Trading Styles - scalping, swing and position trading
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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.
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