Finding Your Currency Trading Style
Finding your trading style is very important before you do anything on the forex market. There are a number of different trading styles that you could choose from, but you need to find the one that best suits your personality. One way to do this is to ask yourself a question that you may think has nothing to do with currency trading. This question is whether you like fishing or downhill skiing?
Currency Trading Strategies
The question about skiing or fishing actually relates to the trading strategies you should be using. If you answered fishing then you are a trend trader. This type of trading requires methodologies, time and patience which are something fishing requires. However, if you answered skiing then you are a counter-trend trader or a fade trader. These traders look for fast profits when the currency prices retrace quickly. Of course, you may like skiing but find yourself more comfortable with trend trading. This question simply shows a predilection to one type of trading not a definitive answer.
The second question you have to ask when looking for a trading style is the timeframe you are comfortable working in. Will you be more comfortable with short-term trades or long-term trades? Faders generally work in the short-term while trend traders have long-term goals.
Of course, there are some trend trading strategies that work on a short timeframe. These strategies work very well for people who like fast profits, but also have the patience to wait for them.
The Analysis Types
There are two type of analysis of the forex market and they are technical and fundamental. There is actually a large divide in the forex market about which is better as some traders believe technical analysis is while others think fundamental analysis is. Of course, the best course of action is to actually combine the type analysis types and use them together. This offers the best view of the market and what may be happening.
Despite this fact most traders actually use fundamental analysis for long-term trades and technical analysis for short-term trades. Over long timeframes the currency price is likely to be influenced primarily by fundamental events like economic news releases and political news. However, in the short timeframe it is technical aspects that affect the market more.
To find the type of trader you are you should consider how you feel about all these aspects. You have to consider how much risk you feel comfortable taking and the timeframe you feel most comfortable in. You need to keep in mind that longer timeframes generally present less stress to the trader than the short timeframe.
The type of analysis you feel most comfortable with should also be considered. There are many people who simply cannot get their head around technical analysis. These people may be better off using fundamental analysis as their primary market analysis. You also have to look at the different trading systems used in the different timeframes.
Short-term trading includes day trading, scalping and momentum trading. Long-term trading contains swing trading and carry trading.