Foreign exchange trading is the largest financial market across the globe. As a result, it comprises a wide range of forex traders who sell and buy securities and currencies like stocks, indices, energies, and metals. Read on to understand the different types of foreign exchange traders in the industry.
These forex traders trade during the day and close their positions at the end of each day. They do not have any open positions overnight. Day traders are knowledgeable, well-skilled, and have a clear understanding of the market they operate in. They also leverage a wide range of strategies to increase their chances of succeeding and ease trading decision-making.
· Characteristics of Day Traders
Day trading is an excellent career option, but to succeed, you must have the following characteristics.
- Day traders should maintain high standards of discipline when executing their trading activities. They should remain focused on achieving their set goals during trading hours.
- Swift-wittedness. Day trading is a short-lived activity, and traders cannot afford to be panic or speculative. A day trader must act swiftly once they recognize a potential buy or sell opportunity.
- Many day forex traders work from home. If you work best on your own with minimal distractions, then day trading is a great career option.
- Passionate about the markets. Do you monitor business news or securities business? If that is the case, day trading may be ideal for you. Being conversant with the systems and cycles that influence securities prices gives you a base to develop your career.
Success for day traders is concluding the day without open positions and more profit than you had at the beginning of your day trading activity. Day trading is ideal for highly conversant traders with price analysis and those who handle high-volume stocks.
Swing traders make profits by holding their position for some time which can be overtime or a few weeks. A swing trader buys once the market starts showing an upward swing and sells when the swing stops. Timing is of the essence for a swing trader, and a successful trader focuses on the stock over prolonged periods. Swing traders operate under the following principles.
- A combined approach to patterns and fundamental analysis. They monitor both daily and macroeconomic trends.
- Putting positions in fluid currency pairs such as the dollar and the pound
- Special attention on limited price strength to exploit the upward swing
- Seizing low and high extremes
- Swing traders must conduct a technical evaluation of price movements
Successful swing traders could earn more profits and incur less risk. However, traders need a robust understanding of forex trading strategies and should analyze trends appropriately.
Position traders hold their positions for more extended periods ranging from months, weeks, and even years. Unlike day traders, they do not focus on short-term price changes. Instead, they target monthly or weekly price action evaluation. They focus more on fundamental models and keenly anticipate announcements like stock splits, reports, acquisitions, and reorganizations. They are always on the lookout for affiliated opportunities. Often, position traders:
- Hold fewer trade positions
- Work with a wide range of the key currencies
- Make decisions based on various factors like interest rates and economic models.
- Maintain fundamental evaluation of stocks
- Strive to seize a position movement’s volume anticipating appreciation over time
Scalpers are forex traders who hold their positions for a limited period to earn profits from the limited hold. This group of traders sells and buys securities numerous times per day, anticipating a percentage of steady profits from the market. Scalpers leverage automated trading systems and a manual on different platforms, creating practical strategies that generate profits from the bid-ask spread. In the trading manual system, the trader makes executions from their computers. In the automated system, traders set guidelines and rules explaining how to leverage trade signals.
Utilizing a forex scalping strategy helps traders earn more profits during high volatility and significant market moves. Still, scalping involves various risks. For instance, when scalp traders enter a trade position where exiting is difficult, they may end up with an open position that may result in losses.
The foreign exchange market offers traders numerous benefits. However, traders should not overlook the risks that come with trading currencies. Every trader must analyze their trading expertise and understand the foreign exchange market before engaging in live trading. Remember, the trading strategy you choose determines the type of forex trader you become.