different types of trading

The Ultimate Guide to master Different Types Of Trading

Learn to master the 4 different types of trading! Today we will help you to determine what kind of trader type you are!

A forex trader should choose a trading style that suits their personality. This way they will simply have a better chance of being a profitable trader.

different types of trading

What kind of forex trader are you?

Choosing the style of trading that best suits your personality can be a difficult task for a new trader, but it is necessary to determine what type of forex trader you are. 


Which trading style is best for you?

Remember, the forex market can’t change your personality, so you need to fit in to make some profitable trades. You need to feel comfortable. Maybe it’s one of the most important lessons to become successful with forex trades.

Forex trading is not very different. Therefore, the answer to whether fx trading is easy or difficult depends on you. Maybe you have blown a trading account in the past? If your forex trading styles fit your personality, things will become much easier for you and you will avoid those big losses. There are many types of forex traders out there, and some don’t know where they belong.


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What are the different types of forex traders?

We can say there are 4 different types of traders:

  • Scalpers
  • Day traders
  • Swing traders
  • Position traders

Successful traders that have nailed where they belong don’t need any other job. You can engage in forex trading as a real business and make real profits, but you must treat it as such. But if you are a new trader or even an experienced forex trader who does not feel that you have found your trading style, here is a list of personality traits that are compatible with different practices. We want to share some main characteristics with you regarding each way to trade. Be honest to your personality, even if you don’t like some of the personality traits that are listed below.

So what are the types of trades?

There are different type of trading you should know about:

  • scalping
  • day trading
  • swing trading
  • position trading

In this article, we will discuss both the pros and cons of head and swing trading, as well as the differences between the different strategies. Many traders choose to enter and leave multiple trades a day, while others prefer to hold their positive numbers for several weeks or months. It’s all about timing.

Scalper

scalper trader
Scalper trader: “Lots of small wins can easily morph into large gains”

Scalping is the ideal way for active traders to make some quick pips short term while they stay in front of the computer. This is the most rapid practice. You will need only some few seconds, jump in and out of the trade. No fundamental analysis are required, and direction could also be random. E.g. the first position might be a “buy trade” that you keep for one minute or two, the next trade could be a “sell position”. You look at the trend in the very moment.

Characteristics of a scalper:

  • Interested in quick trades
  • Excited by market volatility
  • Can trade many daily positions
  • Closes the trades within some few seconds or minutes

Are you good at making immediate trading decisions? Then hit the “trade” button, don’t hesitate. I believe the best scalpers are those that are a little impatient by nature. All they want is some quick profits. If they should fail, they will jump out of the trade immediately. There will always be new currency trading opportunities in the next minutes or so.

The main properties are to keep the focus and concentration. Are you often distracted? Then think again, and look for other ways to trade, because scalping is not for you.

What is the best scalper’s strategy?

  • It could be to just look at the charts and jump in when you see a trend. Here is a simple and profitable scalping strategy where you learn everything from the basic scalping rules to entry and exit!
  • News events could be another reason for a trader to jump in. Pay attention to the charts when important news are released and take action immediately. Look for some fast price breaks in the markets and eventual spikes up or down.

The cons of scalping include:

  • You can’t actually not leave the computer while you are trading
  • You need to pay 100% attention to your trades
  • You need to stay disciplined and have a well-thought exit management
  • Depending of how many trades you are having, the transaction costs can be significant

Day trader

day trading rules
Important day trading rules: Never hold positions overnight in day trading. It requires time, skill and discipline to become successful as a day trader.

A day trader needs to have more patience as they can’t just open a trade at any time, we talk a bit longer term. They need to wait for their ideal entry and exit points and make sure they can get out of the trade on the same day.

Characteristics of a day trader:

  • Seeks to profit from relatively small market movements
  • Very opportunistic
  • Closes normally all the positions on the same day

They can’t neither be stuck in the past. While day traders use data from the past to help them make the right trading decisions, they must be able to apply that knowledge in the moment

Talented day traders draw on past experiences to read new setups quickly and react professionally. There’s no room for second-guessing for these people.

