Day trading is a short-term forex trading strategy that involves buying and selling currency pairs within the same trading day. Forex day traders buy and sell currency pairs throughout the day and close all positions at the end of the trading day. They do not hold positions overnight.
In this in-depth guide you’ll learn:
- What is day trading?
- How does day trading work?
- Best trading strategies for day trading
- 5 best forex brokers for day trading
And lots more…
Let’s dive right in…
10 Best Forex Brokers in South Africa for 2023
|🌐 Broker||⚖️ Regulation||🏛️ Headquarters||📉 Open an account|
|AvaTrade||ASIC, FSA||Ireland||👉 Click Here|
|CMC Markets||FCA, ASIC||United Kingdom||👉 Click Here|
|HFM / Hotforex||CySEC, FSC, FSCA||Cyprus||👉 Click Here|
|IC Markets||ASIC||Sydney, Australia||👉 Click Here|
|Pepperstone||Australia, Bahamas, Cyprus, Dubai, Germany, Kenya, UK||Australia||👉 Click Here|
Quick overview of the 5 best forex brokers for day trading:
- CMC Markets
- HFM / Hotforex
- IC Markets
What is day trading?
👉 Forex day traders typically use high leverage, take advantage of the currency markets high volatility and liquidity and make (or lose money) on small price movements from changing exchange rates.
👉 Forex day trading relies on technical analysis such as news trends and the Economic Calendar to speculate on how currency prices will move. The most popular indicators for forex day trading are Simple Moving Average (SMA), Bollinger Bands, Fibonacci retracements and the relative strength index (RSI).
👉 Forex day traders employ a wide range of intraday strategies, including breakout, range trading, scalping, high-frequency trading (HFT), momentum and reversal strategies.
Best trading strategies for day trading
👉 Forex day traders use a combination of trading strategies and adapt their trading strategies in times of high market volatility. Forex education is key to making money from day trading. Start small, maintain discipline and time your day trades carefully.
Forex breakout strategy
👉 Identifying breakouts is a common forex day trading strategy. Day traders anticipate big market moves caused by economic events or political announcements and expect prices with breakthrough support and resistance levels to start a trend.
👉 Day traders open a position in the direction the price is expected to move and close positions at the end of the trading day. They open long positions when currency prices break above resistance levels and short positions when currency prices break below support levels. Day traders identify the right entry points, market volatility increases, and prices should trend in the direction of the breakout.
👉 Forex day traders identify the start of a trend by monitoring support and resistance levels. These levels are the peaks and troughs on chart trendlines and are essential for technical analysis. Trading forex using the breakout strategy relies on traders keeping up-to-date with political and economic news.
👉 The main risk of this day trading strategy is false breakouts when prices move beyond a price range previously established and retreat to within the previous price range. False breakouts typically occur because support and resistance levels are not one-hundred percent accurate.
👉 Day traders use filters to reduce the risk of false breakouts, but this increases the chance of losing trades which can cut into profits you would make by trading genuine breakouts.
Forex trend trading strategy
👉 Trend trading is one of the most popular forex trading strategies for beginners. It involves monitoring charts to identify long-term trends using smaller timeframes. Once a trend has been established, day traders look at forex charts using smaller timeframes and look for trends moving in the same direction.
👉 Trend day trading is similar to swing trading. The difference is trend day traders trade down or uptrends; swing traders trade within ranges. They sell at resistance levels and buy at support levels. Trend day traders focus on long-term, broad economic news and swing traders focus on short-term price movements.
There are three types of trends:
➡️️ Uptrend; when currency prices rise in value, forex traders enter long positions
➡️️ Downtrend; when currency pair prices fall in value, forex traders enter short positions
➡️️ Sideways trends; when the currency market is static, scalpers or swing traders enter short positions
👉 Trendlines are an essential part of technical analysis and day traders use them to speculate on market sentiment. Trendlines are also known as trend support lines because they identify the direction of a trend and act as a support line.
👉 Forex day traders use candlestick charts to identify trendlines. Candlestick charts show when currency prices are rising during a bull market or falling in a bear market. Trendlines help forex day traders develop trend trading strategies using past and current price action information.
👉 Successful trend traders keep track of the currency market all the time and need emotional and mental discipline to enter positions at the right time in down- or uptrends.
Forex news trading strategy
👉 Forex news trading is the best trading strategy for beginners. It involves keeping up-to-date with global market news and entering short or long positions at the right time. News to follow includes interest rate changes, economic indicators, economic and political developments, economic reports and central bank announcements.
