One of the biggest problems of traders to be consistent is in choosing their way of trading, finding their place among the different trading styles. Forex is a great market that allows you to make a lot of money, but also lose it. The way this business is set up, the logical thing to do is to lose money, not to make money, you’re wondering why. The reason is simple, the most abundant Brokers on the market are the Market Makers, they make money in two ways, with their commissions and with their losses. Regardless, there are decent Market Maker Brokers and others that are on “the blacklist”. But leaving the Brokers aside, keep in mind that when you win, someone loses. At least 50% of the market is waiting for you to lose. There are several reasons for losing losses. A serious trader knows that some of his trades will be negative, and assumes it. What he’s trying to do is lose little and rarely. However, traders who start often lose many times and a lot, What is wrong? Ideally many things fail, such as not respecting loss stops, not having the right mental control, but one of the biggest problems is having chosen incorrectly between the different trading styles. The different trading styles have to do with the preparation of the trader (technical and psychological knowledge) and also with his time available. A bad combination of these time-knowledge elements is the direct path to disaster. We go with the different trading options that you can choose, along with the demands in time and in necessary knowledge. The trading styles depends of your choice.
Scalping is the most demanding choice in time and trading knowledge. Interestingly, it is one of the most chosen by traders who start. Some have read that one of the biggest risks of trading is the market itself, that as you are inside longer, the more you are exposed to the risk of loss. Logically exposing yourself to the market is a risk, and as such you have to face that the longer you are in the market, the greater the risks… but also the benefits grow in equal proportion. To be a scalper you have to have a good knowledge about the price action. Scalpers do not usually use technical indicators, except for volume, price, supports… if they use some kind of indicator, usually their own, it is rarely a classic MAC or RSI indicator. You also have to be very aware of everything that happens in the market and the news that can move the price (economic calendar). Keep in mind that your mission is to perform many operations, very short and that most are profitable, any news can move the market a lot in one direction or another, and they have to be prepared to take advantage of the movements and not get caught on the wrong side. The level of psychological control and the ability to react have to be very high. Finally, the amount of time we need to be a scalper is intensive. We are facing an operator, who has to be several hours a day in front of the computer screen, pending the least movement of the market, concentrated and ready. You think if you get home from work at 3pm, eat and get in front of the screen, are you going to be able to operate? A scalper, like a day-trader prepares sessions. Before starting the day reviews the market, be attentive to the news that can move the asset or the assets it operates, and once all those tasks have been performed, it is ready to be at least two hours fixed in front of the screen, without moving and concentrating. A trader who starts, cannot and should not be scalper.
Day Trading leaves more freedom than scalping, at least it does not require being in front of the screen completely glued. However, if you require a high degree of concentration when looking for operations, you also have to consider the working day. Like the scalper, it lives from price movements in short periods of time, in this case minutes to hours, being warned against any situation that may alter the market, is vital to success. The technical and psychological demands are similar to a scalper, perhaps with less tension, since they do not usually perform hundreds of operations, making one or two good is good for them. In this case, day traders can have a trade open for hours, while a scalper is second. That level of tension is different. Making a sporting comparison, the scalper needs to prepare to win a grand slam, while a day trader prepares to win the next match.
We come to swing trading, one of the most recommended ways to do Forex trading, but they remain fewer people. Looks like having to pay a rollover for having an open position, like it’s sticking a little nose for us. That is why many prefer to be day traders, not to leave any trade open when they close the computer, limiting their market exposure and also, do not incur financing costs. A medium-term trader (swing trading), can have a trade open for a couple of days, even a couple of weeks. It seems that in Forex this is a barbarity, but it all depends on the temperament of the trader, his level of knowledge and the amount of time he can spend on his trading. Swing Trading can be algorithmic in its entirety, choosing a trading strategy as simple as a crossover of moving averages. Its demand at the technical level is average, although it seems that you have to know a lot about Forex, it is not really necessary, it is more important to have a good personal knowledge than technical. Anyone who has been studying technical analysis for a few days could bring to fruition a system based on technical indicators. Another great advantage is the time to dedicate, if we talk about 4-hour charts and daily, with reviewing once a day the trades is enough. We could say that swing trading is very unsy demanding in time, and that it can be carried out with limited knowledge about trading. So it demands, like all trading, a good discipline. Without discipline, there is no reward.