Almost everyone that talks to me about trading Forex refer the day trading. To all this people I tend to say that if you're just starting in this market, "Watch out!" It's not as simple or as easy as it looks.
There are some reasons why most beginners and even advanced traders can't make money consistently day trading Forex.
1 - The Forex market is open 24 hours a day.
Well, this could be an enormous advantage and it sure seems like it. But let us analyze it. If the Forex market is open 24 hours a day and you want to day trade and make money, this would mean be in front of your computer 24 hours a day. Well, this is impossible for one person to do. Even if you could stay awake 24 hours a day (which you can, obviously), would you be in the right frame mind to do a good trade? Would you even recognize that it was a good trade to enter? I don't think so.
2 - The Forex market lacks volatility during most of the day.
I'm sure you already figured it out. If the market is open 24 hours a day, there are periods where there's no volatility and others that the volatility explodes. On these volatility explosions, sometimes you don't even have time to think, not to mention entering an order. When you are day trading, you're constantly looking for a good trade. As during most of the day, the Forex market lacks volatility, prepare yourself to wait a long time before a good opportunity appears. And when it does, will you be able to correctly identify it? Will you recognize that it's a good trade?
3 - The spreads are huge to day trade.
I can imagine what you're thinking. 2, 3 or 4 pips spread is not that much... But let's see what these 2, 3 or 4 pips actually mean when you're day trading. When you want to day trade, you might do several trades during the day. Let's imagine that on a particular day, you made 6 trades. This means that you pay the spread for 12 times. If the spread of the currency pair you're trading is let's say 3 pips, this means that you spent 36 pips just for entering and exiting the trades. So, in order for you to make money for the day, you need to have done at least 36 pips.
4 - The day trading stress.
This doesn't only happen in Forex but also in other financial markets. Although, in the Forex it's even more stressing due to the fact that the market is open 24 hours a day and you can be waiting for a good trade to appear for a long time. Add this to the fact of the lack of volatility of this market.
As you can see, there are a lot of difficulties concerning day trading. This is why I tell all Forex traders, beginners or experienced, that making money consistently day trading Forex is not a simple task.
John Baker is an editor at http://www.ForexTopTen.com
By visiting the website http://www.forextopten.com you can read forex traders reviews about forex trading systems, trading courses, ebooks, softwares and brokers.
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