In this article, we will deep dive into exploring different forex trading styles. If you want to become a profitable trader, you have to choose the right forex trading style for you. There are 4 common forex trading styles. These are:
- Scalping
- Day Trading
- Swing Trading
- Position Trading
We will deep dive into each of these trading strategies and help you figure out which style of trading style fits you.
Scalping
Scalping is basically “High-frequency trading”. Yes, that means that you will be taking a lot of trades, lots. This is also usually done in a short amount of time. Expert scalpers usually scalp for 1 to 2 hours a day. But during this time, they will take 50-100 trades (can be more or less).
Scalping is very difficult and we personally do not recommend it to beginner traders or even intermediate traders. When scalping, each trade lasts a few seconds to a few minutes. Scalping is usually done with 1-minute or 5-minute charts.
To be successful with scalping you need to be highly focused and be a very good trader. Since you will be taking a lot of trades you need to keep your emotions in check.
One of the biggest disadvantages of scalping is that it is harder to track your trades. As Peter Drucker said, “What gets measured, gets managed”. You see, with scalping it’s dang hard to measure, so it is hard to manage it.
For beginner traders or even intermediate traders or even…. “advanced traders”. We recommend day trading or swing trading.
So you may ask. “What trading style should I use, day trading or swing trading?
Well, next we will be looking at both of these trading styles and then you will be able to decide which style suits you.
Day Trading
What do you do for work? I am a day trader. You should be rich.
Well, you can be rich regardless of your trading style. That said, day trading is great. With day trading you will be trading every single day. Well, the forex market is open only from Monday to Friday, so you will be trading “almost every day”.
Unlike scalping, you won’t be taking too many trades every day (which is great). A day trader typically takes 1 to 10 trades a day. And the trades do not last overnight. So, the day trader closes their trades before the day ends.
With day trading you will be using the 30-minute and the 1-hour chart most of the time. Sometimes you might use the 15-minute chart as well.
A great thing about day trading is that you can stay more chilled compared to scalping. Also, your trades can be longer so that you can rake up some larger profits per trade.
Day trading is great for anyone who wants to get started with forex trading. If you are starting out, try to stick to a schedule. Let’s say you work a 9-5 job.
You can set a couple of hours (we recommend around 2 hours) before you go to your job or after your job. This is around 10 hours per week dedicated to day trading the forex market.
With 2 hours, you will most likely take 1-2 trades a day which is great. It is also important that you track your trades as well with a trading journal.
But, let’s say that you don’t have a few hours to set aside every day, then you might want to look into the swing trading style.
Swing Trading
Well, if you are like me, you might not want to trade every single day. Then, swing trading is for you. A typical swing trader takes 1-3 trades a week! Yes, you heard me right, only a few trades a week. Well, you will also be holding your trades overnight.
Also, it is easier to swing trade when you have a full-time job because you don’t have to stay glued to your computer for long hours.
But, a disadvantage to swing trading compared to day trading is that you don’t have many chances to take trades. So, you have to be extra careful about what trades to take.
Also, if you are starting out, I recommend you do day trading and then slowly move to swing trading if you like. Because if you do day trading, you can get more data.
More trades mean more data for you to analyze. (Make sure you have a trading journal.). With this data, you can see what trading strategies work for you and what doesn’t.
Position Trading
Well, this might not be for you. With position trading, you will be holding your trades for weeks or even months. This style of trading is more suitable for the stock market than the forex market.
With position trading, you will be using both technical analysis and fundamental analysis. With day trading and swing trading, you can get away with just technical analysis (who likes fundamentals anyway?).
Conclusion
I hope these insights helped you choose the right trading style. As discussed, I recommend you go with day trading or swing trading based on how many trades you like to take in a week.
