Forex day trading strategies in today's market

Learn about different ways traders capture profits within hours, minutes or even in seconds.

By Ahmed Azzam | @3zzamous | 2 May 2023

Forex Day Trading Strategies in Today's Market
  • Day trading is a popular strategy which involves traders opening and closing strategies during a single trading day. Typical market hours are 9am-5pm in New York’s Eastern Time, to match NYSE’s operational hours.

  • Scalping is a high-risk form of day trading that aims to capture large volumes of small profits by opening and closing trades within minutes or even seconds - but runs the risk of one large negative loss negating multiple small gains.

  • Many consider scalping and day trading techniques as ‘easy to master’, especially for beginner traders, as they require short timeframes, quick decision-making, and very strict exit strategies.

  • No matter which trading strategy is in play, it’s important to monitor how your trading product will be impacted by global economic developments such as national economic health, commodity price trends and labour data.

Day trading in forex

Day trading is a popular trading strategy that involves opening and closing positions within a few hours. Unlike scalping, which prioritizes high volumes of small profits, day traders will typically place one trade in a day and close the position when the day is over.

An ideal strategy for investors with open schedules, day traders will often open a trade at the beginning of the day, act on their bias, and finish the day by closing with either a profit or a loss. To execute their trades, most day traders rely heavily on technical analysis and short-term price action monitoring to identify optimal entry and exit positions. They will avoid holding their trades overnight, which makes day trading a suitable option for those who have enough time throughout the day to analyze, execute and monitor a trade.

Swing traders follow a similar approach to day traders, but they will hold their trades open over a few days or weeks instead. If you find scalping to be too fast-paced and swing trading to be too slow, day trading might be the right choice for you.

However, day trading requires strict discipline, risk management, and a clear understanding of market trends and indicators. But with proper planning, execution, and a thorough analysis of market data, it can be both a challenging and potentially rewarding trading strategy.

Scalping and range trading

Scalping, a popular trading style, involves exploiting small price fluctuations to quickly earn profits. Day traders often use this technique to prioritize making high volumes of small profits over extremely short periods of time. In other words, scalping is a technique that requires traders to buy or sell a security and then quickly close out the position as soon as it becomes profitable. This approach allows traders to take advantage of small price movements, making a quick profit and moving on to the next trade. Day traders who use scalping often aim for a profit of just a few cents per share, but when multiplied across hundreds or thousands of trades, the profits can quickly add up.

However, scalping is a high-risk strategy that requires traders to be alert and make quick decisions. One significant loss can erase many small gains, so traders must be disciplined and have a well-defined exit strategy. This means knowing when to cut losses, when to take profits, and by setting clear trading goals that account for both potential losses and gains.

To succeed in scalping, traders will benefit from access to a live feed that shows real-time market data. They also need a direct-access broker, which allows them to execute trades quickly and efficiently. Finally, scalpers must have the mental stamina to place a large quantity of trades, as they will need to make many transactions to turn a profit.

How macroeconomics impact forex trading

Trading in global markets is affected by economic developments on a global scale, but most forex traders are highly disciplined and adhere to a set of trading rules. When considering day trading strategies like scalping, it’s especially important to research economic factors that may impact your product’s price trends in the day ahead.

Let's take a closer look at some of the factors that affect the status of an economy and can lead to currency price swings. The overall economic health of a country is a key factor in determining the exchange rate of its currency, and general economic health can change quickly based on current events and new information. These factors are important to consider as they will influence trading decisions and ultimately determine the value of a currency at any given time.

Considering multiple different market sectors is a common tactic, for example oil prices can stabilize currency values in certain markets. In Canada, if oil prices increase then the Canadian Dollar’s value will increase as well, as oil is one of their largest outputs. This means that any developments occurring in oil markets will likely have a significant impact on Canadian dollar trading. Economic data also holds major impact on currency movements, such as GDP statistics, inflation data, and other labour reports. Many investors will keep a close eye on central bank and federal monetary policy to prepare themselves for likely market trends.

It is also important to consider that changes in commodity markets can impact other markets just as much as currency values do. For example, movements in gold prices are primarily due to changes that may occur in a country’s economic health. This is because an increase in risk aversion, new geopolitical developments, or even in times of sociopolitical uncertainty, investors will often turn to gold as a safe haven against currencies. When the demand for gold increases, so does its value. Conversely, when the US Federal Reserve tightens monetary policy and raises interest rates, it puts pressure on dollar-denominated commodities, particularly gold, which can lead to depreciated prices.

No matter your trading strategy or market sector of preference, it always pays to do as much research as you can and journal all your trading outcomes. This allows you to be better prepared before you place a trade, and to make the most out of your past trades too.