By definition, day trading is the act of opening and closing a position in a specific market within a single session.
Although it is sometimes referenced in a negative connotation, day trading is a legal and permitted means of engaging the capital markets. In fact, it benefits practitioners in several ways:
Limited Risk: Day trading is a short-term strategy that does not require the trader to hold an open position in the market for an extended period. Subsequently, exposure to systemic and market risks are greatly reduced.
Decreased Opportunity Cost: The trading account's liquidity is ensured due to the intraday durations of trade execution. Risk capital is not committed to a single trade for a long period of time; this element frees up the trader to pursue other opportunities.
Regular Cash Flow: Day trading allows for a regular cash flow to be generated. While profits are not guaranteed, a daily P&L is calculated. As a result, gains are realised much faster in comparison to more traditional investment strategies.
A forex day trading strategy may be rooted in either technical or fundamental analysis. Some of the most common types are designed to capitalize upon breakouts, trending and range-bound currency pairs.
Compared to other markets, the availability of leverage and diverse options make the forex a target-rich environment for day traders. In addition, one has the flexibility to benefit from being either long or short a currency pair. When taken together, these three factors effectively open the door to myriad unique forex day trading strategies.