Comparing the Four Trading Styles in Forex Trading

As the world’s largest financial market and also the most liquid, the Forex market has a strong demand for foreign currencies which is needed to engage in different trades and other ventures throughout the day. In fact, the daily trade happening in the forex market is amounting to 4 trillion. Thanks to the advancement of technology, opening an account in Forex trading has become so easy that budding investors have become eager to start their own trading account.

But it isn’t that easy as you think. You need to have several trading styles and tricks that you need to be familiar with. Some important styles in trading include scalping, day trading, swing trading, and position trading.

 

Scalping

It is the making of many trades which produces small frequent profits. What makes scalping so popular among retail traders is the earning of small frequent profits over a single session. If you have income simultaneously, you will surely have a steady source of income soon.

The main characteristic of scalpers is their ability to make quick decisions. They seldom use any trading patterns. They usually go short then go long in the next trade. Their target is those small opportunities in the market. Scalpers mostly work in the bid-ask spread. This means that they are buying on the bid side and selling at the ask. With all these activities happening on your account, scalpers usually dedicate a lot of their time performing trades and monitoring them.

Day Trading

Another popular trading style among budding traders and retail traders is day trading. This is popular because of its ability to avoid drastic changes that could happen in the market overnight. Trades are excited at the end of the day in this type of trading strategy.

Swing Trading

Opposite to scalping, traders in swing trading hold their trading position within a couple of days, aiming to gain some profit out of the short-term price patterns. The main strategy used in swing trading is identifying a particular trend then the trader plays along with it. But when it comes to patience, timeframe, and possible returns, swing traders are torn between trend traders and day traders.

In swing trading, technical analysis is being used. There are also charts that vaguely display the price actions, and in turn, help in locating the best entry or exit points for more profitable trades. Swing traders also study resistance and support through the use of Fibonacci extensions that are sometimes combined with technical indicators and patterns. Lastly, not all volatility is a treat. There is some volatility in swing trading that is considered healthy because they help arise trading opportunities.

Position Trading

This time, we are going to check out the long-term trading style –Position Trading. This trading style mostly requires patience and strict discipline when seeking more profits amidst major changes in the market. Although this isn’t true for every trader, position traders tend to help a person acquire more stability that they can benefit in the long-run despite the fact that profits won’t grow as fast as other Forex trading styles.