Trading Strategies Simplified: From Scalpers to Position Traders
In forex, just like any other type of trading, every trader has their ways and preferences. Among them – the length of time for holding each position. While some traders prefer to get in and out of trade as fast as possible, others choose to hold their positions longer as they await for long-term trends in the market.
Trading preferences largely depend on the trader’s personality, temper and the amount of time they devote to trading. Depending on this, forex traders are often divided into scalpers, intraday traders, swing traders, and position traders. Keep reading to find out which trading style might be best for you. (And if you find this stuff too confusing, there’s always an easier way. Simply follow recommendations from Harborx Star Traders: they know when it’s best to close a position).
Could You Be a Scalper?
Scalpers are traders that enter and exit a position in a very short period of time targeting a small amount of pips – which means that you’ll have to complete a lot of successful trades to earn sufficient funds. If you are going to enter and exit the market in a rapid timeframe, you have to be able to watch market moves at all times. If you are prepared to be a scalper then you need to have the ability to stare at your platform the whole day and make trades again and again. If you are not willing to spend a lot of hours of your day in front of your screen, then this type of trading is not suitable for you. Make sure you know how many pips you are willing to lose in order to gain around 10 pips and go on. Some scalpers rely on automated scalping techniques.
Are You An Intraday Trader?
If you prefer to hold trades for a short timeframe but think that scalping it too fast for you, then intraday trading may be the answer. Intraday traders hold a position within the day and close it before day ends. They usually use up to hourly charts to monitor their positions and their target is within 50-80 pips per trade. This type of traders is up to date with fundamentals in order to be able to make the right decision at the beginning of their trading day. They also like to use sentiment analysis and exit their positions when they feel that the time has come.
An intraday trader may be looking for breakouts of the hourly trading range in either direction by placing pending orders in both sides of the trading range waiting for one of them to be triggered. Another way to trade within the day is to look at a longer time frame chart to determine the longer trend and then place the orders based on a shorter timeframe in the direction of the trend.
Another approach to intraday trading is looking at longer timeframe charts and determining the entry point on shorter charts, but entering in the opposite direction of the overall trend in order to get some pips from overall trend’s corrections.
Could You Be a Swing Trader?
Swing Traders keep positions open for days. The longer a trade remains open, the wider the Stop Loss and Take Profit should be. Thus, this type of trading requires larger SL and TP than the two types mentioned above. Swing traders usually use daily timeframe charts to evaluate the overall trend and 4-hour timeframe charts for entry and exit (timing purposes).
If you do not feel comfortable keeping a trade open overnight (some people literally can’t sleep because of that), then swing trading is probably not your style. Since swing traders are looking for larger moves, price would move against the trade most frequent than intraday trading. If you cannot watch your trade losing money, then you should not be a swing trader.
Are You a Position Trader?
As you have probably guessed by now, position trading is the longest when it comes to holding positions. Position traders holds their trades open for several months or even years. In order for a trade to remain open for so long, stop loss and take profit orders need to be very wide.As a position trader, you should be focusing on fundamentals and important global news. You need to make sure you have a clear understanding how each fundamental indicator affects your chosen currency pairs.
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Risk warning: there is a high level of risk involved with trading forex, commodities, indices and other contract-for-differences. Past performance is not a reliable indicator of future results. You must be aware of the risks associated with trading directly or indirectly on margin. Please ensure that you fully understand the risks involved and do not invest with money you cannot afford to lose. Please seek independent advice if the risks involved seem unclear to you and refer to our full risk disclaimer.
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