Understanding Different Types Of Traders

 

Different types of traders utilise the financial markets every day. There are many ways to take profits from the markets, and in this article, we are going to look at the different trading styles and strategies that different types of traders employ.

 

Scalping keeps you on the edge of your seat! It is mind-rattling, exciting, and fast-paced. These types of traders hold their trades for a few seconds to a few minutes at most.A forex scalper aims at grabbing small profits repeatedly during the busiest times of a trading day and can place anywhere between 10 to 100 trading positions in a day. Scalping is an expert skill that requires someone who can think quickly and focus intensely. It is best suited for a trader with enough time to spend several hours analysing the charts with undivided attention. Often they will use Expert advisors (EA’s) or other trading plug-in’s to help them increase the amount of trades they can place in a short period of time.

Unlike a scalper who holds on to a trade for a short period of time, a day trader will hold on to a trading position for a few minutes to several hours. A day trader opens and closes all their trading positions on the same day without holding trades overnight. So instead of taking many trades, a day trader will typically only take one or two trades when the day begins, monitor them throughout the day and close them out before the market closes to finish with a win or a loss.Day trading might be the best fit for you if you feel that scalping is too fast, and you do not have the patience to hold your position overnight.

Swing traders are interested in the trends and patterns of instruments, rather than their intrinsic or fundamental value. They rely on technical analysis to identify instruments with short-term price momentum and aim to capture the short to medium-term trend and ride it for several days to profit from the “swing lows” and the “swing highs”.These types of traders aim to profit from trades in around one to seven days.Swing trading is best suited for those who can stay patient and calm when price fluctuations in the shorter timeframes move against their directional bias.It is probably the best trading style for people who work full-time and cannot analyse their charts during the day but can spend some time every night analysing the financial markets

These types of traders employ the longest-term trading style and can hold their trades for months or even years. This trading approach is reserved for individuals with an excellent understanding of the fundamentals and ultra-patient traders.Fundamental themes rather than technical analysis take the centre stage when analysing the market, and these traders seek to understand how economic data will dictate the long-term trends of the instrument they are trading.Those who prefer to postpone gratification in favour of a greater upside are well suited to position trading. The style requires that you have a thick skin and absolute trust in your analysis so that you can remain calm and weather short-term market volatility when your trades seem to be going against you. However, it is also a style that often requires large capital reserves to withstand several hundred pips of drawdown without receiving a margin call when the market turns against you.

These are more of investors who trade stocks based on fundamental analysis of the companies they have an interest in, often committing to hold stocks through all the market ups and downs.They focus on examining corporate events such as acquisitions, anticipated earnings reports, reorganisations, and stock splits.

So, the question is, what type of trader are you? It is crucial that you strive to master one style of trading, while still being proficient in others. If you are in doubt and do not know the type of you are, try asking yourself these questions:

•Are you patient or do you need to see results quickly?

•How much time do you have to analyse the market and trade in a day?

•Are you short-term or long-term oriented?

•Are you a part-time or full-time trader?

Think you have an answer? You can test out your trading style with a demo trading account in the UAE, and using your trading journal, start to figure out the style that best fits you. .

 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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