Day Trading Forex and What Drives the Market
First of all, a lot of people don’t understand what the foreign exchange market (Forex) is. Due to this, I’d like to explain it a little bit and give some background before jumping into this post.
I first got into day trading a little under 10 years ago. As I was learning the ropes, I was given the choice to put my focus into either forex trading or futures trading.
“But what is the difference?” I thought to myself. “All I want to do is make money day trading.”
I laugh as I think back on that time of day trading in my life. How could I be so naive and so young? Of course there’s a difference, even if we’re just talking about the amount of money to be made. In fact, there’s a MAMMOTH difference.
Day Trading Forex vs. Day Trading Futures
It was explained to me very briefly at the time, but I remember it well. It was one of my first days learning how to day trade. My coach told me that I could make more money day trading futures because the market moves quickly. I could get my trades in and out in as little as a few minutes!
I quickly found that while I could make more money trading futures, I could also lose more money. Also, I could lose it a lot faster than I had ever imagined…
In contrast to futures trading, Forex trading was a little more consistent. The market moves slowly in comparison, which means your trades take a little bit longer to run their course.
My profits might not have come as fast as if I were trading futures, but because I had more time to process what was going on, I didn’t lose as many.
What Data to Look At When Day Trading Forex
As I got further into day trading forex, I realized that there were certain factors that contributed to the market’s movement each day. After doing some research, I discovered the following variables to take into account when pulling the trigger on a trade.
The Bureau of Labor Statistics releases a United States employment report on the first Friday of each month. This data is called “non-farm payroll” data, and explains how many people are employed in the country.
If the data shows a strong increase in employment, the market is sure to increase. In contrast, strong decreases point to a down trend.
Monetary policy is mandated by central banks. This makes them the main focus of investors and day traders alike.
Inflation is the amount of increase or decrease a certain currency sees over a period of time. If a currency sees strong inflation, it could mean the market is about to decrease due to a devaluation of that currency.
Gross Domestic Product
Gross domestic product is the amount of goods or services which were finished during a specific duration of time. GDP is broken up into four different categories:
- Business Spending
- Government Spending
- Total Net Exports
- Private Consumption
If retail sales are up, it shows that consumers are spending more, which indicates the economy is healthy. The contrast to this is also true. If retail sales are down, the economy may not be at optimum health.
Durable goods have a life span of more than three years. These tell us how much spending is going on, or the lack thereof.
Trade and Capital Flows
When certain countries interact in a negative way with each other (trade wars, tariffs, etc.), their economy is severely affected. A good example of this is going on right now between President Donald Trump of the United States and China.
Geopolitical and Macroeconomic Events
Finally, geopolitical and macroeconomic events such as elections and government policy changes can play a big roll in which way the market moves. However, these events are a little more difficult to predict, which means the market could go against you in a big way at a moment’s notice.
Day Trading Forex with DayTradeFEED.net
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Get Started Day Trading Forex
If you’re still reading this blog post, chances are you’re pretty interested in learning to day trade forex.
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Day Trading Forex – Still Not Sure?
Still not sure you’re interested in learning more about day trading forex? Check out our Should I Day Trade? page to see if you have what it takes to get in the game!
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