There’s a lot more to forex trading than merely sitting behind a screen and monitoring the market. Before placing trades, you must have devised a strategy that works for you. Otherwise, your capital might vanish into the market right before your eyes. Trading strategies are essentially linked to trade duration. You could decide to be a fast, short, or long-term trader. But the most important thing is to ensure that the trading style suits your personality and skills.
Depending on the length of time, the types of trading include intraday, day, and swing trades. We will get to know more about these strategies as we move on.
Intraday trading involves opening several positions on small time frames. That is, you could decide to maximize the profits available in a particular trading session. Forex scalping is usually more profitable for intraday traders. Basically, these smart analysts take little profits from the many trading positions they have opened. They would have made an incredible profit from their trades at the end of the day. However, intraday trading is not suitable for all markets. If you want to be a profitable intraday trader, you should look out for markets that have more liquidity. Less liquidity means you have to bear more trade-related risks. Again, if you opt for the intraday strategy, it means you love to take your profits in a short trade duration. Hence, it could be a frustrating experience to trade in a market with less momentum.
Also, before you jump into intraday trading, you must learn to monitor price. And this cannot be done unless you master the art of technical analysis.
Day trading shares some similarities with intraday trading. In both strategies, a trader looks for the perfect opportunity to enter the market. But unlike intraday trading, day traders open a position and get out of the market at the close of the day. This set of traders is highly disciplined and decisive. You cannot be tempted to let trading positions extend till the next day in intraday trading.
However, day traders experience fatigue a lot. You have to be on the lookout for trading opportunities continually. And doing this every day can be tiring.
If you are not looking to be a full-time trader, swing trade is definitely for you. This type of trading cuts across several trading sessions. The trade duration is long. But once you have set your take profit or stop loss, you don’t need to be in front of your screen for a long time. Swing traders rely on fundamental analysis such as economic news, central bank policies, etc., to take profitable market positions.
Swing trades require patience. It could take days or weeks before you meet your target. But you can get higher profits than you would from a day or intraday trading. At the same time, holding positions for a longer time in swing trades can bring huge losses.
Be Faithful To Your Trading Strategy
Often, traders switch trading styles just because they’ve not met their target. Once you fall into this trap, there are higher chances that you will blow your trading account. It is better to opt for forex scalping if you can’t trade for longer hours. In essence, the bottom line is to refine your strategy and get your analysis right on a demo account for some time. Isn’t it better to take your time and master a technique rather than lose out heavily on a live forex account?