There are a lot of forex trading styles that can be applied to the FX market. Certain traders leave their positions open for months, while others can open and close their positions in an interval of minutes. This article focuses on the latter category of the forex trading styles.
Day Trading: Forex Trading Styles
It relates to forex trading styles that consist in trading in the course of one day, without leaving positions open overnight. With this forex trading style traders hope they register a small profit in each trade. The profits can add up over the course of the day leaving the trader in a great financial situation.
Because of the fact that no positions are left open, the trader can relax during the night, without having to worry about the price movements. They also don’t have to worry about rollover fees that are increasingly common and adopted by a large number of brokers. Since the position is closed at the end of the day, rollover fees don’t have to be paid.w
It is important to have a plan that is well set up, because day trading requires taking decisions in a very short interval of time and traders need to resist to the stress than can build up during this time. Also it is easy for new traders to make mistakes, such as opening a large number of trades even if most of them are not justified by indicators and there is not enough reasoning to support them. The can even succumb to stress and not make trades with a clear head and relaxed attitude. This is one of the greatest forex trading styles, yet it has its risks.
This strategy requires a trader that is very active and that can take the required decisions while having a clear reasoning behind them.
Styles Forex Trading – Scalping
It is a one of the forex trading styles that has gained traction in the last period of time and that has caused people to talk about it, both in a positive and negative way. It consists in making profit from the differences of the bid/ask spread in the market.
The traders that apply the scalping strategy act like market makers. Making the spread means buying at the bid price, the smallest price, and selling at the ask price, the largest price. This allows them to make profit even if the bid and ask don’t modify their value all day. Taking profit in this way requires only traders who are willing to trade at market prices. The role of the scalper is identical to the role of the market maker, which is ensuring that there is enough supply of money in order for the orders to be processed smoothly.
Up until now it has been said that the spread is a cost that the trader must pay and his earnings must surpass this cost in order to realize profit. Now it is said that the spread can also be earned. In order to clarify this situation it is important to make a distinction. The ask prices are the prices at which the orders can be executed immediately for quick buyers. The bid prices are the prices at which orders can be executed immediately for quick sellers. If we take quick out of the equation, it is easy to see that traders who wish to have their order queued will receive the spreads. Traders who do not wish to have their order queued will pay the spread. For these forex trading styles, the spread can be the main, if not only, source of profit.
The advantage that scalpers have over other styles forex trading is that they can benefit from small movements of price at a time. These small movements have a larger probability to happen, when compared to large price movements. When there are a lot of buyers, the prices will rise and the traders with a long position will profit. When there are a lot of sellers, the prices will fall and the traders with a short position will profit. When there is neither a worthwhile amount of buyers or sellers that is when the market makers profit. It’s true that the market makers profit in every case, but in the event that the price doesn’t move, it is easier to see the difference between them and other market participants, because they are the only one who profit in that period of time.
Scalpers open and close a position in a very short amount of time, such as minutes or seconds. This allows them to open a very large number of positions during the day which can help them register profits. They can register hundreds of small profits as well as hundreds of small losses and they need to have good risk management principles in order to manage their positions.
In order for the small pip movement to represent a worthwhile profit, the volume of trading is correspondingly very large. A large amount of capital is required in order to benefit from such forex trading styles. This is why Forex Bonus Lab recommends you to take a look at the best STP Brokers, as scalping is mostly profitable with them.
News Releases Forex Trading Types
People enjoy trading when there is a lot of volatility in the market because it is their best chance to make a profit. They also benefit from news releases in order to now in which direction they should take a position. If indicators such as Gross Domestic Product or Retail Sales are being broadcast as being different than what the market expects, then this can cause price movements in the market.
One forex types strategy is for a trader to enter the market with a hedged position. This means that he will buy a currency pair with one market order and sell it with another one. One of the most interesting forex trading styles!
Once a news release breaks out, the price is assumed to swing in a direction. Now the trader has the chance to close a position by registering profit from it. When the market relapses
and the price moves in the opposite direction, the trader can close his remaining order obtaining no profit or a reduced one. Overall, the trader gained from the order closed first.
The disadvantage of such forex trading styles is that the trader has to pay two spreads, but it has the advantage of letting him obtain large profits if the market is dynamic enough to let him act in accordance with this principle.