What is the best day trading strategy? There are many great strategies for day traders. I would say pivot trading is my favorite strategy. A day trading pivot point strategy can be fantastic for identifying and acting on critical support and/or resistance levels

Swing trader

Swing trading for beginners
Swing trading for beginners: As a swing trader there is no reason to risk more than 1% of your account.

A swing trader will try to capture larger market moves by focusing on economic data.

You also need to look in a little bit longer perspective if you want to do like swing traders. Most of the time, swing trades may carry over to the next day, so this practice isn’t suited to you that are nervous for your open trades while trying to sleep.  

Characteristics of a swing trader:

  • Chart oriented: Focuses on trends in the market and range trading
  • Price action is important in the analysis
  • Pays special attention to the entry and exit points
  • Could keep positions for days and weeks

If you enjoy technical analysis and can ignore the short-term vagaries of price and market sentiment, then you are probably a swing trader. At the same time, the economic news is not your interest. A swing trader will look for trades with a longer-term than day traders and scalpers, but not as long as position traders. Their trading system could be quite advanced.

The cons of swing trading include:

  • Swing trading includes huge losses and you need to be good at risk management.
  • Nerves are involved. Swing traders run the risk of getting huge drawdowns or being closed out when pullbacks in the smaller ranges appear to be very volatile.
  • You need to spend lots of work on your technical analysis before you enter your swing trades.

What is the best swing trading strategy? One simple strategy which is good for beginners to start with is trend trading.

Position trader

position traders trading style

A position trader is very different. These kind of traders don’t care about time. You buy an investment for the long term in the expectation that it will appreciate in value. Any position is determined as a long-term investment.

The characteristics of a position trader:

  • Looks at his trading account more as an investment portfolio
  • Adopts a buy and hold strategy
  • May use spread betting and CFDs as a hedging tool against losses to long term investments

A position trader is a type of trader who holds a position in an asset for a long period of time. The holding period may vary from several weeks, months or even years. Position trading is about being loyal to your trades.

You need to fund your account with a huge capital to withstand any potential volatility during the lifetime of the trade in order to avoid a margin call. We are going to cover position strategies in another article.

The cons of position trading include:

  • Position trading requires strong analysis backing as you are planning to stay in the trade for a long time and need to stay on the right side. The analysis of how to trade in the most probable direction must be done in a professional way.
  • As a position trader, you will open only very few trades and keep them for months. Lesser number of trades usually means lower profits, so don’t expect to have monthly profits. This is more about long-term profits.

What is the best position trade strategy? We recommend analyzing the support and resistance levels. They can help you to recognize when the price movement is more likely to fall into a downward trend or increase into an upward trend. Discover how to draw Support and Resistance correctly and tell when to trade the reversal or the breakout.

What kind of personality suits your trading style?

Find a Strategy That Suits Your Personality

In this video, we discuss the personality of a trader and demo trading. Find out what your personality is. Your trading journey might show you exactly what sort of trader/person you are. Which path do you need to go down?

After going through the four different trading styles, have you found out what kind of trader are you?

Many inexperienced traders have difficulty choosing a practice that suits their identity. However, finding his or her trading style is crucial to a trader’s long-term success. It depends on the type of trader, the level of experience he or she has chosen, and the time they invest in their trade. While traders grow, many traders are known to “improve” and “improve” their forex trading styles, but finding the right balance between head and swing trading and other types of currency trading strategies is critical to their success. 

Spend some time analyzing yourself as a trader

You have plenty of questions you should ask yourself

  • What is your goal trading forex?
  • What is your attitude towards risk?
  • How much time do you have?
  • Do you have a family or a full-time job?
  • Sort out your personal daily schedule
  • What are your strengths and weaknesses?
  • How is your risk appetite?
  • Try to sort out your degree of patience
  • How is your temperament?
  • Are you often nervous?
  • Can you handle stress?
  • Will huge drawdowns affect your lifestyle?

