Different Styles of Forex Trading

Many people start off in financial marketsby investing. The intention of investing is to build money slowly over time. This is achieved through a buy-and-hold way: making an investment and allowing the price to oscillate over time. This is a long term process to make money.

On the other hand, Forex trading includes the continual buying and selling of stocks, commodities, currency pairs and various other securities. Buying low and selling high is the way to profit. The traders enter and exit within a short period of time. This time period may vary from a few seconds to a few years. According to the time frame and holding period, the different trading styles are as follows:

Position trading:

Position trading resembles investments as it is the longest trading time frame. The traders span a period of months or years in this trading. They use both fundamental and basic analysis to make a trading decision. The traders ignore the fluctuations of short term price as their aim is to profit from a long term trend. However, position traders may use both long and short term trading plans.

Swing trading:

Swing trading is a comparatively shorter term trading than position trading. The positions in this style are held in a period of days or weeks. The traders mostly depend on technical analysis and price action to decide the profitable trade entry or exit point. There is almost no need of fundamental analysis. Continuous monitoring is not necessary for this style of trading. Traders are excluded when their previously set target profit is achieved.

Day trading:

Day trading refers to the style in which the positions are held for a day. Day traders do not hold any positions overnight. The trade is closed utilising a profit target or stop loss. Day traders have to use technical analysis to find intraday price fluctuations. This style of trading is a full day job as the traders have to monitor the positions. The day traders depend on small gains to build profit.

Scalp trading:

This style of trading is an extremely active form of day trading. Scalp trading includes continual selling and buying process during a day. The positions in this trading are held for a period of a few seconds to a few minutes. Scalp traders target the smallest intraday price activities. They rely on very small gain to build profit. The scalp trader may carry out dozensor even hundreds of trades in each trading session.