This article aims to explain some of the different types of traders and styles of trading
There are many types of traders. Each one with his/her own strategy. By picking the appropriate type that suits you best, you could increase your chances of success and achieving your goals. Need some examples? You’ll get them right away!
If you think you're more like the 50 meters sprinter, then the scalper could be your role model. Going further down the line, a day trader is the type of guy fit for the 200 meters races. And what about position trader? Well, if you like marathons, that's the perfect job for you.
Interested in finding out more about all these three categories of traders? Grab your beer beverage of choice and keep on reading!
Scalpers – non-stop action & suspense aficionados (or enthusiasts)
I particularly like the description I saw on babypips.com about scalpers. Quote: “scalping is like those high action thriller movies that keep you on the edge of your seat. It’s fast-paced, exciting, and mind-rattling all at once”. Think about a Scorsese movie combined with one of Nolan’s masterpieces.
You know what? That definition is entirely accurate. Scalpers don't keep their positions open for more than several minutes. They only want to get in, grab as many pips as they can as fast as they can, and get out. Rinse and repeat—multiple times during a day.
What’s so enticing about scalping? Well, it’s a hell lotta more exciting to have these small thrills a hundred times/day than only twice or thrice… for some people. But this trading strategy is not for everyone, of course. You have to enjoy fast trading. You must think fast, be a competent multi-tasker, and also a competent chart reader!
I'll tell you to know: if you're easily stressed or only prefer placing several trades/day, don’t think about scalping. I almost forgot, if you cannot maintain a supremely focused mind on what you’re doing, scalping is not for you. It’s a demanding business being involved 100% in possibly hundreds of trades day in and day out.
Day traders – trading during the day?
Day trading is a popular trading strategy where you buy and sell during a specific timeframe of a single day's trading to capitalize on small price movements.
Day trading is suitable for traders that have enough time to analyze, execute, and monitor a trade throughout the day. This particular trading strategy falls in the middle between scalping and position trading (we’ll talk about the latter next). Why? Unlike scalping, you typically prefer placing one trade/day or maximum a few trades/day on rare occasions.
How can you know day trading suits you? There are several more signs. First of all, you don't fancy keeping your positions open overnight. Then, you are a fan of monitoring the market long in advance, looking for opportunities to place your trades in the next days. Finally, you don’t like surprises: you prefer knowing the outcome of your decisions at the end of the day.
Day traders split into several distinctive categories. They can fall into trend traders group, range traders group, breakout traders group, or news traders army. Don’t worry, we’ll cover all of these in future articles. For now, you must have made a clear idea of whether you fall into the day traders' category or not.
Position traders – when patience is indeed a virtue
Position traders are the long runners, the marathon men of the trading world. They like holding positions for the most extended periods, sometimes even months or years. They love chasing longer-term trends, are extraordinarily patient and masters of the fundamental trading strategies.
Position traders are somehow the most skilled of the bunch, possessing a lot of attributes and knowledge. Additionally, they separate themselves from the rest because of one particular trait: vision. Position traders don’t aim for 100 successful trades worth of 10 pips each. No, they target consistent returns. And they try to anticipate market developments before they happen.
For the reasons above, position traders are usually willing to invest the most significant amount of money out of the bunch. Since their open positions are scarce, they need to have consistent returns, right?
Lastly, position traders never forget to have their stop loss and take profit orders in place. Their strategies heavily rely on them, in fact. Without protecting their positions, things could quickly go wrong. Their trading accounts might be wiped out in a matter of minutes. All that after setting up and preparing for an opportunity for months. Terrible, don’t you think?
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Sources: babypips.com, Investopedia.com
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