There are various methods of trading. The type of method you choose to follow would depend largely on the specific profit target and time you have available.
It’s a trading style in which investors trade frequently over the span of a day and rarely let any one position remain open for more than a few minutes. Scalping is usually aimed at making small profits (usually 4-15 pips) from every position. This type of trading requires a deep understanding of the market traded and hence, novice players should ideally refrain from using this trading type.
In this trading style, investors close their positions on the same trading day as when they were initiated. A trading day generally ends at 5 p.m. New York time. Traders following the day trading style aim at making at least 15-100 pips of profit through each position. This trading style is followed by almost all online currency traders who typically use technical analysis, which involves the study of chart patterns, support and resistance levels and economic indicators to set up their trades.
Investors looking to generate profits in the range of 100-250 pips tend to opt for the swing trading style. In this style, traders let their positions stand for two to five days and sell at the best opportunity. Traders using the swing style tend to use technical analysis before setting up a position.
Position Trading/ Long-Term Trading
This currency trading style is generally followed by traders who have in-depth knowledge of fundamentals and economics. Moreover, you need to ignore the inevitable ups and downs in the market for months or even years to take up this trading style. Long-term trading is usually aimed at generating more than 200 pips of profit per trade. Traders using this trading style tend to use both technical and fundamental analysis before setting up a position.
In this trading style, a trader utilizes a pre-programmed strategy to place orders through an automated software program. These strategies are based on technical and/or fundamental analysis. This style does not rely on human decision making capability and instead uses a robot called an EA (expert advisor).
This trading style involves a trader identifying a price range within which the traded instrument usually trades. With this range in mind, the trader then opens his/her position at a lower level and closes it when the upper price level is achieved. When an investor trades this style, she/he is aware of the profits that can be made from the specific position. This style should only be followed by experts who understand the market well.
When you open a position on the basis of news that could impact a currency’s value, you would be using the news trading style. This trading style is aimed at making short-term profits from the ripple effect of the news.