Every trader who gets into forex trading comes with a different personality and a unique trading style. While some prefer fast-paced trading within short timeframes, there are others who are into long-term trading that could be held open for weeks. Nevertheless, you can classify all of them into 4 different categories based on their trading styles.
Scalpers
Scalpers are fast-paced traders who sometimes hold their trades for not more than a couple of seconds. They open dozens of trades in one day and take advantage of the small price movements, closing their trades with few pips of profit. They rely on news trading and short-term technical analysis and make most out of the sudden spikes in the momentum.Scalping may not suit all traders since it necessitates unwavering focus on trading. Although the profit targets are small here, the number of trading opportunities is more, with lesser exposure to risk.
Day Traders
Unlike scalpers the day traders hold on to only one trade during the day and then close it at the end of the trading day. They act on their bias and pick a position at the beginning of the day by analyzing the market and monitoring it throughout the day. To become a successful day trader you will have to stay updated about the latest fundamental events and spend your day focusing on the trade.
Swing Traders
As opposed to day traders and scalpers, swing traders hold on to their trades for a couple of days or weeks. The risk exposure of these traders is high since the market conditions may change either overnight or during the weekend. Nevertheless, they end up making larger profit targets when compared to day traders and scalpers. You don’t have to monitor charts throughout the day to be a successful swing trader. However you will still have to analyze the market by spending a couple of hours every day. There may be times when trades may move against you. But you will have to remain calm and base your trades on technical as well as fundamental analysis.
Position Traders
If swing traders hold on to their trades for weeks, position traders hold on to them for months or even years. They have a deeper analysis of the fundamentals and understand how they affect the market in the long run. They are well-capitalized and have very large stop losses. They don’t mind waiting for years if they are getting a great winning reward. They are extremely calm and patient.
Understanding what type of a trader you are becomes very critical when it comes to devising a Forex Trading strategy that works for you. Once you devise one, you will be in a better position to manage your risks, cut your losses, and maximize your profits in trading. Remember it is always about who you are and where you want to go. So instead of blindly following others, analyze your trading goals, personality traits, and trading style, and stick to your own trading strategy.
