At MarketClub.com, we cover the Forex markets with real-time streaming data, but trader's blog members often ask which is better: Day Trading or End of Day Trading the Forex markets. To help answer that question and answer ANY other Forex questions you might have is Bill Poulos. Bill's developed an amazing Forex Income Engine 2.0 course (goes live at 10am today), and has decided to give us one more post and clear his schedule to answer any and ALL questions you might have for him! Please comment below with your own thoughts on which is better for Forex trading and your own personal experiences!
Forex traders often ask: “Is it better to trade the Forex markets on an end of day basis (with daily charts) or a day trading basis (with 5, 10, 30, etc minute charts)?”
There is no right answer to this question, as I believe it depends on your individual circumstances, preferred style of trading, amount of starting capital, and volatility in the markets.
Let’s take these one at a time.
Individual circumstances: Here, I am talking about your lifestyle. Are you working a full time job with no access to a computer on a regular basis? If so, day trading would be limited to after or before work hours. This can still work fine as the Forex markets are 24 hour markets, allowing you to trade them within whatever your personal schedule happens to be. On the other hand, in this situation, you may prefer to trade only on an end of day basis (after the New York session ends at 5 PM EST) where you would have several hours to evaluate the markets and place trades before the London session opens. Or as many Forex traders do, you may elect to do both, taking very short term day trading positions when your schedule allows and trading longer term positions on an end of day basis. If, on the other hand, you have regular access to a computer during the work day, you may want to day trade exclusively or do both.
Preferred style of trading: Regardless of your lifestyle and work schedule, you may simply prefer day trading over end of day trading. Day trading is much faster paced and can yield significant pips in a matter of minutes. Or you may prefer a slower paced level of trading that is provided by trading on an end of day basis. And again, many traders prefer to do both.
Amount of Starting Capital: Generally speaking, less capital is required to day trade than is required for end of day trading. This is because the number of pips of initial risk in the trade is generally smaller than is the case for an end of day trade. A day trader can start with as little as $500 and still adhere to prudent risk management principles of appropriate position size. An end of day trader will require a larger account size to adhere to those same risk management principles.
Volatility in the markets: There are times when the Forex markets are more volatile, like the past several months. When this occurs, the initial risk in a daily chart trade (end of day trading) may be too high for the trader to take the trade without violating prudent risk management principles (which should never be done). On such occasions, what many traders do is switch to their intraday charts and day trade with less initial risk and still have the opportunity to capture the profit potential in these markets. Of course, to have this flexibility as a trader, you must have mastered good day trading as well as end of day trading methods. This puts you in a position to become a master trader, where you can trade on an end of day basis when the initial risk is within your risk parameters and when it is not, to switch to day trading a shorter timeframe, as short as a 5 minute chart.
By considering these factors carefully, each trader will find the answer to the question of day trading, end of day trading, or both that best suits them.
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