Best Forex Intraday Trading Strategy for 2023
- Forex Trading Benefits
- Largest Financial Market
- High Volume and Liquidity
- Made for All
- No Single Ownership
- 24-Hour Active
- Lucrative Leverage
- Profitable at Highs and Lows
- What is Intraday Trading?
- Intraday Trading Indicators
- Profit Risks of Intraday Trading
- Intraday Time Analysis
- How to Use Intraday Trading in Forex Markets?
- Best Intraday Trading Strategies for Forex Market in 2023
- Trend Trading Strategy
- Momentum Trading Strategy
- Breakout Trading Strategy
- Bull Flag Trade
- Gap and Go Trade
- Moving Average Crossover Trade
- Pull Back Trade Strategy
- Challenges for Forex Intraday Traders
- Trading Style Challenges
- Final Thoughts
The foreign exchange market is one of the most profitable markets for traders around the world. Forex currency pairs are popular tradable assets among investors. In 2020, the global economic slowdowns have triggered a significant upsurge in forex markets. USD/EUR has become a high-yielding financial instrument around the year. Millions of people are showing interest in being a part of this global decentralized and over-the-counter currency market as traders. They are aiming to make money by investing in these currencies at lucrative foreign exchange rates. However, every trader needs to implement a strategy for making it big in the market. For forex markets, the intraday trading strategy is popular for enabling traders to gain maximum profits from exchanging, selling, or buying currencies at the right determined prices.
Forex Intraday Trading Strategy
Before getting into what intraday trading is and how it works in the forex markets, it is important to understand how one can make money from these strategies. Forex markets offer high-value trading opportunities to traders, and for the past two decades, they have been the most accessible markets to people. New traders facing the challenge of selecting a market are starting with forex markets. Forex pairs are suitable tradable assets for every potential trader. Currency trading is resourceful and makes it easy for traders to start with relatively low investments.
Let’s have a look at some of the perks involved in the forex trading journey.
Forex Trading Benefits
Various strategies can make new traders successful in forex markets. For effectively implementing forex trading strategies, it is necessary to know how the market can benefit your plan.
Largest Financial Market
The market for forex trading is undoubtedly the largest financial market in the world. The market handles global trade and international economic activities. Every day, nearly $5 trillion are traded on forex pairs, which puts an average of $3 billion a minute or $200 billion an hour.
High Volume and Liquidity
Forex markets are enormous and deal with high-volume liquidity. Any large amount of money can be traded in the market at any given moment under regular market conditions. There are no trading limitations as to how much money one can invest in a currency pair. Traders can even automate their trading and keep investing high amounts every day on popular pairs such as USD/EUR.
Made for All
Forex trading is not for market experts or advanced traders. It can work well for beginners as well. The best part is that forex trading does not cost a lot of money. With most forex trading platforms you can find, a trader can start by investing a minimum of $500 on currencies. There is no need for start-up capital, and the trader can enjoy leverage up to 1:500.
No Single Ownership
The sheer size of the market is huge and has billions of participants. There is no single institution controlling market prices or exchange rates. From time to time, the market calibrates itself quickly and levels the odds. The market is decentralized, which means there are no middlemen.
For a market that never sleeps, it is good that forex trading is available 24 hours a day, five days a week. There is no waiting period for the opening of the market. Trading orders are executed before every daily close. The market opens at Sydney session time and closes with the New York time, and repeats this on all weekdays.
With small deposits, traders can go a long way in this market. They can benefit from the attractive leverages offered in trading currencies. Up to 1:500, leverage is offered to traders, and this ratio increases with their buying power. It means that more money invested in forex pairs can reap larger gains. The risk of larger losses can be avoided by executing orders on stop losses on a trade.
Profitable at Highs and Lows
If the market is rising, traders can sell their stocks and profit from the increasing prices. If the market is falling, major currency pairs become available at lower prices for buyers. Every forex trading strategy helps traders in making profits in every trade at highs as well as lows.
Considering these characteristics, forex markets are quite suitable for implementing intraday investment strategies. Let’s learn how these strategies work and which are the best ones for new traders in this market.
What is Intraday Trading?
People new to the trading world may have heard less about intraday trading. As the term suggests, it is a type of trading that involves the selling and buying of stocks within the regular business hours on the same trading day. This same-day trading of currency pairs and stocks is done solely to earn instant profits and not for long-lasting returns. It harnesses the movement of the market, the CFDs, and indices and enables traders to understand these fluctuations in the prices.
Forex Intraday Trading Chart
Intraday traders need to monitor their investments not more than the stipulated day trading hours. They can earn profits on the same day they execute a trade. Online trading platforms around the world offer intraday trading features to their users. In this form of trading, specifying the trade orders within the time limits is necessary. All orders are squared off at the end of the trading day.