Determine your type of forex trader

Different types of forex traders

Have you ever been confused when you hear about different styles of trading forex? Maybe you didn’t even know that there were different styles at all? Well in this video, Candice B provides a brief summary of the 4 most common types of forex trading styles including Scalping, Day Trading, Swing Trading and Position Trading. She hopes that this video can be a good resource for you!

If you do not like the personality trait you have, be honest with yourself, but it is important to experiment with different practices to find the one that suits your identity traits. If you choose the trading style that best suits your personality, you have a better chance of being a profitable trader. If you are a newer trader, you will think about finding a new practice several times.

4 archetypes for deciding your trading style

Archetypes of trading types in forex
Greg Secker describes the 4 different styles of trading in this Youtube video: Are you one of these 4 forex traders?

It is essential for all traders to find a trading style that suits their personality to become a profitable trader, no matter what type of personality trait you have.


Not everyone is necessarily cut out to be currency traders. So before you go out and buy any tools, and especially before you open up a trading account, you need to understand which of the 4 Archetypes or Trader Personality Types you are! Once you get that figured out, you will be well on your way to success. Which trading type are you?

  • Systematic driven person: Loves rules and making plans. You are great in building up a structure, using technical analysis and calculations. The con is you can overthink and make bad decisions because everything is connected to your rules.
  • Risk-averse:– Risk management comes natural to you. You may not be confident losing trades.
  • Progressive: – you are always look for ways to improve your trading. Backtesting, run simulations. But you may be quick throwing one strategy and jump to the next one, it could be a huge mistake. You never get to the promised land, you are just collecting strategies.
  • Adventurous – you are not scared of the risks. You let the profits run, you have the confidence to let the trades run, and can make massive earnings. Because you focus mostly on how much can I make, you will not ask how much can you afford to lose. You focus on the upside and the losing trades may wipe out your entire trading account.

It is true that only one trading style can trade better than the other, but there are several factors that determine which practices suit you best. You have to have a sound plan and, as a currency trader, take all of this into account, and there is no such business that is conducted in a single practice.

Take our Forex Personality Quiz

We want to guide you through this topic, so you don’t need to wonder any longer where in the forex market you belong. Wouldn’t it be much easier if we told you that your identity suits those swing traders or maybe scalpers?

different types of trading

Take our quiz “what kind of trader are you?” and learn more about how you can improve your trading strategy.

By answering the series of questions in our quiz, you will be one step closer in determining how you should trade forex. Feel free to share this quiz with your friends if you find it helpful!

It is designed to assess personality traits that are important in trading to find the right trading style for you. If your identity doesn’t fit your trading style, you can damage your account and your ego. Using what suits your practice and personality will help you the most to limit the emotional difficulties that some traders experience.

This quiz can help you find out what is most important for your position as a trader. As you should now by this point, there are a lot of different types of trading styles, but this means that probably one of them will work also for you. Some traders require patience to stay in the game, and there are many different types of traders with different trading styles and identity traits.

Conclusion

First of all, decide what kind of trader you want to be.

Day traders are the ones who are willing to drop everything and focus on the market. A day trader will be able to react in a much shorter window of time and have a higher risk than day trading and swing trading, but both require you to be vigilant at all times.

If you do not consider trading as a full-time career, you can still consider it swing trading and learn to protect yourself for a short time if your attention is focused on other areas.

After reading this article, maybe you have learned some lessons about yourself. Will it become easier to know what to answer if anyone asks you: What kind of forex trader are you? We hope that you have been able to determine what type of forex trader you are.

Once you have the clarity, you will master the different types of trading and become successful in the currency market. You also need to find a currency pair that you understand and that behaves with your own rules.

Scalping and swing trading are short-term trading methods that are used to make profits from price movements. If you are new to forex trading, learning the difference between scalp and swing trading will give you better control over risk and reward in your situation.

Some efforts are necessarily to become successful. To develop your trading journey you need to study this topic in detail. We are all different. Make the trading your own way.

Relevant sources:

Vantagepointtrading.com

Tradersinfohub

Ragingbull.com

TheBalance.com

The5ers.com

Angelsbroking.com

Dummies.com

DailyFx.com

What kind of trader are you?TAKE THE QUIZ NOW
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