Currency Day Trading Risks

Currency day trading involves opening and closing a foreign currency trading position within the same trading day, usually through the Internet. Traders or investors make profits via the small price movements in the market. In this type of market, traders rely heavily on the technical analysis of the currency trends. However, since the Forex market is highly susceptible to speculation, it can be risky. Here are some of the biggest risks that currency day traders face.

1. Trading Decisions can Become Emotional

One of the biggest pitfalls in currency day trading is being emotional about your investment decisions. Just like in other forms of investment, your emotions can distract you from the facts in the technical analysis. If you ignore definitive reports and studies, you will surely lose a lot of money as you will most likely run against the fundamental concepts of day trading. Allowing your emotions to dominate your investment decisions will make you greedy to the point where you will leave trades open long after the trading day or session has closed.

2.  Currency Prices Move Quickly

The essence of day trading is being in and out of the market within the same day. For many traders, this means being able to realize profits at the end of the day. However, it can also mean that the movement of currency prices is quicker. Since a day trader needs to close their position within the same trading day, recovering the losses within the trading day could be difficult.

3. Market Conditions are Beyond One’s Control

Unlike other types of investments, the Forex market is highly affected by things that are beyond the control of the traders. For example, changes in the interest rates of the country can have an impact on the value of such currency. The trade policies being implemented by governments can also influence currency price movements. Also, natural disasters can affect the value of foreign currencies. Traders can lose all their Forex investments due to unexpected events.

4. Many Day Trading Tips Turn Out to Be Scams

Since currency day trading is mainly done over the Internet, there are many websites that offer expert tips to help traders earn more profits fast. Most of these websites charge hefty fees. However, numerous online newsletters and tips about Forex trading are misleading. As a day trader, you have to be careful about where you get your information. You must first verify the information provider. Some online experts are sponsored by companies that pay for recommendations, so you must be wise and choose your tips and advise carefully.

5. Currency Day Trading can Be Very Stressful

The nature of this type of trading can take its toll on the trader’s emotional and physical wellbeing. In day trading, you must constantly watch the movement of the currency that you have invested in. This can be mentally draining, if it is done with several currencies. Moreover, many traders also worry about the huge expenses that they need to pay for professional training, brokerage firm commission fees, and trading tools or platforms.

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