Different Trading Styles in the Forex Market
Knowing the types of trading methods in the forex market is important for traders in this market in different ways. Keep in mind that using even the best trading strategies will not lead to success if they are not suitable for your type of mentality. And they may even lead to the loss of all your capital. Choosing a trading method in the forex market is very important for professional traders. In this article, we are going to introduce various trading methods in the professional forex market.
What Is Trading in the Forex Market?
Trading in the forex market is the process of buying and selling currency pairs. A trader is someone who is trading in the forex market as a professional and has invested part of their capital to buy and sell currency pairs and earn profit. Trade in the forex market begins when you enter a trade (or open a position) and continues until you close the trade.
In the meantime, the length of time your trade remains open in the market determines exactly the type of trade you have in the market. One major difference between trading methods is the time duration in which the position is open. Maybe if you don’t have the experience of doing transactions in different timeframes, this won’t matter much to you and you don’t know its effect on your transactions process and their success rate.
When you open a position, it is a result of an analysis of the market. There are two types of analyses: fundamental and technical. The fundamental analysis refers to investigating the current and future economic conditions of countries. Technical analysis, on the other hand, refers to the recognition of patterns in chart prices. After your analysis is done, you decide to open a position based on the timeframe of your choice. In the following, we will explain the types of trading methods in the professional forex market.
Scalping or short-term trading is one of the most popular types of trading methods in the forex market. In this method, the trader opens and closes trades in very short time intervals. The maximum time that transactions can remain open in this method is a few hours, and in most cases, the positions can be closed in less than an hour.
The timeframe for scalping in the forex market is from one minute to a maximum of 5 minutes. Traders use timeframes from 15 minutes to a maximum of one hour to determine the trend in this trading method.
The stop loss and the take profit in this trading method are usually lower than in other methods. In a few minutes, the transaction may be completed in terms of reaching the stop loss or the take profit.
Scalp trading is best for those who have a high level of experience in forex market trading and have a complete mastery of their own psychology and the psychology of the market. Using this method for beginners and those who have not yet reached a fixed income in the forex market will lead to a lot of risks, it may cause them to lose their capital even in the short term.
In day trading, the maximum time the trader keeps their position open is a maximum of two days, and most of the time the transactions are closed on the first day. The best timeframes for day trading in the forex market are 15 minutes, one hour, and four hours.
The trader usually uses a daily and four-hour timeframe to determine the general trend of a currency pair and a one-hour and 15-minute time frame to open positions. It is possible to enter trades in the 5-minute time frame, but entering the one-minute time frame is usually not very logical for this category of traders.
The risk of day trading is much less compared to scalp trading, so it is better for beginner traders to use this trading method to enter the forex market. Currency pairs such as EUR/USD or other major currency pairs in the forex market can be the best option to enter for this trading method.
Swing trades usually last up to a week. Swing trades usually last up to a week. The best time frame for swing trading is the daily time frame in which price action patterns and different trading strategies usually have more validity in the daily time frame and can create more powerful deals for traders.
For those who don’t have much time during the day to sit behind different charts, this trading method can be the best option. Due to the higher time frame in swing trading compared to the previous methods, the stop losses and take profits will also be higher.
A significant percentage of professional and experienced traders in the forex market currently use this method for trading. Usually, the possibility of making a profit in this method is higher for traders. Most of the patterns used in trading strategies in the forex market usually have much more favorable conditions in the daily time frame than in lower time frames.
Some traders have a habit of opening their trades only when important economic news is released in countries such as the United States, England, and Japan and close their trades within a few seconds. In terms of structure and conditions, this trading method is very close to scalp trading.
At the time of announcing the news, currency pairs usually face very strong fluctuations. Traders try to get this price jump in some way and be able to profit from it. The risk of event trading is very high and the stop loss can be activated at any moment.
When trading with the news, you need to consider buying or selling currency pairs that get much more influence from the news. Currency pairs such as gold or USD/JPY, EUR/USD, and GBP/USD can be used for trading during the news.
Choose the Trading Method that Best Suits You
Choosing the best trading method in the forex market depends on various factors, most of which are influenced by the psychology of the traders themselves. The best way to choose one of the above trading methods in the forex market is to test them in a demo and then choose the best option based on the results of the transactions.
Aron Groups is a major broker in the forex market. This broker has made it possible for beginners to use the demo version so that they can get to know themselves and find their suitable trading method. Aron Groups helps all traders make more profit in this professional market.