👉 The most popular indicator for a forex news trading strategy is the Economic Calendar that you will find online on popular trading platforms such as MetaTrader 4, MetaTrader 5 and cTrader. Experienced day traders use market sentiment to speculate on currency pair price movements and anticipate news releases that impact exchange rates.
👉 News trading can be profitable due to high volatility in the forex market. Timing and discipline are essential, so positions are opened strategically and not responding to market hype and panic. Day traders focus on recurring news (economic indicators, quarterly reports, Federal Reserve announcements, employment statistics) and unexpected news (terrorist attacks, natural disasters).
Forex momentum trading strategy
👉 Forex day traders use the momentum trading strategy to identify strong price movements that pair with high volume trading in the direction of price movements. Day traders wait for the right time to open positions.
👉 Momentum trading involves buying and selling currency pairs after upward or downward trends have presented themselves. Day traders trade the directions until the end. Forex traders focus on technical analysis (price movements and price action) rather than fundamental analysis (macroeconomic events, company performance).
👉 Momentum day traders are known as ‘market chasers’. They identify a price action trend, look for the best entry point by predicting short-term movement, and exit at the right time to make a profit. Momentum trading relies on a forex traders expertise, skill and discipline.
Forex scalping strategy
👉 Day traders use the scalping strategy to make small profits on small price changes throughout the trading day. A scalper may make up to a hundred traders throughout one trading day. It’s a high risk, high reward strategy and best suited to day traders with experience and a disciplined trading strategy.
👉 Scalping relies on day traders having a strict enter and exit strategy; get in and get out at the right time. One massive loss wipes out all the small gains day trader scalpers make.
👉 Scalpers use several forex trading tools to stay up-to-date with market actions. These include one-minute or tick charts which provide data as close to real-time as possible. Scalping is a good trading strategy for beginners because it offers more trading opportunities, exposes them to less risk and removes the temptation to ‘get greedy’ because it involves targeting minimal returns.
Forex range trading strategy
👉 Forex range traders use support and resistance levels to identify oversold and overbought currency pairs to buy and sell at the right time. Range traders sell during overbought periods and buy during oversold periods.
👉 The range strategy requires forex traders to understand different types of range. They need to identify the range, set up their entry and manage their risk. The trading range can be where a currency has recovered from a support period or retreated from a resistance period.
👉 Range traders buy near support levels and sell near resistance levels. They use a wide range of forex trading indicators to determine their entry point and open trades. When the range has been identified and the entry set up, range traders set up risk management tools to help them maximise profits and minimize losses.
👉 Range trading is a simple trading strategy for beginner forex traders. Forex education and experience will help you trade forex effectively; identify the range, time your entry and manage your risk. Range trading is prevalent when there is no apparent long-term trend in play.
There are four types of range in forex trading:
➡️️ Rectangular range: horizontal and sideways price movements between lower support and upper resistance, clear support and resistant areas, flattened moving average lines and highs and lows within a horizontal band
➡️️ Diagonal range: ascending or descending price action in a sloping trend channel which can be narrowing, broadening or rectangular
➡️️ Continuation ranges: chart patterns develop within a trend, and ranges occur as an adjustment against a predominant trend
➡️️ Irregular ranges: develops around a central pivot line, and support and resistance lines unfold around the ranges
Forex high-frequency trading (HFT) strategy
👉 Forex day traders use complex algorithms to take advantage of short-term or slight market disorganisation or inefficiencies. A high volume of orders is implemented within fractions of a second, which adds liquidity to the forex market and removes small bid-ask spreads.
👉 Sophisticated algorithms analyse many assets simultaneously and execute orders relative to market conditions. The faster the execution speed, the more profit a forex trader is likely to make. HFT is algorithmic trading that involves high-speed trade execution, a vast number of transactions and a brief trading period.
👉 Large financial institutions and institutional traders use the HFT trading strategy. They use computation to scan a wide variety of securities and execute large orders in a second. Retail traders can’t adopt an HFT trading strategy using platforms such as MetaTrader. It is high-speed algorithmic trading and requires high-speed internet, a supercomputer and direct access to the financial exchanges.
Forex reversal strategy
👉 The reversal forex trading strategy is risky for beginner day traders because you could potentially lose a lot of money if you do not have the knowledge or expertise to execute it properly. Reverse trading is also called pullback trending, trend trading and a mean reversion strategy. It complements the momentum trading strategy and can be used for swing and day trading.
