Being a newbie in the Forex industry can be quite scary. After learning the basics, it is essential for traders to identify themselves based on their trading style. According to Trading Psychology, many factors come into play in financial success, such as cognitive, emotional, and social capacity. Therefore, finding what works for you early on is an important step, especially if you plan to engage in trading for the long term.
Trading in Style
Traders are typically divided into four types: position traders, swing traders, day traders, and scalpers. Each of these traders have specific goals in mind when it comes to their assets, depending on what kind of trade they are interested engaging in. When deciding on the trading style to adopt, a trader must consider three things: personality, availability, and Forex knowledge.
One of the biggest factors traders consider when finding their own style is the time they can put into trading.
Position trading is perfect for those who do not mind waiting for longer periods of time to earn profits, as position traders look more into a currency pair’s performance in the long run instead of short-term price fluctuations.
Position traders wait between weeks to months to close open trades. They tend to be more systematic traders as this style lends itself well to those who have a clear grasp of fundamental factors and systemic strategies in making trading decisions.
Unlike position trading, swing trading involves less time as this trading style focuses more on short-term market movements. As these movements can happen quickly, swing traders close open trades in as fast as overnight to a few days, provided that they have the right tools and strategies to conduct these trades. Due to the nature of swing trading, being technical and detail-oriented are prized characteristics of traders who engage in this trading style. It is essential for swing traders to learn technical concepts that include but not limited to moving average and candlestick patterns, as well as support and resistance.
While some traders engage in position and swing trading as a side hustle that requires little time, day traders trade daily and close all their open trades as the trading day ends. Unlike the first two trading styles, day trading involves observing large movements of volatile currencies throughout the day, as well as buying support, selling resistance, and trading breakouts and/or pullbacks.
Clients who engage in day trading are usually on the more skilled end of the spectrum, where their thorough knowledge, wide experience, and tried strategies form part of their capital. Day traders thrive on quick turnover rates, and to earn profit, they make use of their analysis and quick decision-making skills.
Among the trading styles, scalpers hold the most flexibility when it comes to trading. Compared to the other three types of traders, scalpers enter and leave the market in a matter of minutes as their profits rely heavily on small price changes. Those who engage in this type of trading style maintain a clear eye on market conditions while they trade and make quick-witted decisions parallel with the market’s rapid movement. A skilled scalper is highly analytic of information coming in throughout the day and uses these to inform their trading decisions quickly to achieve greater profits from the market’s busy conditions.
Knowledge, patience, perseverance, and dedication are important values when it comes to deciding which trading style to engage in, as these values lay out the groundwork for finding the most suitable style tailored for each trader.
Moreover, while trading can be fast-paced, committing to one trading style is not the be-all and end-all of the industry. Changing styles can also be possible. Whether it is to experience different styles or to look into trades in a more in-depth manner, you are encouraged to find what works for you, provided that you have a clear grasp of one approach before switching to another.
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