In the last decade currency trading has become very popular amongst the retail investors and traders. Currency trading is being done online by millions of people from all over the world now. There are many ways to trade the currency market.
One very popular method of trading currencies is to hold positions intraday. This is also known as day trading. There are millions of day traders around the world who daily make a living by trading currencies. Holding intraday positions means you are going to open a trade and then close it by the end of the day.
Intraday trading requires using M5, M15, M30 and M60 charts for finding high probability trade setups. M5, M15, M30 and M60 means 5 Minute, 15 Minute, 30 Minute and 60 Minute timeframe charts. These are also known as intraday charts.
Trading on intraday charts requires some practice as these are fast moving timeframes. You will get a lot of signals on these intraday charts. The trick lies in filtering out false signals using confluence. You see on the lower timeframes, there is more noise as compared to on the higher timeframes. Noise means there will be false trading signals.
As an intraday trader, you will need to develop a system that filters out false signals. The best system to filter out false signals is to use confluence meaning once you get a trading signals, you look for confirmation with another indicator and only enter into a trade once you find confirmation.
The thing that attracts most people to intraday trading is that the stop loss required in most of the trades is small and is not more than 20-30 pips as compared to trading on the daily charts where you may require a much higher stop loss. Another thing that attracts traders to hold intraday positions is that positions are not held overnight.
What this means is that every night you can have a sound sleep as you have closed all the positions that you opened during the day. Everyday you will start new. Open a position when there is a high probability trade setup and close that positions by the end of the day.
The disadvantages of holding intraday positions is that you will have to monitor that market during the day for finding high probability trade setups. This requires sitting in front of the computer for hours sometimes. One of the most popular intraday trading strategies is to scalp the market.
Scalping entails quickly entering and exiting the market and grabbing a few pips each time you do so. Each scalp trade on average makes 10-20 pips. There are day trading who only focus on scalping as the trade does not last more than 1-2 hours in most cases. It can even become profitable within minutes!
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