Start your Forex journey by knowing what kind of trader you want to be. There are over 4 major types of traders: Scalpers, Swing traders, Day traders and Position traders. These are all rather different from one another in terms of methods, functions, procedures, duration, and other aspects.
And what sort of trader you’re suited to be will vary depending on what you thrive at and what you prefer. So to know what kind of trader you are, down below is everything you need to know about each one:
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Scalping is a kind of trading style where you profit from small and fast trades. Their primary goal is to repeatedly collect very small quantities of pip at the busiest hours of the day. So you sell currency pairs even at the slightest change of price to make a quick profit.
If you want to become a scalper, you must have a strong hold over your impulse and a strict exit strategy. One big bump in your plan can greatly affect your overall profit. So, instead of thinking about generating one large profit, consider making multiple smaller ones.
A scalper usually holds a trade for less than 5 minutes, usually has over a hundred active trades and does not need fundamental analysis.
Although it might not be “illegal” since there is no federal law against it, it’s still banned in 15 states and is also not allowed by certain brokers to be practised by traders. So before pursuing scalping, make sure it’s legal in your state and is accepted by your brokerage. The consequence if caught scalp trading can be lawsuits or even detainment.
Swing traders hold trades for days and weeks in hopes of increasing prices before selling. As a swing trader, you’re exposed to Overnight risk and Weekend risk where you can expect leverage changes, cost of capital, possible price gaps and so on.
Such traders spend a few hours every night studying the market to make wise trading selections because they cannot keep an eye on their charts throughout the day.
No, it is not. There are no said laws, regulations and restrictions against this trading strategy. Although the only thing that’ll hinder you from swing trading is its initial capital to trade. So if you’re looking for a slow-paced trade and have enough money to start, you can consider swing trading.
A day trader is usually compared to a scalper since they seem pretty similar. But what makes them different is that a day trader holds a trade much longer than a scalper. Day traders hold trades for hours, only have a handful of active trades open and need fundamental analysis.
This is also known as inter-day trading where a trader takes advantage of small market movements to make a profit. So at the end of the day, you’ve either faced a gain or a loss.
Day trading is not illegal since there are no said laws, restrictions or regulations against it. Plus it’s not considered to be a strategy that’s frowned upon so, it’s an overall safe and often-practised method in Forex trading.
Position traders profit by keeping a stake in a trade for lengthy periods of time—days, weeks, months or even years—and then selling it in hopes it raises in value throughout the waiting period.
These traders base their choices on analytical speculations since it’s long-term and exposes them to various risks. The market is volatile and highly unpredictable so analytical tools will come in handy when position trading.
Short-term market movements and current events are less important to this sort of trader until they change the position’s long-term outlook. This is one of the most sought-out Forex trading strategies around.
No, position trading is one of the most practised kinds of trading strategy today and is also deemed to be the most secure. Since there are no written or said laws, regulations and restrictions for position trading, it’s federally not illegal.