There are many misconceptions when it comes to Forex Spread Trading as this type of trading is still not recognizable to many people around the world. With large daily trading volume, Forex has become one of the popular product out there that is traded and with many different pairs that can be traded to each day, Forex has become the largest paper money product that ever been traded by people. However, trading this product requires knowledge, patient and experience because of the risks involved in it.
There are three types of trading style that people are usually do in trading the Forex market they are; Swing trading, day trading and scalp trading. Each one of the technique above has their own strong and weak points. Swing traders always trade based on both fundamental and technical analysis since they can let the trade run for many weeks, months or even years, they are also known as position traders. This trading style requires lots of capital to start with and traders are often got quite large profit from each trade because the movement of the price is quite large. Swing traders are those who works for large financial institutions like banks, hedge funds etc.
Day traders are those people who always looking for the best setup on the chart for one day trade opportunity. They always look at the technical aspect more than fundamental aspect. Even so, there are many day traders who are always looking and based their decision on the chart only.
Scalp traders are pure technician, they are in and out from the market many times a day. They are always looking for small profit gain or small losing points. Usually they are only look at small timeframe chart such as the 5 minutes and 1 minute. It is their nature to always active during the trading session. The scalp traders usually working at around market volatile hours like European Session or New York Session.
Looking back to these styles of trading, a trader must be trained well enough, have sufficient funds in their trading account, can hold themselves not to trade when there is no setup for their trading strategy and most importantly, always able to know when they are wrong, admit it and cut the losses when it happens.
Trading the Forex market could be very profitable for us if it is done correctly. The potential risk is great but the potential profit is greater when we do have what is needed in trading the Foreign Exchange market and apply it properly.