Of all the investment strategies in Forex, few can be compared to the strategy of day trading, which refers to the most widely used Forex behavioral method. Many currency market investors use this technique as their primary strategy when investing in exchange rates.
The definition of Forex day trading is basically the set of analyzes that an investor uses to discern which pair is appropriate to invest in, in a specific time. This is accomplished by the monitoring of the indicators and trends that may affect the value of a particular currency pair. Day trading is based on the application of fundamental research and analysis of news and events originated in countries that manage a certain currency. Day trading is the most basic way to invest in Forex.
In practice, day trading involves investors using computers in search of signals and events, and then to operate according to what kind of fluctuation they expect or what currency to buy to earn profits. This is the manual operation mode. There is an automatic mode where the buyer enters the desired factors in a piece of software that interprets the data, and manages the trades as programmed behaviors. The difference is that automated mode subtracts the psychological and human factor of trade. This can be a disadvantage because the computer will not always know how to react correctly to an unexpected market event.
The day trader should look for two things when trading. The first is liquidity. Liquidity means that a buyer can get in and out of stocks with ease; this refers to low levels of spread (the difference between the buying and selling price of a currency pair) and little slippage (the difference between the expected price of a purchase and the actual price in which the trader makes the purchase). The second factor to look for is volatility. Volatility simply means the changing factor of the expected price fluctuations