Forex trader

Defining Main Types of Forex Traders

Forex trader

To call yourself a professional trader you need to have certain reasons for that. These reasons can be intelligence, intuition, and a good feeling of timing. Of course, these characteristics appear over time with years of experience in the market. There are not only many types of traders but also a lot of various time frames that help traders in creating their ideas and realize their strategies. Moreover, good timing can support market investors while they work with several things beyond their control. Among them are nuances of various currency pairs,  leverage of position and influence of planned and unplanned newscast. Therefore, good timing is usually the main point when you take part in the foreign exchange market. It is also an important factor that can be ignored by first-time traders. 

Average time frames of trader

Within the given scenario, there are a lot of types of traders in the market. However, if we take into consideration a time frame, there are certainly three or more types of traders. Among them are: 

The Day Trader

Day Trader is one of the most popular options around the world. Usually, day traders make trades during the day. They try evade holding any costs after they see that session is over and work mostly with high volume. 

Forex trader
Forex trader

Commonly, short-term traders work for a swift turnover rate on one or several traders. The transaction size is mostly more in 10 or sometimes even 100 times.  This way traders gain more income from quite small swings. due to this, some traders who work in their shops are going to make use of charts with short time frames and use only periods in one, five, or fifteen minutes. Besides that, day traders more often than not rely on technical aspects of trading and volatile pairs to gain large profits. Despite the fact that long-term strong bias can be of use, these traders are mostly looking for good opportunities in the short-term frames. 

Among these currency pairs is British pound/Japanese yen. As a rule, this pair is dangerously volatile and mostly used by short-term traders mainly because regular hourly range can reach 100 pips. This situation usually casts aside the ranges in amount from 10 to 20 pips in the slowly moving pairs like the American dollar/European euro and British pound/European euro.

The position trader

The position trader has the longest time frame among in comparison with other traders. This happens mainly because their position differs from their perspective of a certain market. You will never see these traders checking upon movements in the short-term market, however, they always monitor long-term plans. As a rule, position strategies involve days, weeks, months, and years.  Then traders can look at the technical structure and opt for long-term strong models and opportunities. The Foreign Exchange portfolio managers are going to study and weight various government decisions, economic models, and interest rates to determine trading decisions.  The wide range of criteria is going to put the position trading in any well-known currencies that are usually liquid. Among these currencies usually groups of seven currencies and also other rising market favorites. 

Swing Trader

While reaping the advantages of long time frames, from time to time the swing traders keep a position for several hours to make a turn in the market. In comparison with a day trader, these traders are searching for income from the arrival in the market in hopes that difference in direction can help their situation.  Because of this, it is quite important to take into account timing for a swing trader than for day traders. Nevertheless,  these traders have the same bias for technical analysis rather than a fundamental one. A sly swing trade most probably takes place in a much more liquid currency pair like the American dollar/British pound. 

Supplementary factors

As you can see there are three main types of traders. However, the financial field has many other factors that influence the success within these types. If you know only about time frames, then that is not enough. You, as a trader, should understand some extra factors that influence traders on various levels.  Among these factors are: 

Leverage

On one hand, the leverage can be a two-way street. On another hand, it is the best supporter of a day trader. While the currency market provides rather small fluctuations, a trader with no leverage is like fish out of the water. To put it in other words, if an expert does not have proper tools, he or she can not benefit from the opportunity. Then, a day trader will always take into consideration the amount of leverage or risk he or she is ready to take on before doing any transaction in any kind of trade. 

In a similar fashion, a swing trader may consider his or her parameters of risk.  Despite the fact that their positions should be meant for long-term fluctuations, there are cases, when a swing trader have to suffer some losses before gaining any profit on his or her position. If a trader adds a slow stochastic oscillator, his or her swing strategy would have tried to enter the market at certain points encircling the golden cross.  However, over a period of 2 or 3 days, the swing trader would have to face some losses, and then the following market turn might be called more correctly. In case when the situation doubled the losses with leverage, the final results of a loss of income would be dramatic if there was no assessment of risk. 

Various currency pairs

Except for leverage, take into consideration the volatility of currency pairs.  Not only calculation of your losses per trade count but also the speed of trade’s losses.  Due to this, separate time frames count on separate currency pairs.  For instance, if a day trader knows that British pound/Japanese yen cross can alternate 100 pips in one hour, he or she can face challenges with more easiness. However, this knowledge is not useful for swing traders who seek change in market direction. Thus, swing traders are more likely to opt for a more popular group of seven main pairs, mainly because they are more liquid than cross currencies and rising markets. For instance, the European euro/U.S. dollar is more popular than the Australian dollar/Japanese yen. 

Newscast

All three types of traders should be especially aware of unplanned and planned news releases and how they influence the market they work in. Three types of traders should adjust their trades according to press conferences from central banks, economic announcements, or irregular surprise rate decision. 

Short-term traders are more affected by any news releases mainly because their losses can be worsened. At the same time, swing traders’ directional favor may be blemished.  To avoid such a situation, some people would choose to be position traders. While they have a sustainable perspective and vast portfolio, the position trader is partially protected against this situation, because they already have apprehended the short-term disruption of price. All the while price is going to follow the long term approach, position traders are protected while they search for the next benchmark targets. While short-term traders have to face changeable and volatile trading, the long-term traders are still quite protected as long as they do not change their bias. 

Choice of time frame

The proper choice of time frame mainly depends on you. Do you profit even in volatile currency pairs? Or do you have different interests and choose more long-term and protected profit of a position trades? The good news is that you do not have to choose only one type of trading. Different time frames can be mixed to create a position in a profitable market. 

Like a Day Trader

After you set the long-term trend that is continuous deleveraging of the British pound in your case, you can detach daily opportunities that may create a possibility to sell during the trend with the help of easy technical analysis that include support and countermeasures. The best solution here is to search for good short opportunities after the price actions. 

As a rule, this process is often depreciated when there are other complex strategies.  While people study long-term trading they rarely calculate their risk after entering the market. As a result,  they face more losses than they have expected. If short-term charts have more action, traders are going to see a situation more clearly and lessen possible unpredicted losses. 

Like a Position Trader

forex market
forex market

Any position trader should study the situation in the economy of the country they live in. Let us assume that under certain world conditions, for example, the United Kingdom’s economy is going to continue to have weakness like other countries. Manufacturing is less popular these days in a line with industrial production mainly because the sentiment and cost of consumers are continuing to go lower.  Even now, policymaker makes use of a benchmark interest rate to improve consumption and liquidity. This leads to selling off of the country’s currency because low-interest rates lead to cheap money. Ideally, long-term trading can be negative for the American dollar. 

Summary

As you can see, time frames are quite crucial for any type of trader. Even if you a swing or, day or even position trader, these time frames and their implementation should be taken into consideration in any kind of strategy, especially complex ones. So, this advice and warnings can help you improve your knowledge in time trading and its processes. This relates even to first-time traders who learn the basics of the market.