Intraday Trading Indicators
There is a lot of research that goes into booking profits in intraday trading. As the market is accessed for a finite number of hours, traders must study how the market will move in the day. For this, they have to follow certain technical indicators. These intraday tips are believed to bring the best results from every trade. While they may not be entirely accurate, intraday trading indicators are the necessary tools that traders use to implement a comprehensive trading plan. Intraday traders use them in developing strategies for maximizing returns. They get a detailed understanding of how the market will perform and how their strategy can be put into effect.
Profit Risks of Intraday Trading
Intraday traders are susceptible to some inherent risks that come with this form of trading. The markets that perform better today may tumble tomorrow. Hence, every intraday trader needs to customize their day trading plans and adapt accordingly. The price volatility of these markets can significantly impact the income of intraday traders. They need to set a daily volume for their day trading. It is advised that day trading has a lot of risks, regardless of the market. Investing more than two percent of the total trading capital on day trading is quite risky. A single trade of high volume may not be the most profitable order executed by intraday traders.
Intraday Time Analysis
To make the most profits, intraday traders need to analyze the market at multiple levels. They need to use daily charts that track every market movement in real-time. These charts help them decode the trends influencing the price movements, which are also the key tools used by popular intraday traders worldwide. A thorough analysis with a one-day interval can help intraday traders implement a guaranteed trading strategy. The time analysis that these charts deliver becomes a part of their trading techniques. They illustrate the movement of the prices between the market opening and the market closing. Every daily trading session can be analyzed through these intraday charts, which also come in customizable parameters.
How to Use Intraday Trading in Forex Markets?
To succeed as an intraday trader in the forex market, it is crucial to learn to select the right currency pairs. Intraday forex trading involves staying actively involved in the movement of currencies. Forex traders fail to make profits when they select an inappropriate currency pair for trading during the day. This skill of choosing the right currency pair needs to be mastered as it determines how much profits every intraday trade can make.
Many investors consider intraday trading as an action-packed plan for forex trading. However, the most successful day traders in the forex market believe intraday trading has only 10% of the action. The real profits come from waiting for the right day and time to trade and watching every currency evolve in its prices. Day trading can be lucrative for forex traders if they leverage these price fluctuations rationally. They should not get carried away and adopt high-risk investments. It is dangerous for new forex traders if they don’t manage every forex intraday trade strategically.
Best Intraday Trading Strategies for Forex Market in 2023
Here are the most popular intraday forex trading strategies illustrated in a structured manner for traders. These intraday trading strategies can offer guaranteed success when implemented under appropriate market conditions. Their role in ensuring the success of every trade determines their effectiveness for the specific market conditions.
Intraday traders can use these strategies to trade all types of currency pairs. It is important to stay flexible by practicing multiple strategies and adjusting them according to various trading scenarios.
Trend Trading Strategy
Trend trading strategy, also known as reversal trading strategy or pullback trading strategy, is popular among intraday traders. It is highly debated as a strategy designed specifically for beginners, but several pro traders also find it effective. It involves investing in currency pairs against the trend. It is a difficult strategy to implement. Investors are required to identify the pullbacks accurately and work according to their strengths. They need to garner credible trading experience and have a detailed understanding of the market.
Trend Trading Strategy
In trend trading, intraday traders famously approach the market with a daily pivot. They focus on trading pairs at high pullbacks or daily lows. Traders look for currencies priced at extreme highs or extreme lows, having a great potential of snapping back abruptly. The trade becomes highly profitable as soon as the price trend reverses. By investing against the trend, they can acquire short or long positions for making profits from the price movement.
Momentum Trading Strategy
To gain success in day trading of currencies, traders can find viable opportunities in pairs with momentum. They can invest in currency pairs that move between 20% and 30%. It gets tricky as traders have to find these pairs in the early hours of the day. They can invest in them only before the movement of those pairs gains momentum. The movement of currency prices can be tracked as they move either downward or upward. This is where the traders need to determine the speed of price movements and assess the security of their trade. Intraday traders must hold positions for minutes and try to stop losses for hours or even the entire day.
Momentum Trading Strategy
The momentum trading strategy is effective only when the day begins. In day trading, some traders can use it based on the market news when a sudden increase or decrease in price movements is reported. This is one of the few day trading strategies where the trading volume can be increased flexibly. The only risk for traders is identifying the momentum of the currencies correctly, for which they have to constantly observe the market and evaluate its uptrends at the start of the day.
Breakout Trading Strategy
Breakout trading is one of the most prevalent day trading strategies for intraday traders. In this strategy, the trader needs to identify when the currency prices fall below or rise above specified levels. The times when these movements happen are noted, and the trading volume is increased accordingly. If the currency price surpasses above the specified level, the intraday trader can buy more and hold a long position. Similarly, if the price falls below the specified level, the day trader can sell the stocks and hold a short position. The support and resistance to this strategy keep changing based on the price movements.
Breakout Trading Strategy
This strategy becomes effective only through observation. If the currency prices exceed beyond the specified levels, the trading volatility increases and the pricing trends head towards the direction of a breakout. The timing at which this breakout occurs is of the essence. Most traders look for such pairs whose price rises only for the time it is available for selling.
