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What Kind of Forex Trader Are You?

There are many various kinds of forex traders, and each requires a unique strategy. Whether you choose for the slow-paced marathon of position trading or the rapid-fire sprint of day trading, choosing the best style for you will increase your chances of success. Continue reading to discover more about the many forex traders that participate in the biggest market on earth.

THE SIX TYPES OF FOREX TRADER

Scalpers, day traders, swing traders, position traders, algorithmic traders, and event-driven traders are the six main trading categories that most forex traders fall under. Find out which kind best fits you by taking our DNA FX quiz! Discover the best character attributes for each type by reading about the various kinds below.

  • Scalper

Scalpers are traders that only maintain positions for brief periods of time, often between a few seconds and a few minutes. Forex scalping tactics entail frequent trading throughout the day with the goal of making modest profits during the busiest (most liquid) periods.

Scalpers have a fast-paced lifestyle. You should be alert, instinctive, and quick-witted, but also stoic under pressure since you will constantly be digesting new information and responding to swift market movements.

  • Day Trader

On an intraday period, day traders also often place deals. Day traders would also liquidate all positions before the conclusion of the trading day in order to avoid holding any overnight, albeit their procedure will not be as brisk as a scalper’s. This indicates that unfavorable news that may impact prices before the market starts or after it closes has no impact on trading.

You must be able to adjust to sudden price swings and be aware of key trading strategies, such as fading the gap, if you want to succeed as a day trader.

The five-minute chart below shows a typical day trader’s entrance and exit positions and is utilized by scalpers and day traders. Relative Strength Index (RSI) signals, with the oversold and overbought levels marked on the chart, provide the basis for these observations.

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  • Swing Trader

Swing traders may hang onto transactions for up to a few weeks, and sometimes for more than a single day. Although they should still be aware of the news events that might cause volatility, swing traders will often priorities technical analysis over fundamentals during this short period.

Extreme vigilance is less necessary for this trader type than for scalpers and day traders, but you’ll still need a keen eye for detail when it comes to chart analysis. Learn more about spotting and trading market fluctuations.

  • Position Trader

Several weeks to years are common for position traders to hang onto deals. Position traders, who have the longest holding duration among trading methods, are naturally more interested in an asset’s performance over longer time periods than than its short-term price changes.

You will need patience as a forex position trader since your money will often be tied up for extended periods of time. Advanced analytical abilities will be useful to you since it is advantageous to have a good understanding of basic elements, especially when making longer-term transactions.

Here’s an example of a daily chart that a position trader may use, displaying a long position and an exit around a month later, both based on circled RSI indications. Position traders often scale down to lesser periods in addition to using the daily timeframe to identify trends.

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  • Algorithmic Trader

Algorithmic traders depend on software to execute deals on their behalf at the most advantageous pricing. Traders may either buy pre-made items or create their own programmes using specific instructions or high-frequency trading algorithms.

People who are at ease with technology and wish to use it in their careers as forex traders should choose this style of trading. Algorithmic traders will also have a sharp eye for the technical charts given the nature of the algorithms.

  • Event-driven Trader

Event-driven traders base their judgments more on fundamental research than technical charting. They’ll try to capitalise on increases brought on by political or economic developments, such as Non-Farm Payroll data, GDP, employment statistics, and elections.

A individual who enjoys keeping up with international news and has an understanding of how events might affect markets would be good at this form of trading. You will be adept at digesting new information and making predictions about the course of both global and localized events since you are inquisitive, inquiring, and forward-thinking.

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CAN YOU CHANGE THE WAY YOU TRADE IN FOREX?

Your forex trading style may vary at any time; it doesn’t have to remain constant. You could be a scalper who is troubled by volatile price movements and longs for the time-saving benefits of position trading. Alternatively, you can be a technical swing trader who wants to understand the foundations of the events-driven strategy better.

Whatever your preferences or objectives, there is always room for improvement. You may also test your market knowledge in novel methods.

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