Understanding 4 Types of Traders in Forex Trading

Sangkolan.com – The personality of a person must be different from one another. Likewise with a trader when trading . In the world of forex trading , there are several types of traders who have different trading styles .

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Learn about the types of traders in forex trading In the world of forex trading in general there are four types of traders, namely speculators, day traders, position traders and swing traders. This type of trader is characterized by a risk profile, trading frequency , and target location when entering the market. Well, since the trading frequency and target positions are not the same, they generally use different time frames, risk management and trading systems.

This difference is usually due to differences in the personality and circumstances of the Traders , as the Trader may be a student who tends to have more time, a full-time worker who cannot monitor prices much, or he may be an independent worker, and so on. . For this reason, Trading has a different strategy.

Understanding 4 Types of Traders in Forex Trading
Understanding 4 Types of Traders in Forex Trading source investopedia

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The more often a forex trader makes transactions, the higher the risk opportunities and the more trained his trading skills are. The trading style of each type of trader has the same goal, which is to make consistent profits in the simplest and most convenient way for traders to do. Take a look at the following four types of traders and which one suits you best?

1. Scalper Trader
Scalper trader is the term given to traders who use speculative techniques. Frequency of speculators trade more often than Trading else, because Trading holds a position in a very short time, from seconds to minutes. Short trades with high frequency and small profit targets. Within an hour, Traders can frequently open and close positions.

This strategy can be applied if the trade has a lot of flexible time although the risk tends to be higher as the linear saw odds also increase. What is a leather saw? Whipsaw is when the price suddenly and unexpectedly moves in the opposite direction. In addition, transaction commissions are also more wasteful.

Usually the profit target in this strategy is 1-10 pips per transaction. This type of trader generally relies on 1-5 minute charts. It is better to apply a speculative strategy when the American and European markets are open, i.e. when there are price fluctuations. Here are a few things that an exploiter should look out for.

Spread size Choose a currency pair with a close spread. Avoid pairs with large spreads as the risks outweigh the rewards. Examples of currency pairs with small spreads are EUR/USD, USD/JPY, and GBP/USD. In addition, this currency has high liquidity.

Increasing the financial level
Because the scalping strategy has a high trading rate with a small profit target in a short time, the leverage used is also high so that it can generate larger profits on a percentage basis.

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2. Day Traders
Day traders are traders who make trading transactions in one day. Trading transactions are completed before the close of trade both losses and profits. The time required for a single transaction ranges from minutes to hours. Traders feel at ease if they go through closing positions without holding positions to avoid news surprises that can disrupt prices.

Usually the day trader’s profit target is 20-40 pips, depending on the currency pair purchased. The choice of currency pairs to trade is the same as that of speculators, currency pairs must be volatile in a short span of time.

Meanwhile, to monitor price movements, 15-minute and 30-minute charts are used. Unlike speculators who avoid news, day traders look to economic news that can move the market further. Day trading is also known as Day trading .

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3. Swing Traders
Swing traders are traders who trade starting from a few days but less than a week. Traders who work full time or who have limited trading time are suitable for using the swing trading style .

In volatile currency pairs, swing traders can set a profit target of 50-150 pips or more. The chart is used as a guide for 1-hour and 4-hour transactions.

Strategically, swing traders tend to be more conservative than speculators and day traders. Before moving forward, swing traders review several parameters for confirmation. So they are not affected by price movements in the intraday range.

They focus more on mid-term trends. Because the profit target is bigger, swing traders are not affected by currency fluctuations and wide spreads. Here are some of the advantages of a swing trade :

less risk
Swing traders have a lower trading frequency than speculators and day traders. Opportunity also avoids common mistakes and avoids the intraday price movements that usually outperform day traders.

save time This
type of trader strategy can be applied to traders who are busy and have little time to trade so that traders do not need to constantly monitor price movements.

Opening the lid of the chart can certainly distract from the focus of the work and become ineffective. This feature allows swing traders to trade while still being productive in their field. In addition, watching too many charts can “tempt” Traders to engage in unprofitable deals.

Swing traders are generally carried out by individuals who have no formal basis for Economist trading . With limited time, he also doesn’t have time to follow economic news and do fundamental and other analysis. So swing traders rely on technical analysis and use it as a trading guide .

Technical analysis is believed to be effective in reflecting various current market conditions through statistical parameters.

4. Position Traders
A position trader is a type of trader who makes transactions by holding positions ranging from a few weeks to several months. In terms of timeframe, the trader’s position is the longest compared to other types of traders. Their trading style is the opposite of that of speculators who want to be fast.

If swing traders are guided by technical analysis, then they are guided by fundamental analysis with standard economic data. Even if you use a little technical analysis, trade positions using daily, weekly, and even monthly time periods.

Target profit per transaction can be up to 500 pips. Some of the advantages of this strategy is that it saves time so that you can stay focused on your activities without constantly monitoring prices, because you rarely trade, of course, transaction costs are also very minimal and you can even get a chance to make a profit. interest exchange.

Swap is the interest paid on a loan that Trading provides in exchange for the currency pair he currently owns. This is also known as a carry trade. (This article has been previously published in this source)