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Article Directory :: Finance & Investment Articles
Of the many components that go into the decision making process of a successful forex trader, finding a trading strategy that works for you is one of the most important parts. But even if you have a winning forex trading strategy, it is in your best interest to determine what your currency trading style is. Forex traders come in three basic varieties: Scalpers, Day Traders, and Position Traders, with the majority of traders falling into the middle category.
A scalper is somebody who goes for small profits usually in the range of 3-10 pips, will usually base their trades on a chart with 1-minute to 5-minute candlesticks, and will tend to place multiple trades in a single day.
A day trader will hold an open position anywhere from 15 minutes to longer than one day. They will be using a time frame of maybe two different charts with 5-minute and 15-minute candlesticks (possibly 30-minute if they are a longer-term day trader), and will tend to set profit targets of 10-50 pips.
A position trader is one who will go for long term gains and will place their trades based on a 1-hour or 4-hour candlestick chart. This trading style requires a large risk tolerance, and profit targets will tend to be over 50 pips and as high as 4 big figures or more (400 pips or more).
Determining which type of forex trading style you prefer and which one matches your trading strategy the best is a very important step that many traders never take. Choosing and sticking with a certain trading style can allow you to see which trading opportunities to pursue and which ones to avoid, such as whether you should focus on following fundamental-based or technical-based trading indicators.
Choosing a specific trading style is also important because you can see which currency pairs and currency crosses to trade and which ones to avoid. For example, if you decided that you were a scalper and you wanted to go for small profitable trades multiple times per day, you would want to trade a currency pair that had a very small spread. If you were trading a more exotic non-dollar currency cross then this would tend to have a much higher spread and make a profitable scalping strategy nearly impossible.
Conversely, if you decided that being a position trader was the best route for you and you were willing to hold positions open for days at a time or even a week or two, then a 9-pip spread on an exotic currency cross may not seem like such a big deal since you might be aiming for a profit target that is larger than 200 pips. Depending on which forex trading style you choose, there are different considerations to be made for each one and there are also profits to be had with each one.
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