Welcome back here!
This week, in this article, we will discuss one key factor that separates great traders from others. And this factor is KNOWING THE TYPE OF TRADER YOU ARE.
Some of the things you would learn in this article include;
- Why it is important to know the type of trader you are
- The types of traders there are
- If there's a superior trading style to adopt?
WHY DO I NEED TO KNOW?
The great philosopher Aristotle said, “knowing yourself is the beginning of all wisdom”. This statement rings true still through the fabric of time. The reason is that self-awareness is so foundational that every other thing must build up from it.
As a forex trader, knowing the type of trader you are is pivotal to a successful trading career. If you don't know yourself, you won't know what your strengths are and how to leverage them, you'll also not know what to avoid.
Many forex traders who have figured this out have been able to optimize their forex trading career for higher/greater profitability
DIFFERENT TYPES OF TRADERS
The different types of forex traders are differentiated by their manner of approach to taking positions in the market and the length of time they’re willing to hold on to their trades.
The following are the types of traders that exist;
Scalpers can be called “short-term traders” and this is because they only hold positions for timeframes as low as seconds to a few minutes.
They are not interested in holding trades for a long time because they’re more interested in making short-burst profits from the market and not getting tied down to one position.
They trade so frequently throughout the day, intending to accumulate all of their small gains, to sum up to substantial sums at the end of their trading session. They usually trade at the busiest (most liquid) times.
Scalpers are all in for the thrills and the shrills that come with the fast lane.
A scalper can take as many as 50-100 trades in a single day as they are constantly monitoring the markets for potential entries and closely watching their charts to exit trades quickly.
The Scalper typically analyses and places trades within the 1 minute and 5 minutes time frame on their trading platform.
To be a scalper, you’ve really got to be agile, observant, and prompt in execution.
The Day Trader
As the name implies, this type of trader focuses his trading activities to span within one day.
This means that such a trader does not allow his trades to run into another day but rather closes any and every trade before the day runs out.
Since all the opened trades would be closed within 24-hours, the Day-trader could open more than one trade and enter each with a sizable lot size (but of course, probably not as many or voluminous as the Scalper).
Day-traders attempt to interpret what the market would do within a day and then based on their analysis, they enter positions that they allow to run for some time.
To this end, they typically put a lot of emphasis on technical analysis and volatile pairs to make their profits. They also like the Scalpers, look out for opportunities within short time frames.
The Day-Trader typically analyses and places trades within the 5 minutes, 15 minutes to 1-hour timeframe on their trading platform.
The Swing Trader
This type of trader usually holds on to trades for periods ranging from a few days up to weeks at a stretch.
Typically, individuals or institutions with sizable capital are the type of people you would find in this category.
They are comfortable enough to not run after daily profits but to rather wait out their positions for longterm to make more sizable gains after their expected structure plays out.
These traders are a lot more relaxed than the two aforementioned types. Although they still monitor their positions from time to time, they do not do this as incessantly as the former two would.
Swing traders are more long-term focused, as such, they try not to focus on daily ups and downs in the markets.
They analyze and take their trades on the 4-hour, Daily, and Weekly timeframe on their trading platform.
Now, all that has been said above must already beg this question for you…
WHICH TRADING STYLE OF THE 3 IS THE MOST PROFITABLE?
This is a great question to ask.
Truth is, no one trading style is superior to another. Every trading style can be equally profitable.
You choose which trading style to adopt based on your personality and time allowance type rather than the assumed profitability of it.
Again, each trading style can be highly profitable if proper trading strategy, risk management, and good psychology are adopted.
There are a few other types of traders namely;
- The Position Trader
- Algorithm Trader
- Event-driven Trader.
But we would discuss these 3 other types in a future article!
Thanks for reading through!
Before you go, we're eager to know what type of trader you are. Please tell us right away in the comment section, would you?
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