Like the Great Recession before it, the coronavirus pandemic has taken a huge toll on the world’s socio-economic climate. This has challenged and changed the behaviour of adults, who have sought out new and increasingly flexible ways of optimising their incomes.

To this end, it’s thought that nearly 1.8 million adults dabbled in day trading during the outbreak of Covid-19, dealing in popular and volatile assets such as stocks and forex in the process.

Day trading is a challenging pastime, however, and one that makes it hard to sustain a viable profit over time. So, here are some helpful day trading tips to help you optimise your chances of making a profit as a forex trader. 

#1. Remember That Knowledge is Power

Regardless of how you choose to trade the markets and your preferred investment vehicles, it’s important to keep in mind that knowledge remains your most effective resource at all times.

This includes a number of different elements too; from knowledge of basic trading procedures to an understanding of the latest market news, trends and the macroeconomic factors that impact international currency prices.

Each of these components will be combined to create a viable forex trading plan, which is informed, relevant and capable of leveraging market trends while retaining a deterministic overview of the underlying laws that govern price movements.

The key here is to adopt a detail-oriented approach and commit to doing your homework, paying particular attention to the technical and fundamental analysis of specific currency pairs and the most relevant market data.

#2. Be Sure to Set Aside Funds

Typically, day trading is a risky investment vehicle, and one that requires you to successfully leverage the innate volatility that exists in the forex market.

Make no mistake; the derivative and margin-based nature of forex trading means that you can lose amounts that are disproportionate to your deposit and capital holdings in some cases, with this risk amplified by the particularly volatile nature of day trading.

Of course, you can also make significant returns in relatively short periods of time when day trading, as leverage also enables you to open and control positions that are far larger than your cash deposit.

So, you can at least risk a relatively small amount of capital on each individual trade, with most successful operators committing less than 1% to 2% of their accounts per single order.

This can help you to strike the delicate balance between optimising returns and minimising loss, which is crucial when placing multiple day trades during each 24-hour period.

Just remember that the total amount of capital invested should never exceed an amount that you can afford to lose, as even small single trades can quickly accumulate in relation to volume and frequency.

#3. Create Time for Planning and Analysis

Not all forex trading strategies have been created equal, particularly in terms of risk and the amount of time required to optimise your chance of success.

With day trading, for example, you’ll focus on making a high volume of short-term trades that will leverage relatively small price movements over a matter of minutes and hours.

In fact, you’ll never leave a single position open overnight when day trading, so a great deal of research and preparation must go into executing and managing your activity within each 24-hour period.

This means that you’ll have to commit a concerted period of time each day to this practice, especially if you’re to execute informed orders and avoid being one of the 70% of forex traders that regularly lose money!

#4. Start Small and Scale Organically Over Time

Being a beginner in the world of forex trading can be daunting enough, even without getting to grips with the intricacies and complexities of day trading.

So, we’d definitely recommend that you start small as a day trader, by focusing on one or two major currency pairings and only looking to scale your efforts gradually in line with increased profitability and experience.

Major currency pairs (such as the USD/EUR which accounts for 24% of daily trading volumes) are ideal for day traders, as they boast high levels of liquidity and are relatively predictable in terms of their trends and price shifts.

You can also offset your risk by trading relative safe-haven pairs like the JPY/USD, before expanding into minor currency pairings and then exotic alternatives over time.

The latter enable you to leverage higher levels of volatility and potentially huge profits, so long as you’ve developed the necessary experience and understanding over time and boast a diverse currency portfolio that helps to minimise your risk.

#5. Target High Volume Trading Windows 

Last, but not least, it’s important that day traders look to capitalise on periods that see the highest volumes of trade.

This is because such time-frames tend to see the highest levels of volatility too, creating more opportunities for day traders and potentially higher profit margins.

Interestingly, these periods of time tend to occur during the various crossovers that exist between different geographic trading sessions.

For example, both the London and New York Exchanges are open between the hours of 1pm and 5pm (GMT), triggering significant trading volumes on both sides of the bond and popularising pairings such as the USD/EUR and GBP/USD.

Of course, you should target different session overlaps depending on your target currency pairs, but it’s important to keep this in mind when planning and building your day trading strategy.