Forex trading is the exchange of one foreign currency against another. It is the most active market in the world and is one of the biggest markets also. In 2019 alone, the forex market had an average daily turnover of 5.1 trillion USD. This makes it an ideal source of investment for budding business people.
There are different ways to invest in the forex market. It can be said that there are four types of forex traders, which are listed below.
Scalping is, in the simplest terms, holding onto a currency for not more than a few minutes. They try to attain small pips as much as they can during the busiest times of the day and sell it at slightly higher prices when the activity reduces. It requires extreme focus since the scalpers are necessary to keep their attention undivided on the charts. This is a fast-paced method, and you need to have excellent decision-making skills to be a good scalper. This method does not guarantee you instant money; instead, it provides a small of profits that number increases to a large amount over a period of time. If you are easily stressed and do not like fast-moving markets, this method might not be for you.
If you think scalping is too fast, but you do not want to hold your trade for more than a day, day trading might be your thing. What these traders do is, they choose a side and act on their biases. They may walk away with a profit or a loss at the end of the day, but they walk away at the end of the day, whatever happens, not holding their trade overnight. It takes a good analyst and a better competitive mind to keep up in this type of trading.
This is mainly for traders who cannot pay full attention to trading but can devote some part of their time for trading. It is done by identifying swings in the market, i.e. a swing low or a swing high. At a swing low, the currency price decreases, and it is better to buy more, while it is better to sell at a swing high to maximize profit.
Position trading, just like scalp trading is not for everyone. It takes an immense amount of patience to do this type of trading, and the trades can last between a few weeks to a few years. Position traders are usually very well versed in the trade and therefore have a grasp of the fundamentals of forex trading. This is a hazardous type of trading and should be done by people who have been in the business for years.