Day Trading
Day trading is a strategy of buying and selling assets inside a day. As the day goes on, prices go up or down in their values, creating the opportunities to gain or lose. It can bring big money but not in short time. Day trading is not a sure road to immeasurable wealth and success. It is as all the other business venture: in order to be successful at it, you need to have a PLAN.
It wouldn’t be a good idea to jump blindly. Choose the right tools, get the right knowledge to use those tools and you will see that the risk will have a significant reduce. With perseverance and commitment, you CAN find trading success.
Day trading require a high attention from the traders, and they need to be present at the trading terminal all day long. It is accepted that the shorter the time frame the trader choose to trade, the higher is the risk they are exposing themselves. That’s why day trading can be described as one of the riskiest approaches to the currency markets. Anyone, traders who have years in the market and have lots of experience and enjoy the adrenaline of fast trading, they are choosing day trading strategy and hitting the market successfully.
If you want to be a successful day trader you should have the following qualities:
Capital
requirement
You should have a considerable amount of capital in disposal with a predefined risk/reward ratio. It is recommended to keep the trade size reasonably low.
Market
knowledge
A day trader should keep both eyes in fundamental analysis and technical stuff as well. Only the combination of both analyses would bring a good result.
Strategy
A successful day trader must come up with a new strategy almost every other day, or at least adopt their current strategy to the new market conditions.
Extraordinary discipline
Success without discipline cannot be achieved. It is very important you to monitor prices for wide periods of time without making any decisions.
Position Trading
Position trader stands for somebody who holds an opened position for a certain period of time, during which they expect that it will appreciate as an asset. The time frame a position trader keeps his positions opened go from weeks to months. They are not focused on short-time movements or daily news which might affect the prices. Position traders do not trade actively, with most placing less than 10 trades a year.
Position traders follow the trends. They believe that if a certain trend starts, it will continue. So, they keep their positions opened for long. Only long-term investors, who are called as passive investors, hold their positions for longer than do position traders.
Position trader’s philosophy is moved towards successfully identifying the trends which would lead in an appreciation of their investment capital. It is the opposite of day traders. They seek to take advantage of short-term market movements.
Position traders usually choose one of the trading analyses, sometimes they combine both when it comes to decide. They also take in consideration macroeconomic factors, general market trends and historical patterns to select investments which they believe will achieve their desired outcome. A position trader should decide since the beginning protective mechanisms, like stop-loss levels.
Swing Trading
Swing trading is that style of keeping positions opened and catching movements in a stock or any financial instruments during few days to several weeks. Their first “gun” to reach to the necessary information is technical analysis. They check for opportunities through graphs. They may use fundamental analysis in addition to analyze price trends and patterns.
The goal of swing trading is to capture a potential price move. Some traders go after volatile markets with sharp movements, others prefer safe stocks. In either case, swing trading is the process of identifying where an asset’s price is likely to move next, entering a position, and then capturing a chunk of the profit from that move.
Successful swing traders are only looking to capture a chunk of the expected price move, and then move on to the next opportunity.
Advantages
- Asks for less time to trade compared to other styles
- Makes the most of short-term price movements by capturing the bulk of market swings
- Traders can rely only on technical analysis, making the trading process easier
Disadvantages
- Trade positions are exposed to overnight and weekend market risk
- Sudden market reversals can lead to considerable losses
- Longer-term trends are often lost in favor of short-term market moves
Scalping Trading
Forex scalping is referred to forex traders who buy or sell a currency pair and then hold it for a short period of time to make a profit. A scalper seems to open many positions and making the most of the small price movements which happen randomly during the day. It seems like the profit is low per trade, like 5 to 20 pips, but if you increase the position size, you will see magnificent results.
Scalpers usually keep positions opened for seconds to minutes and open and close multiple positions through a single day.
Forex Scalpers usually uses leverage, which multiply their power in the market allowing them to open larger sized positions, so a small change in price equals to a considerable profit. For example, a five-pip profit in the EUR/USD on a $10,000 position (mini lot) is $5, while on a $100,000 position (standard lot) that five pip movement equates to $50.
Scalping is mostly used after crucial financial data are released such as the U.S. employment report and interest rate announcements. This happens because these data bring immediate impact on price fluctuations in short period of time. Due to the increased volatility, position sizes may be scaled down to reduce risk. While a trader may attempt to usually make 10 pips on a trade, in the aftermath of a major news announcement they may be able to capture 20 pips or more, for example.
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