Forex Day trading, swing trading, scalping and position trading approaches

There are millions of Forex traders today constantly going online and earning money through well-thought out trades using Forex Day trading, swing trading, scalping and position trading approaches . When it comes right down to it however, these millions of traders can only be divided into classifications: day traders, swing traders, scalper and positional traders.

Here is how each one works.

Day Trading

As the name implies, day trading means that an individual makes trades and closes them within a single day. This translates to small profits since the movement in currency pairs does not really move much within 24 hours. On the plus side however, day traders manage to skip the risks that occur overnight, therefore giving them solid profits each time they buy and sell their currencies. Typically, day traders make several movements within the day, adding up the small profits so that it results to a decent amount for the whole day. Individuals who are new to Forex or those who just want to make money on the side use this method at first to familiarize themselves with the system.

With day trading, there are four different techniques used to earn a profit. This includes:

Scalping – this involves targeting small changes in the market. Scalpers typically exit after 20 pips worth of changes. Trading on different currencies multiple times a day, these 20 pips tend to accumulate.
Daily Pivot – this makes use of the pivot table, a tool that helps you identify the best points for entry and exit. It involves the use of formulas.
Fading – this is when an individual trades against the general direction of the market

Swing Trading

Swing trading is much like day trading but covers a longer span of time. Specifically, swing trading may extend to more than one day, giving traders the chance to earn more through quote swings. The risk is also minimal although compared to day trading, swing traders have more to lose as their positions are more at risk with every day that passes. Of course, this also translates to higher profits. Typically, swing traders can be further classified into three subtypes:  breakout trading, reversal trading, and retracement trading.

Positional Trading

This is the long-term type of Forex trading and is considered to be the riskiest one of all three. The source of the risk is obvious: the long-term holding of a position means that massive fluctuations may occur; leaving the trader at a loss after a significant amount of time has passed. Again, the risk-reward ratio is proportional as positional traders stand to gain more with this strategy. Under this type of trading, individuals will have to make use of different analysis tools, specifically technical and fundamental methods. The key is to identify the currency pairs that promise great movement over a period of time and exit when the market hits the sweet spot.

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