👉 Reversal strategy involves trading against the trend and identifying the right time to buy or sell the daily low and high pullbacks or reverse. If a currency pair has been trending upwards for months and a trader identifies a signal that a sell-off is likely, traders can profit from the reversal of a bull trend and vis versa.
5 best forex brokers for day trading
👉 Day trading is hazardous, and while it is lucrative for many day traders, most retail traders lose money on this activity. Making a success of day trading relies on beginners educating themselves on the pros and cons of different trading strategies, developing a solid trading philosophy and being disciplined.
👉 It’s essential that you trade forex through a reputable forex broker that is regulated by a top-tier authority, offers complete pricing transparency, keeps your funds safe and offers fraud protection.
📱 Trading Desk
MetaTrader 4, MetaTrader 5
📈 Total Pairs
🕒 Account Activation Time
🏛️ Visit Broker
👉 AvaTrade is an award-winning global forex and CFDs broker who accepts traders in Africa. AvaTrade clients trade currency pairs, commodities, stocks, indices, futures and cryptocurrency on the MT4 and MT5 trading platforms and AvaTrade’s proprietary trading platforms.
👉 AvaTradeGo is a user-friendly and intuitive mobile trading app. It provides step-by-step guidance on opening and closing trades, feedback on your activity and support anytime and anywhere you need it. You can manage multiple accounts and switch between demo, real and competitive spreads accounts, and get all the data you need for your forex trades while using your AvaTrade account credentials. AvaTrade is licensed and regulated by top-tier regulatory authorities across all six continents.
📈 Total Pairs
👉 CMC Markets is a leading forex and CFDs broker established in 1989. With over three decades of experience, CMC Markets offers forex traders in Africa an excellent trading experience, providing access to multiple assets with competitive spreads.
👉 The global broker supports the world’s favourite MetaTrader 4 trading platform and Next Generation, an award-winning proprietary platform, to trade currency pairs and CFDs on indices, cryptocurrencies, commodities, shares and treasuries. CMC Markets is regulated by the FCA in the United Kingdom and is a safe and reliable broker for forex traders in Africa.
CySEC, FSC, FSCA
📱 Trading Desk
📈 Total Pairs
🕒 Account Activation Time
🏛️ Visit Broker
👉 HotForex is a global, multi-regulated forex and CFDs broker who accepts Africa traders. Founded in 2010, HotForex and HF Markets fall under the HF Markets Groups, which operates in multiple jurisdictions. HotForex offers access to many asset classes on the MT4 and MT5 trading platforms with six trading accounts. HotForex publishes a wide range of research and educational material. The trading platforms support advanced trading tools such as AutoChartist, a Trading Calculator and Economic Calendar, and the Traders’ Board.
👉 IC Markets is a leading, Australian-based forex and CFDs broker, offering access to a wide range of financial markets on MT4/MT5 for retail traders and cTrader for institutional clients.
👉 IC Markets caters for beginner and intermediate traders, but it is more suited for advanced and institutional traders. It’s the preferred forex broker in Australia for high volume traders, scalpers and trading algos due to their New York Equinix NY4 data centre, which processes over 500 000 trades per day. IC Markets supports additional trading platforms for copy trading, including ZuluTrade and MyFXbook.
FCA, SCB, CMA, ASIC, DFSA, CySEC, BaFIN
📱 Trading Desk
MetaTrader 4, MetaTrader 5, cTrader and TradeView
Yes – CFDs
📈 Total Pairs
🕒 Account Activation Time
🏛️ Visit Broker
👉 Pepperstone is globally-regulated forex and CFDs brokerage that accepts beginner traders in Angola. Pepperstone was founded in 2010, its headquarters are based in Australia, and the brokerage is regulated by several Top-tier authorities, including the FCA in the UK and ASIC in Australia.
👉 Pepperstone offers clients access to various financial instruments on the MT4, MT5 and cTrader trading platforms. Pepperstone publishes an impressive range of trader research and educational material, including Market Analysis, Economic Calendar, trading guides, webinars and daily market news. It supports additional trading tools such as Smart Trader Tools, VPS hosting and Autochartist.
FOREX TRADING AFRICA DISCLAIMER
Forex and CFDs are complex instruments, and trading these instruments come with a high-risk warning. Trading forex and CFDs involves a high risk of losing money rapidly due to leverage and margin. You need to understand how forex trading works and decide whether you can afford to take the risk of losing money on trade orders that do not go your way.
Forex Trading Africa annually reviews brokers and financial instruments and provides information to help traders and investors make better decisions when trading on global markets. The information is published to help improve your knowledge and understanding of international multi-asset trading and market participants.