FOREX Day Trading

Why You Will Never Succeed day trading!

One 0f the biggest myths in the investment world is that you can make money By FOREX day trading.

FOREX day trading however will simply ensure that you lose your investment, as you can never get the odds on your side to win longer term.

Here we will outline all the reasons why you will lose at day trading and at the end of this section, give you some ideas on a better way to trade, so you can trade with the odds on your side.

First, let's look at why FOREX day trading will lose you money.

Short Term Volatility Is Random

To believe that you can determine where volatility will go in such a short time frame as a day or a few hours is simply ridiculous.

In FX markets all short term moves are random.

This is obvious to most people and the reason why will become clear with a little more explanation.

Let's look at the participants in currency markets and how they trade.

The Participants

The markets are vast and currency turnover is huge, making it the world's largest investment market.

Each day currency markets turn over trillions of dollars in the major currencies and currency traders can be divided broadly into the following groups:

1. Central banks

This group will intervene to push currencies up or down, depending on the economic and political objective of the bank.

Although they don't intervene often, they are a major force and have the ability to move currency markets up or down on their own.

2. Large Speculators

This group consists of large funds or individual speculators who are trying to make money for their own, or client accounts.

3. Hedgers

Hedgers are not speculating to make gains - their aim is simply to make sure that they protect themselves against adverse currency movements that can affect the value of their portfolios.

4. Small Speculators

In this group we have everyone else, including the vast majority of FOREX day traders.

The above groups all have different objectives and trading styles and their movements cannot be predicted in a day or in hourly time frames.

FOREX Day traders claim that they use technical analysis and the theory of support, resistance and pivot points to enter and exit trades for profit.

They claim these levels are important in daily time frames, but they are the only people who think so.

The vast majority of FOREX Traders don't think so and volatility can and does, break day traders predicted levels everyday.

Why The Myth Of Day Trading Continues

There are a huge amount of FOREX day trading systems advertised to online currency traders.

The copy is appealing, but the reality is none of these day trading systems have a long term track record of profits.

You will get A hypothetical track record of FOREX profits, or maybe some testimonials from lucky traders or friends.

For those of you who don't know what a hypothetical track record is lets define it:

It is a track record put together in hindsight when the person putting the track record together knows the closing prices!

It's no wonder you never see a FOREX day trading track record that loses.

If we all knew tomorrow's closing prices today, we would all be millionaires but that is not the reality of online FOREX trading.

FOREX day trading systems are sold by failed brokers or by enticing marketing copy by people who have never traded in their lives.

The vendors simply appeal to the greed or naivety of investors.

Of course, the reality as we have seen is a theory simply doesn't work and it also breaks a fundamental rule of investing which is:

Run your profits to cover your inevitable loses.

Day traders claim they can keep their loses small and they can, but they get stopped out all the time, as volatility can and does take prices through their support and resistance levels.

So you have a lot of small loses, but can day traders compensate for these small loses by running their profits?

Of course they can't!

Running profits is alien to FOREX day traders.

When they do get lucky and have a winning trade (even FOREX day traders get lucky) they close out their positions within the day, or have a profit objective that aims to scalp a few points.

The reality of FOREX day trading is the following equation:

Lots of small loses + Occasional small profits = A long term wipe out of equity.

A Better Way To Trade

FOREX day trading is simply one of the best ways to lose money in online FOREX trading.

If you want to trade currencies, like the euro, yen or the British pound, you need to look longer term and use technical analysis to get the odds on your side.

They all have great long term trends, so you will increase your odds of success and be able to run your profits and cut your loses.

This is the key to making money in FOREX trading.

A long term trend following system will put the odds in your favour and allow you to build long term capital gains.