There are four basic trading styles which are used by most of the CFD traders, and those are trend trading or longer-term position trade, swing trade, day trade, and scalping. Here we will discuss those popular styles and provide the advanced idea of which style will be better for which type of traders.
Popular Trade styles in Forex
Scalping indicates a special type of trade, which generally stays less than 15 minutes for 15 to 20 pips of profit or less. When an investor is doing scalping, he does it by setting a time frame of 1 to 5 minutes. The opportunity of upside is limited here because larger time frames take all of the pips.
Experts do not recommend the practice of scalping for the newbies as there is a huge chance of loss in a shorter time frame. Scalping works as a defense management system as most of the traders have a lack of knowledge and effective business plan. Scalping has no future, and even some traders do not want to scalp generally.
There are so many reasons to consider scalping as a bad trade strategy. Due to scalping Forex, the money management ration becomes negative, and eventually, a trader loses his funds. For each pip that is at risk, an investor cannot make more than one pip as profit. Experts know that this amount of profit is too small, and 50% of the time, they may lose their whole account.
Scalpers do not follow any appropriate style that can be helpful in the long run. Most of the businessmen face high risk with a lot of leveraging as a part of their scalping method as scalping is not a good practice, so it will be a good practice to use the other styles in the CFD market too. Scalping is considered a poor method which deals with a huge financial risk.
2. Intraday trading
We find this style where the investors open a trade and close it on the same day. In the FX market, most of the activities occur in the main session, and a day business is executed base on the movement cycles of small time-frames such as M5, M15, or M30 with a duration of 1 to 6 hours. When someone enters into a day trading, his pip potential is generally 20 pips to 175 pips per entry, which mostly depends on market volatility.
3. Swing trading
Swing is an individual cycle based on the H4 time-frame, and the holding time frame is 3 to 6 days or longer. Swing trade works best in a trending market, and if currency pairs are on an uptrend on frames like W1 and MN, then traders prefer to use H4 swing cycles. Experts believe the swing trading style will be helpful for beginners because it maintains the proper risk and reward ratio, and the amount of profit can be higher.
4. Position trading
Position trade is guided by the highest time-frame such as D1 or W1 time frames, and investors hold the trade until the rise of the trend. A successful position trader always focuses on the risk management system by setting a stop-loss order in advance. In position trade, the holding period varies from weeks to months or even years, and it provides a great facility of liquidity.
There are so many styles for the Forex trade, but mastering the style varies from person to person. Some of the businessmen show their skill on swing business based on three to six days, and some of them prove their efficiency as day traders. But all of them are the same in the opinion that they should avoid the practice of scalping and set a mindset of trade based on a longer time frame with proper money management methods