Bull Flag Trade
If the price of a currency pair rises explosively within a few days, traders can implement the bull flag strategy. This is one of the few day trading strategies that is implemented only when the currency is at its peak price. Once the price reaches a peak, the market witnesses a pullback in a diagonally symmetric direction. It gives the graphical impression of a flag.
Bull Flag Trade
During the pullback, the lows and highs of the prices become parallel to one another. Traders need to remain patient and wait till the right time the pullback takes the shape of a flag. Based on this time, traders can identify the upper trend lines and the lower trend lines. They can also detect the spots of entry on the lower and the higher side of the trade. Some traders can also identify points for stop-loss orders. Issuing stop-loss orders at these points is quite profitable for intraday traders. These stop-loss points help the day trader in generating profits before the emergence of another market trend.
Gap and Go Trade
In some instances, when a particular currency pair does not have any substantial pre-market trading volume, it opens at a gap from the close of the previous trading day. Here, if the price opens at a higher level than the close of the previous day, it is identified as a gap up. And a gap down is when the price opens at a lower level. In such cases, the gap is usually created in the view of a news catalyst.
Gap and Go Trade
Day traders observe the currencies with decent pre-market trading volumes. If these currencies are gapping over their previous close, traders bet on the gap getting closed during the day. This makes them small profits in a quick manner, and there are menial risks involved.
Moving Average Crossover Trade
Every currency pair has a price movement that averages its price action. This moving average determines the trend of currency prices. Traders can find a way to pick these pairs for their day trading by implementing a price action accordingly. If the price goes above the moving average, it signifies a downtrend change in the market. If the currency price falls below the moving average, an uptrend change takes place. Based on these changes, traders can make decisions about selling or buying.
Moving Average Crossover Trade
Currency prices usually have a short-term moving average. When they attain a long-term moving average, a strong movement is anticipated by the traders. Under the short-term average, the currency crosses over its estimated price action, and traders are inclined to buy more. If the short-term average crosses under the moving average, the day traders can sell their currency shares.
Pull Back Trade Strategy
Currencies tend to experience pullbacks as a part of their long-term trend. In several instances, a short-term market trend heads in the opposite direction of the long-term market trend. Unlike other trading strategies, the pullback trading strategy helps traders during such trend altercations. It helps them hold their position during the short pullbacks and generate profits. Traders can make money by ensuring that the short-trend is not a reversal but a pullback. To ascertain this, one can look at the trading volumes of the previous day.
Pull Back Trade Strategy
If the currency price trends heading upwards experience a pullback, the day traders can identify this as a buying opportunity with low risks. When the pullback eases, and the prices adopt a long-term trend, traders can sell and book more profits. Similarly, if the price trending downwards undergoes a pullback, the day traders can sell the shares and buy them back when the long-term trend resumes.
Challenges for Forex Intraday Traders
While implementing the above intraday trading strategies, a day trader is likely to face some challenges. These challenges can impact the efficiency of these day trading strategies and affect the profits made from trading currencies.
One of the main challenges of currency day trading is placing the right order types. If the trader is overestimating the risks and placing stop-loss orders at the wrong time, the price actions may falter, and the profits are restricted. Similarly, if the trader cannot determine the resistance levels correctly, a wrong order can be placed.
Trading against the trend is a major challenge for intraday traders. Currencies tend to move according to their long and short-term price trends. However, the pullback strategy works with the trend, while the reversal strategy works against the trend. When this creates confusion, the traders cannot determine the right strategy to implement and the right time frame for implementation.
Trading Style Challenges
Several forex traders also get stuck with their price actions in long term trading. Their trading style is unable to identify the correct time frame and the appropriate price action. Currencies experience some support and resistance from news catalysts. But, getting stuck with a trading style lowers the adaptability of the trader. There are several impediments faced by the traders when they employ an untested strategy. For example, sticking with a traditional trading strategy or combining multiple strategies leads to complications that cannot be solved in a day.
The risk appetite of intraday traders should be high. Currencies go through different resistance levels as their prices change at every open and close of the day. To buy or sell them, traders make sure that their short term trading strategy is backed by technical analysis. This technical analysis involves monitoring the latest news on currency pricing trends.
At the end of the trading day, these strategies can effectively ensure that profits are made with every trade executed. Some charts indicate the right price action for every trade. Similarly, day traders can find the best time frame to invest in a currency with the help of these strategies. Day trading in the forex market requires an understanding of how currencies behave under certain conditions. A day trading strategy works when the trader is aware of the trends being adopted by the currency pair.
External events can impact the outcome of a day trading strategy. A currency pair may adopt an unusual market trend and jolt every trade made its way. Further, it can obstruct a day trading strategy by working against the support and resistance of the market trends. While these strategies are designed to help traders, most of them have to be used interchangeably. Market conditions decide which intraday trading strategy brings more money from your forex trade.