Pros and cons of intraday forex trading
There is an opinion, and rightly so, that forex intraday trading is the most difficult type of trading in the foreign exchange market. This is not a good forex trading method for beginners. You have to be experienced in trading, have skills in proper graphic analysis of Forex market, have deep knowledge in technical analysis, but most importantly - to have a steel will, iron nerves and unwavering discipline to work intraday.
What attracts traders to intraday trading
It's difficult to have all these qualities at once. That's why there are so few truly successful intraday traders. But trading intrade has its own advantages which attracts more and more followers time after time.
1. higher profit percentages due to the fact that intraday trading covers all price movements during the day. If a medium-term trader works in one direction, as a rule, the trend direction, then the intraday trader intercepts movements in different directions.
2. The possibility of more flexible behavior on the market. As you know, the market is not very predictable. Yesterday all analysts based on their brilliant strategies, predicted the movement upwards, and today it is going downwards, contrary to all predictions. Intraday traders, are able to reverse their bets according to the situation. Medium- and long-term traders can "hang on" for a long time with their losing trades.
3. having clear boundaries between the working day and the leisure time. An intraday trader works during the day. As a rule, all the deals are closed by the night. And the trader can quietly sleep, have rest, and not be psychologically tied to the exchange. It is quite a different matter with medium- and long-term traders. Their deals will "walk" for several days or even weeks, keeping a trader in constant psychological tension and anxiety for the fate of the deal.
And yet, there are some disadvantages.
For many people the disadvantages of intraday trading on Forex outweigh the pros. For example:
1. as a rule traders choose working timeframes no higher than 1 hour. They mainly work on five-minute and fifteen-minute timeframes, sometimes even going down to the minute timeframes. And the work on minute timeframes is dealing with "informational noise" of the market, where only very and very experienced traders can distinguish the main price movement from the movement of provocations, short-term news spikes, etc. Forex beginners usually cannot do that.
2) Intraday trader has to permanently pay attention to the market. Practically, an intraday trader is chained to the screen from morning till night. In contrast to medium- and long-term traders, who after placing bets can only come up to the monitor from time to time to control the process.
It is not so easy for an intraday trader to determine the acceptable mathematical expectation of the deal. Stops are usually short, but intraday traders' take-profits are not large as well. They rarely catch global trends. Therefore it is very important for them to have a trading strategy which allows making statistically larger amount of positive trades than negative ones. While medium- and long-term traders can afford having a higher percentage of negative entries, due to more favorable stop and take profit ratio.
Of course, each trader decides for himself how and on what time frame to trade, but, strange as it may seem, those who survived the market, trading on "small" charts, and gained some trading experience, sooner or later shift to medium-term trading.