2Bull Forex Blog

Have you ever asked yourself what kind of trader you want to be? If you haven’t, it’s important that you take your time to decide which timeframe you’re most comfortable with trading in. Yes: the timeframe you like to trade in will determine the type of trader you’ll be. Here are 4 of the most popular types of traders: scalper, day trader, swing trader or position trader. Let’s go into a little more detail about them in this article.

Are You A Scalper?

Scalpers trade in very short time frames using minute charts and sometimes hourly charts. They look for small profits of about 5 to 15 pips in each trade that they take. As such, scalpers typically enter into more than one or two trades a day. They are constantly entering and exiting their trade positions in search of every small opportunity for a profit. A scalping trade can be over in as short as 20 minutes.

Are You A Day Trader?

Like scalpers, day traders typically use minute and hourly charts to trade with. Also similarly with scalpers, day traders don’t hold any of their trade positions overnight. They always exit their trades by the end of each trading day.

However unlike scalpers, day traders usually hold their trade positions for at least few hours. As a result, their gains and losses are also larger than that of scalpers per trade.

Are You A Swing Trader?

Swing traders trade in intermediate timeframes that can last from a few days to a few weeks. They look to ride along an entire up- or down-swing in order to profit the most out of each major price fluctuation wave. As you can guess, they normally use hourly, daily and weekly charts to trade with.

Are You A Position Trader?

Position traders usually hold their positions for more than two weeks, and are typically fundamental traders. They aren’t too interested in the everyday price fluctuations of the market, and prefer to look at the big picture of where a currency pair might be headed. They use mostly daily, weekly and monthly charts.

Before you try your hand at Forex trading, it’s important that you first understand what you’re getting into. I’ve lost count of the number of times I’ve met amateur traders who can’t even calculate the value of one “pip”… it’s no wonder there are so many losing traders in the market!

Do You Know What A “Pip” Is?

The first step to understanding Forex trading is to know what a “pip” is. Can you calculate the pip value in U.S. dollars for the EUR/USD currency pair? What about the EUR/JPY pair? If you can’t, it’s a good idea to learn more about the basics first.

Do You Fully Understand The Costs Of Trading?

Many people are fooled into thinking that Forex trading does not bear transaction costs. Even though most Forex brokers (or dealers) do not charge commissions from you, they will actually still charge you money whenever you trade with them. This cost of transaction is called the “bid/ask spread”. This spread can cost as much as $20 to $80 per trade that you make. If you’re serious about Forex trading, you must understand all the costs involved.

Where Can I Learn More About The Basics?

Forex trading basics are easy to pick up these days. You can find a variety of Forex trading books in almost any bookstore you come across. You can also find lots of freely-available information on the internet. However, be careful when choosing your online learning sources… there are many Forex websites that provide misleading information that could cause you to make bad trading decisions.

Don’t be afraid to invest in your trading education, the rewards will be more than worth it!

Forex trading is a zero-sum game. For every dollar won by a trader, there is a dollar lost by another trader. It’s a sad reality, but it’s still nonetheless a reality.

Taking from others is the only way wealth is created in the Forex market. It’s not like the stock market where almost all investors can benefit from rising stock prices. The Forex market does not provide a win/win situation, but rather a win/lose situation. You can thus imagine the importance of understanding your competitors… you must “know thy enemy”.

Who Are Your “Enemies”?

Before you can study and understand your competitors’ trading tendencies, you’ll first have to know who they are.

So who are the major players in the Forex market?

Multinational corporations (MNCs), banks and hedge funds are just some of the big players you should be mindful about. These are the “sharks” of the market. They prey on retail traders like you and me all the time.

And don’t forget everyday retail traders. They’re your competitors too! Of course, retail traders will have different tendencies from the big financial institutions.

Understand Your “Enemies”

The big financial institutions trade at all times of the day, and are experienced and resourceful enough to “eat” us retail traders alive. Large market movements are usually due to the actions of financial institutions, so it’s a good idea to follow their lead rather than to trade against them.

On the other end of the spectrum you have retail traders as your competitors. Understanding their tendencies can also give you a better chance at making money at their expense. For example, many retail traders will place their stop-loss orders at obvious support or resistance levels such as previous swing lows or previous swing highs. Knowing this, you can then exploit this tendency and make money out of it.