If you don’t already know what your trading style is, it’s important to spend the time learning about the different styles so that you can figure out what type of trader you are. Finding the right trading style is one of the first steps on the journey to becoming a successful forex trader. Once you’ve found it, you’ll be ready to start working on your trading strategy. To be clear, there are differences between a ‘trading style’ and a ‘trading strategy’. Your trading style refers to the way you trade, for example, swing or day trading, position trading, and scalping. Your trading strategy revolves around the way that you make your trades and goes into more detail about the reasons why you decide to make a trade when you choose to enter and exit a position, your risk-management precautions, and other factors.
Novice traders should begin by choosing a trading style before moving on and choosing a strategy. If you skipped this step and already started trading, don’t worry, you can still go back and work things around. Below, we will describe the four main trading styles to help you decide which is the best fit:
As the name suggests, day traders trade during the day, often opening several positions per day. In most cases, day traders close out all of their positions before the end of each trading day. This style can be time-consuming – some day traders even complain that they can’t leave their computer to eat or use the bathroom, otherwise, they might miss a good opportunity. Still, this is a popular style, even though it is considered to be risky because of the number of positions one opens per day. We would recommend this style to traders that have enough time on their hands unless you’re considering using a forex robot to trade for you if you don’t have the time.
Swing trading is essentially the opposite of day trading in that traders usually open one medium or large trade and leaves it open for a period of days or weeks so that it can accumulate. There are some advantages to this style because it is considered part-time and can be taken up alongside regular job hours if you wish. On the downside, most brokers charge fees for leaving positions open overnight, and this can really add up if you’re leaving your position open for several days, especially considering that triple charges often apply on a certain day of the week. The positive side of swing trading is that it doesn’t require much effort and it’s even been said that the best traders trade less often.
Position trading is similar to swing trading; however, traders actually keep their positions open for months or years instead of days or weeks. These traders are looking for more historic price movements and can really capitalize off of those movements. This doesn’t require much time, as you barely have to watch the markets, but you do need to have a strong belief that the market is going to go up in the long run.
Scalping is our fourth trading style and is like day trading, with the main difference being that traders can make hundreds of trades per day where day traders make less. Each and every market movement is an opportunity for a scalper, and they attempt to make small profits from those movements. Over time, profits add up to a substantial amount, although one of the downsides to scalping is that one large loss can eliminate the multiple wins that the trader worked so hard to obtain. This style is considered to be intense but rewarding when done correctly.
The Bottom Line
There are several different trading styles out there and it is important to find the one that suits you best. One of the first things to think about is how much time you actually have to trade, considering that day trading and scalping require more time spent at the computer while swing trading and position trading don’t require as much attention. The pros and cons of each style are also important, as some styles are riskier but can be more profitable as well. Once you figure out which trading style is the best option for you personally, you can put much more time into perfecting your trading strategy.