In specialist literature, the types of investment are most often distinguished by the type of market (instruments) or the time of execution (short and long-term investments). The forex market itself is such a complex market that offers so many investment opportunities, so no one should be surprised by the fact that many conventional investment styles have been formed in the context of this market.
What you should know about investment styles
Day trading, as the name suggests, is a type of trading in which a position is held for only one day. A day-trader wants to avoid charging negative swap points and leaving positions overnight, i.e. when the market is the shallowest (least liquid) and least predictable. Therefore, all open positions of a day trader should be closed before the start of the next session. Due to the short period of a single investment, technical analysis and low time intervals on the charts dominate among day traders.
Scalping is a variation of day-trading. Here, too, the position is opened and closed within one day, but usually these are very short transactions (from a few seconds to a few minutes at most) with close SL and TP orders, usually ending with a few or several pips profit or loss. Very low time frames such as M1 and M5 dominate among scalpers.
Position trading in the context of the forex market is long-term investing. Position traders use fundamental analysis much more often than other types of investors, due to the long investment horizon. If a position trader uses technical analysis, they usually use daily (D1), weekly (W1), or monthly (MN) time frames.
Swing trading is about properly identifying the entry point into investments so that you can catch and make the most of a large price movement. Usually, swing traders hold a position open for more than a day, even several weeks, so when it comes to the duration of the investment, swing trading is somewhere between day-trading and position trading.
News trading is a variation of trading that involves the use of market news and its impact on individual FX pairs. During the publication of important macroeconomic data in individual markets, liquidity decreases and volatility increases. In such extreme trading conditions, accuracy and reaction time are very important, which is why most traders who play this style use automated trading and automated strategies.
Carry trading is a type of long-term trading in which the trader uses positive swap points. The most important element in the selection of instruments is a large difference in the interest rate of currencies in the FX pair, therefore the most popular currency pairs among carry traders are such pairs as EUR/TRY or USD/ZAR.
Most forex traders use technical analysis when analyzing prices. Below are examples of time frames that are usually used by traders of this type:
What is a forex broker?
A Forex broker is a financial institution that allows traders to make trades in the financial markets. The name forex broker can be misleading, because nowadays most brokers offer a wider range of instruments than just those based on the currency market. Forex brokers often offer contracts for other types of markets, such as CFDs on stock indices, commodities, stocks or cryptocurrencies. It also happens that a forex broker offers access to a different type of services through its trading platform than CFD trading.
Success in the forex market is the result of many factors. One of the most important, next to the knowledge and skills of a trader, is a good work environment, i.e. a trading platform. A trading platform is also called a trading platform, trading platform or investment platform. A trading platform is nothing more than software for a computer or mobile device, through which an investor can make buy and sell transactions on financial markets via the Internet. More and more trading platforms no longer even need to be installed on an electronic device, as they are also accessible from the broker’s website. Different platforms vary, but basically each one includes real-time quotes, online charts, and a range of technical analysis tools.