There are many different types of forex traders, and each one needs a special approach. Your chances of success will increase whether you opt for the steady marathon of position trading or the quick-fire sprint of day trading. Learn more about the numerous forex traders who participate in the largest market on the planet by reading on.
THE SIX TYPES OF FOREX TRADER
Most forex traders fall into one of six basic trading categories: scalpers, day traders, swing traders, position traders, algorithmic traders, and event-driven traders. Take our DNA FX quiz to find out which one suits you the best! Read about the various types below to learn the optimal character traits for each.
- Scalper
Scalpers are traders that hold positions for only briefly, frequently for a few seconds to a few minutes. With the aim of making small profits during the busiest (most liquid) times of the day, forex scalping strategies involve frequent trading throughout the day.
A fast-paced lifestyle is typical among scalpers. Given that you will always be assimilating new information and reacting to rapid market changes, you should be vigilant, instinctive, and quick-witted while still being stoic under pressure.
- Day Trader
Day traders frequently place trades during the intraday time as well. Although their process won’t be as quick as a scalper’s, day traders would also close out all positions prior to the end of the trading day in order to avoid holding any overnight. This demonstrates that negative news that might affect prices prior to the market opening or following its close has no bearing on trade.
If you want to be successful as a day trader, you must be able to adapt to abrupt price movements and be knowledgeable about important trading tactics, such as fading the gap.
Both scalpers and day traders use the five-minute chart below, which displays the entry and exit positions of a typical day trader. These findings are supported by relative strength index (RSI) signals, with the oversold and overbought levels noted on the chart.
- Swing Trader
Swing traders sometimes hold onto transactions for more than one day and for as long as a few weeks. Swing traders frequently put more emphasis on technical analysis than fundamentals during this brief period, though they should still be cognizant of news items that could lead to volatility.
Compared to scalpers and day traders, this trader type doesn’t require as much extreme caution, but you’ll still need a good eye for detail when it comes to chart research. Find out more about identifying and trading market changes.
- Position Trader
Position traders frequently hold onto deals for several weeks to years. Position traders, who among trading strategies have the longest holding period, are inherently more interested in an asset’s performance over longer time horizons than in price fluctuations.
As a forex position trader, you will require patience because your money will frequently be locked up for lengthy periods of time. You will benefit from having advanced analytical skills because it is advantageous to understand fundamental concepts, particularly when making longer-term transactions.
Here is an illustration of a daily chart that a position trader might employ. It shows a long position that was taken and an exit that was made about a month later, both of which were based on circled RSI signals. In addition to using the daily timeframe to spot trends, position traders frequently scale down to shorter time frames.
- Algorithmic Trader
Trading algorithms rely on computer programs to carry out transactions on their behalf at the best possible prices. Trading professionals have the option of purchasing pre-made products or building their own programs utilizing detailed instructions or high-frequency trading algorithms.
This method of trading is best suited for those who are comfortable with technology and want to use it in their careers as forex traders. Given the nature of the algorithms, algorithmic traders will also possess a keen eye for the technical charts.
- Event-driven Trader
Event-driven traders base their decisions less on technical charting and more on fundamental analysis. They’ll strive to profit from rises brought on by political or economic changes, such as GDP, employment data, elections, and non-farm payroll data.
This type of trading would be best suited for someone who enjoys following global news and has a knowledge of how events could impact markets. Since you are inquisitive, inquisitive, and forward-thinking, you will be skilled at processing new information and developing predictions about the direction of both global and localized events.
CAN YOU CHANGE THE FOREX TRADING WAY YOU DO IT?
Your approach to trading currencies can change at any time; it is not required to do so. You can be a scalper who is concerned by erratic price changes and longs for position trading’s advantages in terms of time savings. Alternately, you can be a technical swing trader who want to learn more about the events-driven strategy’s fundamentals.
No matter what your priorities or preferences are, there is always space for development. You can use cutting-edge techniques to assess your market knowledge.
