Day traders often rake up major commissions charges if they are trading stocks which makes it that much more difficult to beat the overall market. In case of currency trading, the cost of trading is hidden in the bid/ask spreads offered by the broker. So the more you day trade, the higher your trading cost will become. In the end, if you are unable to breakeven, you cannot survive long in day trading.
Determining your trading style is very important right from the beginning. Not knowing what type of a trader you are can make or break your trading career. Take the analogy of a cricket team. There are 11 players in each team in the match. All players are talented and super fit. Everyone can throw and catch the ball. However some are more skilled at balling. Others are more skilled at batting. If the baller is going to do the job of the batter, not many runs will be made and the match will be lost.
You should focus on the non-commercial participants rather than on the commercial participants when you look at the COT report. You would ask the reason for ignoring the commercial category. Commercial participants are mostly trading forex futures for hedging purposes. They keep on rolling on their positions from month to month for hedging even though they maybe taking losses. This way they are hedging the foreign exchange risk for their business transactions.
The mood of the currency market depends on what the majority of the traders are thinking about the present market situation. How do you measure the currency market sentiment? You can get an idea of the overall market sentiment by reading reports written by analyst and financial journalist in the news wires. You can also join online trading forums to see what other traders are thinking about the current market situation to form your opinion on the market sentiment.
Economic growth of countries can also have a big impact on the overall currency market sentiment besides the interest rates. When the economy overheats, inflationary pressures increase forcing the Central Banks to increase the interest rates in order to cool the economy. US economy is the key factor in determining the global currency market sentiment. United States is the largest economy in the world. US economic news can and does affect the major currency pairs like EUR/USD, GBP/USD, CHF/USD and JPY/USD.