Four Types of TradersThere are only really four main types of traders.
ScalpersFirstly, there are Scalpers. These guys (and girls) are in-and-out of the market in rapid timeframes; they are often going for less than 10 pips on a trade. It usually requires the ability to stare at monitors all day and repeat the same process religiously. In many cases, a lot of this style of trading is now part automated. At 10 pips a trade, a key concern for scalpers is cost-per-transaction.
Intraday TradersNext up are the Intraday Traders, characterised by the fact that they seldom hold positions overnight. A normal trade for them is on the 15-minute to hourly charts, with somewhere in the region of 30 to 80 pip targets. They often use alert systems to highlight potential entries or warning signs for exits. These traders are looking for patterns, but will also be focused on more general market sentiment, and are likely to exit a position based on their ‘gut’ feeling for when the market is turning.
Swing TradersThird are the Swing Traders. These are individuals looking to hold positions normally for a couple of days or more, and are therefore running much wider stops and profit targets of typically upward of 100 pips. They tend to be more focused on the daily and 4-hour charts and as always are looking for patterns, though they tend to be a little more rules-based than some intraday traders. A swing trader’s focus is on capturing large movements in the markets and parts of key trends.
Position TradersFinally, Position Traders. These are the guys that will hold large positions for weeks at a time, sometimes technically based, but more often than not based on fundamental reasons. Due to the cost of carrying long-term trades, they are looking for hundreds of pips profits from their positions. Such a trader will also look carefully at carry trade potential.
Knowing these basic personal descriptions of the types of traders above and understanding your strengths and weaknesses should help you to understand where you ought to be focusing your energy.
A big issue for new traders is a lack of understanding about themselves. Often, they try to fit themselves to a strategy that isn’t right for them. Instead, they should embrace who they are and find a strategy that works around that.