Online day trading was just until a few years ago limited to just the big financial institutions and banks. It was only those with deep pockets who could benefit from day trading.
But, now due to the availability of the Internet, brokers, individuals, brokerage firms and governments agencies, we can have access to online forex trading with ease.
Internet and computer technology now enables everyone to reap the benefits of online forex trading. Online forex trading is one of the largest financial markets in the world. This is due to the huge volume of transactions done over the counter every day.
Online forex trading is now exceedingly popular due to the ability of the computers to make complex charts. This was not possible in the past as traders could not afford to access the internet. There was also a lack of high powered computers at homes.
So trading was mostly confined to the professionals who had the money to invest. But things are so different now. Anyone can invest some money and start to day trade currencies.
Benefits of online forex trading!
With the advent of the online forex trading, day traders can trade anytime they want, regardless of where they are located.
This is important in contributing to the growth of the forex trading industry. Although the forex markets are one of the largest, the retail day traders are still a small part of it. Therefore, make no mistake that currency trading is still dominated by the bigshots.
But the reasons are different. The big financial institutions dominate the industry in terms of volume. After all, if you wanted to exchange currency, would go to an online retail broker or to the bank?
It is quite easy to open an online forex trading account. There are many forex brokers who now allow you to do this. The minimum deposit is also exceptionally low. You can use leverage to ramp up your capital to make decent profits.
To make things easy, forex brokers also give you the option to practice trading before using your real money. This is a forex demo account. Using this demo account, you can trade, with no risk to your money. The funds you see in your demo trading account are virtual.
The ease of which you can open a day trading account means that anyone can trade online. This is made possible only because of the internet and the IT technology we have today. Online day trading also adds to the liquidity. Because of its popularity, the spreads are thin, which means you don’t end up paying a lot at the end to your forex broker.
Traders can also easily access the online forex quotes.
Before you get started with day trading
While it easy to open a day trading account and begin trading, it is also risky. Forex trading platforms allow you to start day trading currencies in just a few minutes.
You can choose the currency pair you want to trade and hit the BUY or SELL button. That is it! It can’t get any simpler than this.
For example, you can easily trade with the EURTRY currency pair online.
The rise of the forex day trader has brought some normalcy to the markets. The bulls and bears in the market are influenced by the retail trading crowd too. Yes, although this influence is small, it still cannot be ignored.
One aspect to bear in mind is the transparency of the forex broker you choose. There is no hide-and-seek involved. Price discovery is an important aspect for the efficient functioning of the currency markets.
Traders can make use of this to spot the trends in the market. Having a good day trading strategy also now becomes important. You should know or at least have a trading plan in mind before you begin to trade.
A good trading plan will help you eliminate any problems you might have. It will also help you to control your risk. You don’t want to end up losing all your investment in just one trade.
Costs of online day trading in forex
Forex day traders should also focus on the costs of trading. Depending on the forex broker you trade with, there may be commissions, fees and spreads.
Commissions are charged by forex brokers every time you day trade. This means, every time you open or close an order, you also pay a small commission.
Spreads are charged by your forex broker. The spread is the difference between the bid and ask prices. The forex broker uses spreads to make small money. If the forex broker gets too greedy, they can add a high spread.
This can lead to an inefficient trading for you. It might also lead to losses.
Fees are miscellaneous fees that the forex broker thinks are required. Sometimes, if you do not trade for more than 30-days, your forex broker may charge you some money. Therefore, pay attention to these little known aspects with forex brokers.
How to be safe in online day trading?
Knowledge is your best friend!
Therefore, first you should arm yourself in knowing everything should know about the forex broker. This includes little things like the fees, trading terms and conditions and last but not the least, the forex broker’s business.
Anyone with good enough capital can open a forex trading account. Therefore, you should be careful about this. An offshore forex broker can be risky because they can easily take your deposit and close their business.
It can be difficult to chase the broker and get your funds back. Therefore, you should only choose a good, licensed forex broker. You can read forex broker reviews, which will give you a good idea about the forex broker.
You can also learn if they allow you to trade any particular forex currency pair that you are interested in.
Last but not the least, spend time in the forex broker’s website to learn more about them. The more research you do before hand, the easier it will be.
At the end, remember that day trading forex is risky. You can lose money if you are not careful enough.