The Forex market is a hyper-competitive financial market. It is full of both retail traders and institutional investors with cutting-edge technological tools and analysis teams. In fact, on close study, you might think you will not be able to do any well in the game.
Forex Trading Styles.
However, that is not true. Although it has been unofficially estimated that 9 out of every 10 Forex traders fail and quit, some still believe that the statistics are just exaggerated. So, if that is true, you have better chances to indeed succeed as Forex trader far more than you think. But there are warnings.
You should not take any chance at it. You should know what works for you and what does not. You should be aware of your circumstances, personality, and develop specific goals that you would want to achieve with your trading. Most importantly, to succeed, you must choose the right trading style.
What is Trading Style?
There are approximately 8 billion humans in the world. Scientifically, no one is like the other. And even when you evaluate them based on factors such as circumstances and personality, every one will still be different to some extent. In trading, there is also the importance of catering to participants based on their unique situations and needs.
An individual who works full time on their job and still wants to participate in Forex is not the same as a homemaker who gets to be home throughout every day. Also, both are not the same as another person who has dedicated his full time to analysing and trading in the Forex market. Additionally, a conservative individual is not the same as an aggressive risk-taker. The two have their peculiar needs.
This is where the concept of trading style is so useful. It seeks to delineate participants of the Forex market on the bases of the time they are willing to devote to trading and on the bases of their personality and objectives. It is amazing because it handles most of those unique factors that every trader has to battle out themselves. It has four types and they are:
- Scalping
- Day Trading
- Swing Trading, and
- Position Trading
We will take them one by one.
Scalping
Scalping is a high-frequency style of trading whereby the trader enters and exits trades within seconds or even fractions of seconds apart. Scalpers go long and short on positions with a high degree of rapidity. As a result, this trading style tends to work best with automated systems and is especially popular with high-frequency traders (HFTs).
Since it requires the making of multiple decisions within a short time, scalping is most suitable for impatient but alert traders. As a scalper, you must be focused and sharp. Hence, if you are an easily-distracted kind of person, scalping is definitely not for you.
Day Trading
Day Trading is the style of trading whereby traders enter and exit their Forex positions within a day. Actually, it is the most popular style as it seems that most forex signal trader prefer to day trade the Forex market. In fact, when people talk about Forex trading, they are usually talking about day trading.
Day trading is ideal for aspiring Forex traders who either keep night jobs or will not be comfortable leaving their positions open for long over many nights. Hence, it is a trading style that works best for individuals who are committed to clearing their tasks all in a day. However, it requires a considerable amount of dedication and time.
Swing Trading
Swing trading is a style of trading that goes on for days. The aim of swing traders is to capture the substantial price volatility that comes when a trend breaks and a new one is trying to establish itself. Since trends usually take a long time to form, swing traders tend to hold their positions for more than a day, but not usually more than a week.
Hence, if you are patient and not very concerned about the volatility that the market can be subjected to overnight, swing trading is for you. However, since swing trades are kept for more than a day, it is always necessary to use large stops.
Position Trading
Position trading is the longest of the four. If you are extremely patient and not easily excited, it is for you. It entails the holding of your Forex positions for not days or weeks but for months or even years. In terms of the time window and associated risks, it is the closest of the four to investing.
A very important characteristic of position traders is a balanced psychological makeup. Those folks are ready to slug it out with their positions during different conditions of the market, whether bullish or bearish. Little surprise they target large gains on those positions, too.
Changing Your Trading Style
Your choice of trading style should not be set in stone. You should be able to change it as your situations change and as you get a better grip of certain aspects of your personality. At those times, you need to have the flexibility to know if it is working for you or not.
However, be careful. Do not be quick to change your style at every slight trouble. Doing so will only make your trading inconsistent. Studies have indicated that traders with inconsistent trading styles do not do quite well.
As long as a style satisfies your needs, works for you, and you are comfortable with it, then you should continue to stick to it.
Conclusion
Before you can succeed in the Forex market, you need the right style to approach it. The style you choose should be determined by your circumstances, personality, and objectives. Any other decision you want to make about your trading career (e.g. signal service) will be influenced by it.
In that light, 1000pip Builder’s Forex trading signals are the best in the industry. They are compatible with the different trading styles and are useful no matter the strategy you use. You can take your trading to the next level by subscribing to them.