Forex trading requires a lot of things. It needs continuous practice and education and these are very challenging. What makes FX trading tough? Firstly, you must consider the fact that you are going against professional traders from all over the world. These people have been in the business for quite some time and were able to build connections and use the best technology possible. If these professional traders fail, they can easily stand up and start trading again. If you join the game, this means that they can earn more.
What’s more, individual small traders tend to get emotional all the time and they create personal biases. But those professional traders know that these things will just ruin their trading plans and strategies, which is why they ultimately cut these things when they trade.
Deciding What To Buy and When To Buy
In day trading, traders tend to deal with assets such as stocks, options, currencies, and futures. They usually leverage huge capital to handle this. When deciding which one to focus on and when to buy, traders must consider these three important things.
- Trading Volume
Liquidity gives you the chance of entering and exiting the market with a good price, like tight spreads, or low slippage. Volatility is the measure of your expected regular price range. This range is where a day trader regularly operates. The more volatility you have, the greater the profit or the loss you can gain.
Trading volume is the measure of the times that stock was sold or bought during a particular period of time. This is also known as the average daily trading. If there is a high level of volume, this means that there is a high interest in the stocks.
Knowing the kind of asset you are looking for means that you can properly identify the entry and exit points in the market. There are several tools that you can use to effectively identify the right entry points.
Tools To Use To Identify The Right Entry Points
Real-time news services – news affects stock prices. Therefore, it is so important to subscribe to those services which can tell you the latest news and updates that can affect the market. By doing so, you can determine the news that is the market moving everything it comes out.
ECN and Level 2 Quotes – Electronic Communication Networks (ECN) are a system that’s computer-based and displays only the best available ask and bid quotes coming from different market participants. Then, it matches and executes trade orders. As for level 2 quotes, they are a form of service that is subscription-based and provides real-time access to price quotes such as the Nasdaq order book. When combined with an OTC bulletin board, you can have the best access to orders executed in real-time.
Intraday Candlestick Charts – these candlesticks are providing you with a raw analysis of the price action.
Forex trading can be tough especially if you don’t know using the right tools. But with practice and continuous education, you can surely cope with other traders who are more professional than you are.