Part-time or full-time trading in different avenues like options or commodities can be a great way to supplement your income and achieve financial independence. Today, many people across the world invest time and money into learning trading to become professional traders.
Trading in foreign currency exchanges or forex trading is also one of the most popular trading alternatives. As per a recent report from the Bank for International Settlements, the global worth of the international forex trading domain was more than $ 5.1 trillion by 2019.
If you are an aspiring forex trader, this blog can be a useful read. It delves into the definition of forex trading and explains in detail the different types of forex trading.
What is forex trading?
Foreign exchange or forex is the marketplace for the purchase and sale in bulk of different currencies from across the world. Forex trading refers to the purchase and sale of currency bonds at a profit. The profit margins are dictated by the current value of the currencies being traded.
Forex trading also involves a certain amount of speculation on the future value of specific currencies. For instance, you can buy an enormous amount of bonds of certain currency if you expect the value to further increase in the foreseeable future. Selling the bonds after the value has increased can get you a good profit margin.
What are the different types of forex trading?
There are six basic types of forex trading—scalping, day trading, swing trading, position trading, algorithmic trading and event-driven trading. The primary categories have been further explained below.
- Scalping: Scalping refers to short-term foreign exchange trading for time periods as short as a few seconds to a few minutes. Scalpers trade throughout the day and focus on achieving small gains at the busiest hours. Scalping is extremely fast-paced and is appropriate for those who can think on their feet and open to a hectic lifestyle.
- Day trading: Day trading also involves making short-term trades throughout the day. However, the time-periods are longer as compared to scalping. However, day traders mostly close all their positions before the end of the day and rarely hold any bonds with them overnight. This protects them from being affected by negative news that can hit prices before the market opens.
- Swing trading: Sing trading can involve traders holding on to their purchases for longer than a day and typically for a few weeks. This type of trading is less frantic as opposed to scalping or day trading, but still requires you to closely observe the market regularly. Swing trading focuses on long-term gains and might incur some short-term losses. As a swing trader, you might have to inculcate a keen eye for detail and a strong intuition for stock analysis.
All the trading strategies are relevant in the current forex market and you can use them as per your affinity or convenience. You can learn more about these trading strategies and further get knowledge about forex trading by pursuing a course on the subject. Enrol in a forex trading course today to kick-start your trading career.