TRADING STYLES:
Each trader needs to
determine whether they are going to trade for the long,
intermediate, or short-term. This
depends on the amount of time you have available to devote
to your trading. If you can spend all day in front
of the computer, you can trade for the short-term; however,
if you can only spend a little time each day, you may
want to focus on long-term strategies. Regardless
of what you decide, you can be successful. Traders
are usually categorized into one of three types of traders,
Scalper (short-term), Swing (intermediate-term), or Position
(long-term). The currency market allows you to
choose the type of trader you want to be, based on your
available time. Some traders trade multiple styles;
although, this takes more time to do
SCALPERS:
Scalpers are those traders
who trade for the very short-term. The
definition of a scalper is a trader who attempts to capture
or “scalp” a few pips from every trade. Some
scalpers look to gain as little as one to five pips. Doing
this, the scalper must make many trades each day in order
to accumulate enough profits. A scalper gets in
and out of trades quickly, so the price does not move
against them. As long as the scalper uses proper
money and risk management, they can be very successful
trading this way. This style of trading is the
most aggressive type of trading. Extreme discipline
and the ability to follow set rules are critically important
for scalpers.
In the following example,
you can see a type of scalping that you may do on a
short term chart. In about
4.5 hours you can see that this pair moves up about 100
pips. Quickly moving in and out of a currency pair
is the mode of a scalper.
SWING TRADERS:
Swing traders look to
make trades based on the same strict disciplined plan
that scalpers do; except, they look to hold the position
for a longer time period. Instead
of 5-10 pips, they may look to gain 50-100 pips each
trade. The charts used with this style of trading
are set at 15-60 minute intervals. This is still
an aggressive trading style, but less aggressive than
the scalper. Trading with the trend becomes even
more critical and looking for the confirmations of each
move will help increase the success of the swing trader. As
the currency markets move up and down, the swing trader
looks for opportunities to buy and sell as these swings
occur.
In the example below,
you can see that a swing style trader may hold onto
a trade for several days as the momentum of the pair
moves up or down. In this
case you can see that the move was about 385 pips in
four days.
POSITION INVESTORS:
Investors or position
style traders are those traders who are looking to
take advantage of the long-term trends of the currency. This trading style is less aggressive
than the other two, but the same caution and use of money
and risk management tools still apply. Fundamental
data plays an important role with long-term movements
in the currency market and should be looked at in order
to know the likely long-term move of the currency pair. Entry
signals are still given by technical indicators. These
indicators should be used to determine the best possible
time to get into a trade. Due to the long-term
nature of this trading style, most traders need to anticipate
some moderate swings within the overall trend of the
currency. An investor or position trader may hold
a position for months or years, if the trend continues
its movement. Typically, investor charts range
in the one-day to one-month time interval and capture
the major moves. This style of trader may be looking
for gains in the range of 500-1000 pips.
In this example, you
can see that the position trader may hold onto a position
for several days and will be looking for larger profits
over that time period. Here
you can see the pair moved up 640 pips in about 28 days.
As you begin trading,
you may try different trading styles to figure out
which one works best for you. In
the end, you may trade multiple styles as your trading
experience grows.
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