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Day trading has always been one of the most well-known and widely misunderstood forms of speculation, not only in the forex (foreign exchange) market but also in stocks and futures. Skill and experience is especially important to forex day traders since the market movers (the “smart money”) are notorious for manipulating short-term price action to deliberately slaughter the fresh prey.

Unfortunately, beginners to online forex trading seem to have a tendency to believe that day trading is somehow easier, safer, and more appropriate for those with very little experience — and a a very little account balance to match. It isn’t.

Profitable day trading in the foreign exchange market is indeed possible, even in such a heavily manipulated market environment… but it simply isn’t suitable to every trader for many reasons, both psychological and practical. If you choose to attempt it, then make sure you’re choosing it for the right reasons.

I’ve come up with five keys to survival to illustrate what it really takes to become a full-time day trader.

1. Watch price action in real-time… every day

I know this isn’t what beginners want to hear but it’s the truth. If you want to be able to learn text book chart formations and immediately be able to apply them, then at least start with hourly or daily charts first. Reacting to the price action on shorter term charts used for day trading (generally 15 minute, 5 minute, or below) requires an element of skill and experience in addition to an understanding of basic price action principles.

If you’re determined to learn day trading (or even scalping) time frames, pay close attention to the speed of price movement and the price areas surrounding round numbers (x.xx00 price levels, or xxx.00 in the case of Yen pairs.)

2. Learn, understand, and internalize what price action really is

The forex market is driven by orders, whether they originate from corporate entities or speculators. Imagine that the current price is a city bus that will either travel north (long) or south (short) after you’ve boarded it (entered a trade.) At every 10 pips on this “road”, there’s a traffic light. At every 100 pips (big round numbers), there’s a major intersection.

For the purposes of this strange (but hopefully illustrative) metaphor, let’s assume that you have no access to the schedule and maybe you’re visiting this strange foreign city (newcomers to forex) so you can’t even ask the driver which way the bus will head (you can’t ask the market movers what they intend to do) — all you know is that you want to travel one way but there’s an almost-50/50 (and I emphasize almost 50/50, because it isn’t exactly) chance that the bus might take you in the opposite direction from the one you desire.

The point is that, after you’ve hopped onto a bus (entered a trade), whichever direction it heads toward, you should remember that at every 10 pips there are traffic lights (opposing orders) that might or might not turn red (and consequently stop the bus.) If it turns red, the bus might have reached the end of its route (reversal) or it might continue in the direction it came in when the light turns green (continuation.)

As mentioned before, the traffic lights we should pay the most attention to are the major intersections (the big “double zero” round number price levels.) The bus is less likely to end its route at some random little residential street in between than at one of these — less likely but not impossible.

Remember, the driver won’t tell us where he/she is heading so we trade probabilities, not certainties. Our job as day traders is to learn, practice, and internalize ways to profit from higher probabilities.

3. Never assume that advice meant for other (longer term) forms of trading applies to day trading or scalping

A lot of the advice from books and internet forums are excellent for swing traders and position traders, mostly on hourly and higher time frames. Very little of it, as far as I’ve seen, is well suited for short term day traders and scalpers.

One example that comes to mind is the common strategy used to enter trades after a “confirmation” of a break-out. In hourly and higher time-frame strategies, waiting until price has clearly broken a support or resistance area can be very effective. In short term intraday styles of trading, where these areas of short-term support and resistance are much closer together, the odds don’t favor such late entries. Instead, try to “speculate” on an overall direction based on a higher time frame chart (or simply zoom out for the bigger picture), and then enter based on short term retracements.

Likewise, many trading books stress the importance of trading psychology. While it’s a major factor in dealing with inevitable losing days, weeks, and months in day trading, it’s actually less of a factor for longer term traders — less but not entirely insignificant. In day trading, more than any other trading style, psychology really is a major factor to your success because it’ll affect your decision making process on every trade, every day.

There are other examples out there I’m sure but just remember that not everything you read will apply to your situation — though some of it will in different ways.

The point is, as a day trader in the forex market, you’re attempting to tame one of the world’s most vicious and carnivorous tigers. While some of the advice given to owners of domesticated house cats might apply to your situation in some way, it’s generally best not to assume that all (or even most) of their advice applies in the same way.

4. Never expect to win every single trade… and never assume that you need to

90% of the world’s trading advice will tell you that you can’t win every single trade. The other 10% is lying to you (or, more accurately, trying to sell a lie to you.)

No professional trader has a 100% win rate, not even the tier 1 bank traders and market makers. Sure, their percentage is higher than the average retail trader or even hedge fund trader, but there are still occasional losses. And it doesn’t matter.

FX trading, and all trading of financial instruments for that matter (stocks, futures, options, forex, etc.), is a business. Like every other business, from movie studios to convenience stores, losses are a fact of life. In the end, all that matters is whether a month, quarter, or year is profitable — but not every transaction along the way needs to be.

Most beginners to online forex trading tend to hop from one method or “system” to another in search of that one, single, key to loss-free trading. Marketers take advantage of this ignorance by marketing lies with “no loss” robots and books that promise the impossible. There’s no secret “no loss” formula to forex any more than there’s a “no rejection” formula to dating; some people manage to come pretty close but it’ll never be a perfect 100% record… and it doesn’t need to be.

5. Have realistic expectations if you’re a beginner

I realize that not everyone reading this is a complete beginner. Some of you might even be profitable traders looking to expand your range of strategies. Unfortunately, the vast majority of traders looking for new information are system hoppers with very little experience and knowledge. And for this reason, #5 is almost entirely aimed at struggling beginners.

Don’t expect to be able to instinctively predict market movements with little to no understand of markets and price action. You might get lucky in a demo account but it won’t be the same experience when you trade with real money, especially when it comes to day trading — the most psychologically tolling trading method for newbies.

Conclusion

The truth is the majority of beginners, and other less experienced traders (and not yet consistently profitable on the monthly or quarterly basis), are far better suited for longer term trading strategies. Among other things, longer term strategies allow a trader far more free time and require less screen time.

Day trading is a specialized occupation that takes years of work and experience to master. If it’s the road you choose, be prepared for the bumpy road ahead. Rest assured, it’s not impossible — but it’s also not easy… and it’s not the only way to trade profitably either.