Types of Traders in Forex: Renaissance FX Makeover!
Would you like to be the best trader version of yourself? From the good to the great trader? What sets a good trader apart from a great trader? Instinctual intelligence, courage, and an unmistakable sense of timing. There are actually as many time frame types as there are trader types. If you have a firm grip on timing trades, you naturally handle position leveraging, currency pair nuances, and scheduled/unscheduled news release impact. Unsurprisingly, the importance of timing on FX trading cannot be overstressed.
Trading styles as dictated by time frames
As is easy enough to fathom, the whole approach to style a trader might have hinges on time frames. Try to find time frame elements in the following nomenclature:
- Day trader;
- Swing trader;
- Position trader.
Day trader
The day trader has the largest audience. All are eager to learn from Day traders who are found in high volume trades. Also, they have no truck with the market once the sessions close, not holding anything water closing time.
On any given trading day, the day trader will set sights on a fast turnover rate on one or more trades, ranging between ten to a hundred times the usually-obtainable transaction size. The aim is to squeeze the most out of a very small swing. As expected, some traders work with one-, five-, or fifteen-minute periods. These traders focus on short-term opportunities and like to deal with the volatility and technical trading patterns. Day traders, therefore, have a short term focus tempered by long term bias.
Swing trader
Leveraging a longer time frame to call a market turn, the swing trader holds positions for anywhere between a few hours to even days. The swing trader is aiming to profit from a market entry. He is banking on the changing direction to bolster his market position. Timing, therefore, assumes greater significance to a swing trader than it would for a day trader.
Position trader
By far the longest time frame, the position trader sets his sights on a longer-term plan. Traders of his ilk will pay attention to long term models and opportunities, opting in technical analyses only insofar as the latter may have bearings on their states trading goals. Interest rates are the sort of big data indicators posting traders go for. Also, they like being Forex portfolio managers.
Types of forex trading: other determinants
As would be easy enough to surmise, other determinants are affecting the different types of traders. After all, one kingly factor alone cannot move FX by itself. Factors impinging on the performance of various trading styles include:
- Leverage;
- Currency pairs;
- News releases.
Leverage
Leverage is critical and crucial to any day trader. With the comparatively minor fluctuations, the FX market is characterised by, it’s easy to see why a day trader must appreciate the tools of the trade. Consequently, a day trader will always be mulling over the degree of leverage or risk they are ready to engage with prior to any transaction.
Likewise, a swing trader may deliberate the usefulness of risk parameters. Despite their positions being meant for longer-term fluctuations, the swing trader will have to exert himself somewhat before experiencing gain in a handful of situations. Once every so often, there might be instances when, over 2-3 days, the trader would have to take it on his chin before market turn were to be properly called. Downtrends and slow stochastic oscillators can give rise to such opportunities. Leverage only exacerbates these losses. Only risk management saves the day, smoothing the final profit/loss.
Various FX pairs
Besides leverage, FX pair volatility has to be taken into account as well. The volume you can lose per trade does bear upon your trading behaviour. However, another factor that undoubtedly has to be accounted for is the speed of loss. Consequently, different time frames call for currency pairs compatible with them. Currency pair cross fluctuations may interest day traders. The same data, however, would be irrelevant to swing traders observing a market direction change.
News releases
Ultimately, traders of all dispositions and persuasions have to be attentive to unscheduled/scheduled news releases and the manner in which they impact the market. Regardless of these releases being economic announcements, interest rate policy statements, or central bank press conferences, all traders will be assimilating the same data through disparate mechanisms for varied ends. Short term traders will find themselves impacted deeper than the rest, with losses aggravated. Swing trader directional bias, too, will be adversely impacted. It would seem that only positional traders can find solace in news releases. The latter being perceived as temporary price disruptions by positional traders, news releases have a more moderate impact on longer-term oriented, detailed portfolios.
Conclusion
Drawdowns are avoided/minimised when traders look at short term charts. Risk management in its short term dimensions finds relevance since traders find that long term perspectives do not help them in dealing with probable daily losses. Hence, the sageness of long term positional; traders holds fast and is not debatable. Undoubtedly, those with a well-rounded understanding of styles and types get the most out of FX. In other words, types of forex trading, trading styles impact all types of traders in forex.
