4 Types of Forex Traders- Day Trader, Position Trader, Swing Trader, Scalpers Traders

by SAM. M
4 Types of Forex Traders (Strategies) | FX Investing Index

Ranging from a day trader to a position trader, there are various types of forex traders in the market. Every one of the types has its advantages and disadvantages. Mainly there are four types of forex traders– day trader, position trader, swing trader, and scalpers trader.

It may seem a position trader has to wait longer and thus it is not appealing. But practically, it is not the case. The success depends not on the type but on the techniques and timing. If you follow the right technique and hit the best timing, you can become one of the best forex traders by following any of these four types of trading.

Day Trader

If crossing the night tensioning about the trading is your issue, day trading is the best match for you. Just like the name, a day trader mainly trades in the daytime. As soon as the day passes, his job gets done. He may end up in profit or loss. It does not matter. What does matter is a day trader does not leave anything for the night.

However, if you trade four day trades or more during five business days with a margin account, you will become a pattern day trader. And to become a pattern day trader, you must have $25,000 in your margin account. If the balance becomes lower than this margin, you won’t be able to make day trades anymore until you cover the balance.

To become a successful day trader, you must have high skills and deep knowledge of forex market analysis. And you also have to have a good set of techniques to encounter different circumstances. If you do not, day trading may not be that much beneficial for you.

Why Become a Day Trader?

Choosing the day trading comes with plenty of benefits. The first and foremost of them is to not get disappointed by any overnight news. There are a lot of people who want to play safely in forex trading. That is why day trading is still a popular choice among traders.

If you manage to end the trading in profits, your returns are most likely coming more quickly than the other types of traders. And as you are not leaving any risk for the night, you may even invest more in the following day to grab more profits.

By playing safe, I mean by becoming a day trader, you are missing a lot too. Overnight news can be both positive and negative. As you are not taking the risk, you are opting out for some of the good deeds too. There is a say, no pain, no gain. But it is completely okay here, as you are choosing, “play safe and hurt less.”

And another bad thing about day trading is you have to pay the commissions and fees a lot more. Because you are starting fresh every day. This may affect your overall profits. And as day trading does not give you very much (as you are not taking risks at night), it may not be that much profitable at all for you.

So, you have to be very careful about your decisions. Best day traders mostly apply their technical knowledge to get the edge. Sometimes they even depend on their instinct too (if they have huge experience). You may follow their footsteps to become one of the best day traders. But at the end of the day, it is your choice because it is your money.

Position Trader

This is quite the opposite of day trading. You have to hold your trade for a long time. Sometimes you may have to hold the trade for several months, even years. As you have to hold a trade for a very long time, you must have to be patient. Well, if not, position trading is not for you.

Because there is a very good chance of your money being locked up for longer periods. And as you are aiming for the long goal, any type of short-term changes should not be your concern. Rather, you have to keep your eyes on long-term factors. If you have fundamental knowledge about trading, it will come in handy for position trading. Unlike day trading, analytical knowledge will play a key role in your success.

Why Become a Position Trader?

As we have mentioned earlier, if you are going for the long run, position trading is the ultimate choice for you. Day traders or Scalpers may earn a lot of money within a very short period of time. But they are at the risk of losing their capital or profit at the same time. Since you are not doing that, you are very much safe in this regard.

You may not even need to stay updated about the news all the time. Because you know that any short-term or sudden change is not going to harm your trading in a huge margin. So, you are not giving your brain any pressure thinking about the trade stuff every day. This is a huge plus!

Another benefit of the position traders have is that they are not going out in the first place. Well, if you choose the wrong techniques, there is always a chance of failure. Leaving that option out of the discussion, in position trading, you are giving time to your trade. And most probably, it will come out as successful.

However, quick money is not the thing with position trading at all. If you have anything like that in your mind, position trading is not for you. Analyze the market properly, and most probably you are coming out as one of the successful position traders.

Swing Trader

You can say swing trading is the bridge between day trading and position trading, more or less. Swing traders do not need to wait for months or years. At the same time, they do not close the trade within a day too. Swing traders basically wait for the swing to rise. And in their favourable time, they sell and quit.

As a swing trader waits for a favourable swing, it may either last for a few days or for a couple of months. Whatever the time period is, if you play the cards right, there is a very small chance of failure. For reliability, swing trading is becoming more and more popular as the day passes.

Why Become a Swing Trader?

In short, you are eliminating the risks from both day trading and position trading. Rich forex traders can be found more often here. Because swing trading gives traders a lot of flexibility. You are not going for something to hold on to for years. Well, you can do so as you have the option here. But that would eventually turn into a position trading.

And if you compare swing trading with position trading, you would see there are small stop- losses in swing trading. This happens mainly because you have the flexibility to close the trade anytime you want. Here, best swing traders make the difference by utilizing flexibility at its best forex traders .

However, swing trading is not totally risk-free. You will be in real danger in the period of weekend hours. In most cases, the opening market price is a lot different than the closing. And in some situations, you will not be able to recover a huge net loss even with a stop-loss. If you want to be one of the most successful swing traders, you have to tackle this issue. Otherwise, you are going to suffer heavily.

This risk will not be a big issue if you know how to play things smartly. If you just wait for the swings to rise and sell, there are not a lot of risk factors to get worried. Thus, timing is the key factor here. If you look at the most successful swing traders, you will see that they always do the timing right. Bad timing will affect you the most in swing trading as the best swing traders don’t do that here.

Scalpers

Scalpers traders hold their trades even shorter than the day traders. They usually hold their positions ranging from seconds to minutes. Scalping requires calm and fast brains, as the trades sometimes don’t even last a minute. However, a scalper needs to stay updated about every single change happening at that moment in the market.

Successful scalpers traders intend to gain a series of small profits with the investments instead of going for a whole day of trading. Scalping will be beneficial if you are able to pay very close attention to all the details of the trade market.

Why Become a Scalper?

As you are eyeing small profits, there is very little chance of losing your capital. You are going to play the safe but not a long game here. Since you are investing a lot of money, you must not be greedy and thus make the wrong choice. It would be pointless.

The duration is very short in scalping. That is why you can both choose the peak and lowest markets to trade. However, you have to invest a lot of money in scalping. Because fewer amount investments don’t stand a chance against commissions and fees.

If you have a quick and productive brain, scalping may be the best match for you. A series of profits will eventually surpass the likes of day trading, sometimes even position trading.

Conclusion

There is a say, “risks come with rewards.” It is 100 per cent true in trading. The higher the risk, the higher the reward. But that comes with an even higher chance of loss too. If you make any wrong move, even position trading will become very risky for you. That is why to be one of the best forex traders, you have to make your moves very carefully.

If you are a moderate player, day trading is the thing you should go for. But if you have a calm and fast brain, you can go for scalping. And if taking advantages of the situations is what you love to do, go for swing trading. Not to mention, whatever you choose, play the cards right. Otherwise, getting your name on the list of rich forex traders will remain a dream.

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