Here’s a List of the Different Forex Trading Styles:

And How to Know What Style of Forex Trading Is Best For You Based on Your Personality & Lifestyle

If you’re just starting as a Forex Trader, whether you’re a beginner, intermediate, or don’t even have the first clue about Forex trading, but you want to know how it could best suit you, then look no further. Because in this post, I’ll be sharing each Forex trading style, what they mean, and hopefully help you figure out which style of trading best suits you.

As a quick note before we dive into this shortlist, it’s important to know that ALL trading styles work and that there are professionals at every level who have learned how to profit at every turn of the market. In other words, it’s not a question of which style works best, but which style of trading works best for you. I will list the styles in order of time invested to profit. So for example, the first trading style in the list is the one that’s rapid-fire, minute by minute, the last on the list is one that will require months or even years. Let’s begin.

The Definitive List of Different Forex Trading Styles

Scalping:
Scalping and traders who follow this trading style are usually known as scalpers. They usually adhere to 1 min – 5-minute charts. It’s called scalping because they enter portions in a currency over and over again to make quick profits on very small market moves, usually between 5 – 15 pips.

REFERENCE NOTE:
A pip is the 4 number AFTER the dot in a number shown. So for example if, GBP/USD (British Pound/US Dollar) is trading at 1.30150, Then the number 5 is a pip. So if the market moved up to 1.30160 then that would be a 1 pip move. If the market moved to 1.30250 that would be a 10 pip move. At 1.31150, that’s a 100 pip move.

So what type of person is scalping good for? Usually, people who can control their emotions well, especially when they see they’re in a negative trade. People who are comfortable making fast decisions when they need to be made and are ready to watch the charts, buy walls, and sell walls tick up or down in real-time.

This style of trading is also for people who are comfortable betting VERY large position sizes in short periods. The reason you need to trade with such large portions is that you’re trying to make a decent amount of money per trade with very small market moves.

So for example, if you want to make 50 bucks per trade on let’s say a 5 to 10 pip move, you would need to be in larger positions which are inevitably more risky, especially if you aren’t comfortable trading large amounts, have smaller accounts, and aren’t too comfortable making decision quickly. It takes a certain type of person to place bets like this and the majority of people just aren’t that. Plus, “Spreads” which are fees from brokers typically cut into profits here and it can be tough for people to make money if they lose as much as they win.

Day Trading:
This is probably the most commonly used term when people hear of “Trading.” Hollywood movies glorify them and we all know of that one kid back in school who’s dad was rich frombeing a “Day Trader.” But what exactly is a Day Trader and is it the right trading style for you?

Day traders typically play bigger market moves than scalpers with smaller position sizes relative to their overall account sizes. So, for example, to make the same amount of money as a scalper, they would trade less money because they’re usually looking for bigger Pip Moves than the scalper. Instead of 5 – 15 pip moves, they may look to trade 10 – 50 pip moves while doing technical analysis on 5min – 30 min charts.

However, if you look up the term “day trading,” Usually, you’ll find references to the fact that day traders place trades during the day and don’t usually fo to bed leaving that trade open overnight. They want to enter and exit positions during the hours they work. So typically being a “day trader means you need to make this a full-time job.

Can you be a part-time day trader? Sure, but that would usually mean you need to leave your current positions open overnight and that could create unnecessary risk. The goal of a good day trader is to minimize their risk by never leaving trades open into the next day. Although some trade daily and run over 3 – 5 days, which typically means they’re trading bigger pip moves.

Is day trading right for you? Well, the question you have to answer is do you have the time? Do you want to be a full-time trader? If the answer is yes, then becoming a day trader is the best option for you seeing as you will need to show up daily at least 5 days per week 6 – 8 hours per day.

Swing Trading:
These next two are for casual traders who are still committed to getting good and earning great profits but at a slower pace. While the first two involve mostly technical analysis, the second two can use a combination of technical (charting) and fundamental (news) analysis.

Swing traders usually look at the hour-long charts and 1 hour – 4-hour charts. Swing trading refers to trend trading and trends can last days, a week and sometimes even upwards of a month or two depending on how volatile the market is. This is a powerful form of investing because you take a bird’s eye view of the market and where it is moving so, for example, a 50 – 100 pip move may be MASSIVE to a day trader and a scalper because they are trading big lot sizes to make small consistent profits while swing traders may take out smaller positions and don’t get as worked up over small market moves that seem big.

This is a powerful style of trading because it takes advantage of overall trends which is one of the surest ways to trade, in my opinion. All Forex Professionals agree, “The Trend is Your Friend.”

Plus this style of trading doesn’t require you to be glued to the news or your charts throughout the day like the other two so for that reason, this style of trading is where I recommend the majority of “investors” and Forex traders begin because you can trade small position sizes over longer periods.

The typical swing trader will look for opportune times to enter the market, place their small bet and live their lives while keeping an eye on the market. So if you want to do your charting or analysis between 30 min to 2 hours per day, this may be the best trading style for you.

Position Trading:
The last and final style of trading is also the most common among the typical blue/white-collar workforce and institutions alike. This is the style of trading that also pays the least amount of attention to the markets and it’s sporadic movements.

So for example, if you think of stock markets, Sally Joe may go and buy 100 shares of a stock and then forget about it, checking in every once in awhile to see how it’s doing. As for institutional investors, they may see a good opportunity to buy into a position and then forget to watch over it at is goes in the direction they’re hoping for.

A position simply means you’re taking a position like you’re joining a team, the bulls or the bears and ride it out for months or even years. Position traders rely a lot on Major news events and Weekly to monthly charts. The risk to reward here is pretty equally across the board as it’s possible to make a lot of money or lose a lot of money over those months and years depending on your position. So, that being said position traders have one way to hedge (protect) their money against losses and that’s to diversify (spread their money) evenly across many investments. This is what most “brokers” will do, they will have what you call a “portfolio” and diversify your money across many investments.

This style of trading is more for your patient investors, and people who don’t have as much time to trade but still want to benefit from the markets overall. It requires the least amount of working capital but it’s also the slowest grow and safest for your average investor. Most forex traders don’t position trade, they either day-trade or swing trade.

If you want to be a position trader, it will require between 1 – 2 hours a week, making it the least time-intensive and most rewarding over the long haul for the least amount of time devoted. You can enter 2 – 5 positions in an entire year and make a lot of money. But you have to note, you could also lose half of those trades so if you’re young and a bit more aggressive, this may not be the right bet for you.

Final Thoughts and Advice
There you have it, 4 styles of trading and who they’re for. As a final thought, it’s important to note that people have become very rich from all styles of trading, it’s just personal preference. Some folks take 2 – 3 big trades a year while others take hundreds or even thousands.

If you want to get good as a Forex Trader (which is why I’m assuming you’re here) then I recommend you try your hand at swing and day trading. The fastest way to learn and get good at anything is to do it a lot and then after you’ve tried those enough, you’ll begin to find out what style best suits you, your lifestyle and needs.

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