Forex Trading: The Right Forex Trading Style

Within the Forex Trading community, there are many different atyles of trading available for both the new trader as well as the veteran traders. Most traders stick to particular style of trading that they are comfortable with, but how can one identify which type suits them most? In this post, we will explore deeper into the different styles of Forex Trading, so that you are more equipped with the knowledge to decide what style of Forex Trading suits you most.

Scalpers: Quick and Precise Trading

Those that engage in ultra short term trades that last only a few minutes are also known as Scalpers. These traders target 1 – 5 pips per trade typically. Scalping is a form of trading that capitalizes on trading at high frequencies, executing these trades rapidly, and minimizing overnight risk exposure. As it is a form of hyper precise and quick trading, the brokerage costs are naturally higher as more trades are being placed. If you think that you are able to make such quick judgment calls, Scalping is the form of forex trading for you.

Day Trading: Capitalizing on Short-Term Opportunities

Day Trading refers to Forex Trading that closes their trades within the same trading day. Trades are opened and closed within the day, and these traders do not leave their trades open for multiple days. This style of trading aims to capitalize on short term price fluctuations, typically seeking profits from between 5 – 20 pips per trade. This approach is demanding, as it requires swift decision making and a keen focus on the intra day charts. However, it is not as demanding as Scalping. Additionally, Day traders do not enter as many trades at scalpers and thus do not have brokerage costs as high as Scalpers. For those people that think that they can make swift decisions in a fast paced environment, Day Trading offers an opportunity to seize short term market opportunities.

Swing Traders: Capturing Medium-Term Trends

Swing Trading is the trading style where medium term market trends are captured. This style of trading can last from a few days to a few weeks, and their aim is to secure gains of 50 – 200 pips. This strategy often offers more flexibility for traders that are not able to consistently monitor the charts. While it has lower brokerage costs due to the lessened amount of trades entered, it does carry the risk of being exposed to overnight risk. Moreover, profit realization is slower as compared to day trading and scalping. Swing Trading is a favoured choice for those seeking a balance between activity and flexibility.

Position Trading: The Long Game

Position Trading adopts the longest term perspective as compared to the other styles of trading mentioned here. Positions can be held for weeks, months and even years. This style of trading aims for substantial gains ranging from 200 – 1000 pips or more per trade. This style of trading offers the lowest trading activities, and is ideal for part time traders that want to capitalize on long term trades. This style of trading often involves a focus on fundamental analysis, but requires patience as positions are held for extended periods. Position Trading is well suited for those that are patient, and who seek a longer term perspective and the opportunity to capture large market movement. It allows for the most flexibility, and its ideal for traders who cannot dedicate their full attention to the Forex Market.

In conclusion. each forex trading style has its unique strength that comes with their requirements. Your choice ultimately depends on your trading goals, risk tolerance, and time commitment. Regardless of the chosen style, always bear this in mind; Mastery in the forex world is achieved through continuous learning, practice, and disciplined execution. There is no easy shortcut to master Forex Trading.