Forex Day Trading For a Living
There are lots of participants in the financial markets around the world, who indulge in day trading for a living. Generally day traders concentrate on one or two markets to earn regular profit. By keeping a regular track of these markets they get closely familiarize with the developments in the market, making it easier for them to take wiser decisions.
They devote most part of their business plan to specialize in this.
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Following are some of popular markets that are considered suitable for day trading for a living by most players:
- Financial futures
- Forex or foreign exchange
- Stock market
Financial futures
Basically, market players use financial contracts for hedging against uncertainty and risk that may affect their holdings or portfolio. By definition, a futures contract is an agreement between a prospective buyer and seller to for a definite trade at a precise future date and price. Traditional futures contracts involve commodities, such as foods, fats and oils, fibers and textiles, metals, precious metals and miscellaneous materials such as rubber and steer hides. Let’s take a closer look on how futures work.
Suppose you are a corn farmer with a few months to go until harvest time. If you could sell your crop today at the prevailing price of $5 per bushel, you could fetch a profit. However, if the price falls to $4 per bushel before you are ready, you would be incurring heavy loss. So you will find a futures contract a viable remedy to insure against a loss on account of falling price. In effect you will enter a future contract with a buyer (for instance a cereal manufacturer), agreeing to sell a specific amount of corn at a future date for a price that seems fair — like $4.75 per bushel.
If the crop’s price falls to $4 per bushel, you will still lose money, but you will make a profit off the futures contract. And if prices remains at $5 per bushel, your futures contract will result in a loss, but you can balance the loss with the profitable sale of your cash crop.
Financial futures also run on the same principles. The only difference is that they are based on changes in such market indexes as the S&P 500 or the Dow Jones Industrial Average. In reality, a day trader is expecting that a particular index will gain a particular level at a certain date in the future.
Foreign exchange or Forex
As you know, forex trading is the trading in international currencies to profit from fluctuations in the exchange rates. Forex market is the most popular market and offers a lot of opportunities to make day trading for a living. The great advantage of Forex market is that its huge size, high liquidity, zero time constraints are ideal for making profit from most of your deals. Although price changes in the forex market is small, the use of leverage enables traders earn significant profits.
Stock Market
The stock market is still one of the most common markets for day traders. And most of them concentrate primarily on stocks listed on the NASDAQ exchange. NASDAQ exchange is the largest in number of companies listed and often remain highly volatile. And volatility is one major attraction for day traders, as it provides great trading opportunities for traders to make profit. And its no wonder lots of people operate in NASDAQ and utilize day trading for a living.
