In Forex trading, there are many types of traders and these are important to be considered if you want to pave your way to become a Forex trader. We all know that, in trading, the general category is divided into two categories, that is, short-term and long-term traders in which these two categories are divided again into four subcategories. Namely, scalper-day trader-swing trader-position trader.
Why is it important? Simple, it is because each individual has a different risk appetite which you could expose to yourself. For example, I am the writer of this blog and also trade in the Forex market have a low-risk appetite and do not want to stay on the screen to look at the chart for too long. Therefore, I am certainly not a short-term trader such as a scalper or day trader. Instead, I am a long-term trader who still wants to have a time where I could use it to do other business or to develop myself further especially Forex knowledge.
Without further complex explanations like in the above paragraph, let me explain it so simply below here regarding scalper, day trader, swing trader, and position trader.
Scalper
The scalper means it is people who trade in Forex with low timeframes such as 1-5 minutes where the market could move significantly during those timeframes. According to Dicks (2010, p. 51) scalper wants to make a fast profit from the market ranging around 2-10 pips. The requirement to become a scalper is that you have to know well about the structure of the market you trade and be willing to spend your time in exchange for 'potential' profits.
Uniquely, I have tried to be a scalper before but it seemed it did not fit well with my psychological conditions that dried out my money. That is why if you want to be a scalper, you have to be prepared to take a loss gloriously and if you are prepared for it then you are ready to take a profit gloriously too.
Day Trader
According to Schock from Investor.gov, day trader is people who trade in the market without having to wait for more than one day to buy and sell. This means those who trade in the Forex market would be able to make a profit as well as make a loss so fast to your Forex account. This kind of trader seeks short-term trade just like a short pencil you could see on the image that I attached.
If I am not mistaken, usually most of them use a 15-minutes timeframe to time the market. Because of that, you have to have much time to see on your screen just when you work as an employee who sits down in front of your laptop or computer. But, this is dangerous unless you prepare for the risk that is going to haunt you, that is, cut loss in which this could disrupt your confidence and thus it would destroy your psychology conditions if you are not prepared for it.
Swing Trader
If you see the explanation in Dicks (2010, p. 53), he wrote that the swings are based on large moves fluctuation of the market. I would say that a swing trader is a kind of mid-term but could be regarded as a long-term trader which is like you are trying to swing the Grim Reaper scythe to the market Usually, they use 1-hour timeframe to determine enter the market and zoom out with 4-hour timeframe in order to have a better look at the market conditions.
Position Trader
The fourth is position trader which is a long-term trader or you could say this as an investor. According to Dicks (2010, p. 52), this position trader would increase the size of his/her trade over time. For example, if you are trading in the trending market then when you reach the halfway trend you would add a new position following the trend of the market to multiply your profit yet also increase the risk if the market reverses suddenly.
Conclusion
In short, four types of Forex traders fill the field of the Forex market. Those four types of traders which are scalper, day trader, swing trader, and position trader play an important role to move the Forex market whether it is big banks, institutions, individual investors, or other players in Forex which could be seen like pencils who doodle the papers.
Written by Andre I.
References
Dicks, James. 2010. Forex Trading Secrets: Trading Strategies for the Forex Market. New York: McGraw Hill.
Schock, Lori. Thinking of Day Trading? Know the Risks. Retrieved from Investor.gov. (Accessed 11 January 2022): https://www.investor.gov/additional-resources/spotlight/directors-take/thinking-day-trading-know-risks