Major Forex Trading Profiles

The 3 Major Forex Trading Profiles

Trading profiles should align with varying trading needs, time frames, goals, and levels of risk exposure. A simple way to identify a trader’s profile is to ask which chart time frame they use. Day traders, for instance, typically use 1-minute, 5-minute, 15-minute, or even 1-hour charts. Position traders rely on daily, weekly, or monthly charts.

Here are the three most common trading profiles in Forex:

1) Day Traders

Day traders open and close multiple positions within the same day. Their analysis is based exclusively on technical factors. They typically aim for profits ranging from 20 to 200 pips per trade. Day traders hold positions from as little as one minute to a few hours. Holding positions longer increases exposure to unpredictable market conditions. News developments can disrupt day trading, which is why day traders avoid trading 30 minutes before and after major news releases. They usually analyze charts ranging from 1-minute to 1-hour time frames.

2) Position Traders

Position traders seek to capitalize on market movements that last from several days to a few weeks. They target returns ranging from 200 to 1,000 pips and use both technical and fundamental analysis. To avoid ‘market noise,’ position traders prefer higher time frames. They typically use lower leverage compared to day traders, allowing for wider stop-loss placements. These traders are also subject to swap charges, which are applied by brokers every 24 hours. For example, if a position remains open for five days, the swap value is charged five times. The swap is determined by the interest rate difference between the base and counter currencies. This means a trader will incur higher costs when holding pairs where the counter currency has a higher interest rate than the base currency. For example, in EUR/TRY:

• Buying EUR/TRY incurs a daily cost of $0.75 per $1,000 position

• Selling EUR/TRY earns a daily credit of $0.06 per $1,000 position

  This difference becomes significant with larger trade sizes.

3) The Forex Scalpers

Forex scalpers are traders who execute dozens or even hundreds of trades in a single day. Their trades typically last from a few seconds to a few minutes, targeting returns from a few pips up to 20 pips. Scalpers rely exclusively on technical analysis and use 1-minute to 5-minute charts. They are particularly sensitive to trading costs, which is why they prefer ECN and STP brokers that offer tight spreads with minimal slippage and no re-quotes. Additionally, scalpers focus on the most liquid Forex pairs, primarily EUR/USD and GBP/USD.

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