of random volatility and accept the fact when the trend changes you are going to have to give a good chunk back - but that’s ok, if you caught 70% of every major trend you would be very rich.

Forex trend following is all about having a simple system, being patient, buying valid breakouts and following breakouts with discipline - its not easy to do - but if you can do it, you will make huge gains and enjoy currency trading success.