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Types of the Forex Traders

Time is money. As trivial as it may sound, it is very true when we talk about forex trading. That is why, the easiest way to describe someone's trading style is the time scale.

The Table below introduces the short time, medium and long term trading along with their advantages and  drawbacks. Your trading style and your money management are the key to profits. As far as the money management is concerned, many times fundamental forces send currency rates swinging in one direction only to whipsaw into another in minutes. Therefore, it is important to limit your possible losses by always using stop-loss points and trading only when the opportunities occur.  Note that you may increase the number of indicators to decrease the risks however, using too many indicators may limit your opportunities. Placing the  stop-loss points at the nearest resistance levels may help to limit the risks as well. Finally, many traders employ trailing stop losses to lock in profits and limit losses when. However,  all the above methods may result in forfeited gains.

           Table. Types of Forex Trading

Type of forex trading

Description

Positives

Negatives

Short-Term (Scalper)

A forex trader who works in range of minutes and tries to forecast small price changes.

Binary option traders can trade in 60 seconds intervals.

Usually scalpers use a large leverage.

Quick profits or losses due to the rapid nature of this type of trading.

In order to profit from very small price movements large trading account is needed.

Medium-Term

A trader holding  positions for one or several days. The traders usually rely on certain aspects of technical analysis such as indicators.

The traders may be looking for the opportunity during considerable time: from more than a few hours to several days.   

The lowest funds required. The leverage is needed only to enhance the profits.

Less opportunities. The profitable of trades are difficult to find and execute. This type of trading is the most common. However, it requires good technical skills, knowledge of the forex patterns, solid strategy and some intuition.   

Long-Term

A trader holding the positions for months or years. The strategy is similar to getting interest rates. Usually, it is based on a long-term fundamental analysis of the economics and political situations   

Produces reliable long-run profits if the  fundamental analysis is correct and proven experimentally.  

 

Large capital requirements to cover possible volatile movements of the market against open positions.

 

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