In a long trade, the trader is betting that the currency price will increase and that they can profit from it. A short trade consists of a bet that the currency pair’s price will decrease. Traders can also use trading strategies based on technical analysis, such as breakout and moving averages, to fine-tune their approach to trading. However, picking a particular time frame for forex trade largely depends on your trading style and strategies in your mind. You must decide whether you want to make money with volatile currency pairs or want to be patient for long-term profits in position trade.

Scalpers are short-term traders focusing on holding positions for timeframes as small as a few seconds to a few minutes. Forex scalping strategies involve trading frequently throughout the day, with the intention of achieving small gains at the busiest (most liquid) times. Day traders are traders that close all their open positions within a day.

Which trading style best suits you

It can be stressful and emotionally taxing, but it can also be highly profitable for those who are disciplined and have a solid strategy in place. Well, a reversal forex trader is the trader that looks at the market and tries to figure out  where price is going to reverse and takes trades based on that analysis. Now, every forex trader at one point in their trading life will gravitate towards a particular type of trading style. For my case, after a while, I figured that I gravitated more toward reversal trading.

What Type of Forex Trader Are You

These people use different techniques, software, and online platforms for their activities. A trader speculates whether the value of a currency will rise or fall against another. This type of trading will suit a person who likes to keep up with world news, and who will understand how events can impact markets. Inquisitive, curious and forward-thinking, you will be skilled at processing new information and predicting how global and localized events may play out.

What Is the Easiest Forex Strategy?

For example, they may put up $50 for every $1 you put up for trading, meaning you will only need to use $10 from your funds to trade $500 in currency. An interesting aspect of world forex markets is that no physical buildings function as trading venues. Instead, it is a series of connected trading terminals and computer networks. Market participants are institutions, investment banks, commercial banks, and retail investors from around the world. The FX market is the only truly continuous and nonstop trading market in the world.

  • Yet, the retail forex market didn’t catch up until the information technology advancement of the 1990s.
  • Unlike scalpers who accumulate trading costs from high-frequency trading, position traders do so from swaps.
  • This creates daily volatility that may create new opportunities for traders.
  • Day traders may use a mix of technical and fundamental analysis to capitalize on intraday price fluctuations.

With the leverage consideration you can anticipate the amount of loss. However, it is equally important to know how fast you can lose your trade. For example, it is seen that the British Pound/Japanese yen currency cross can vary up to 100 pips in an hour. For a day trader, it is a challenging thing but can give instant returns. One such currency pair is the British pound/Japanese yen as shown in Figure 1, above.

Level of trading experience

They’ll seek to benefit from spikes caused by political or economic events, such as Non-Farm Payroll data, GDP, employment figures, and elections. In conclusion, different forex types of forex traders have different characteristics. Now that we have discussed the different types of traders, how do you identify which type of trader you are?

It will take you experience and time to figure out the trading style that best works for you, and as you achieve trader growth, you will find the answer. Quiet people should opt for long term trading styles since they will not be very active in the markets. Aggressive traders can choose to trade aggressive styles such as scalping or news trading. Swing trading requires patience and discipline, as traders need to wait for the right setup to present itself. It can be less stressful than day trading, as traders do not need to monitor the market constantly. However, it can also be more challenging to manage positions over a longer period of time.