One of the biggest decisions a Forex trader needs to make is to choose his or her trading style. This is also a decision that you need to make early on because it influences how your going to educate yourself and which programs or courses you need to get.
But how do you go about choosing your forex trading style?
First of all, try to figure out how much time you have to spend on this. Some trading styles require a lot of time to spend going over charts and looking for trading openings.
1. For instance, scalping is a style in which you have to spend hours each day going over charts, looking for any small opening. You need a lot of trades because the profit you’re likely to get from each trade is very small.
In addition, scalping involves trades which may be open for 2-3 minutes so there’s not a lot of space to breakaway from the charts. So, to be a scalper you need to have a lot of time, be willing to spend it on Forex, and the concentration to make a lot of quick trades. Scalping is also a high anxiety style so take that into consideration.
2. Day trading is another style which involves trades which begin and end on the same day. This is similar to scalping but the trades can be open for hours. In rare cases a trade may be open overnight but this is the exception, not the rule.
A lot of people choose day trading because it can be done with a low time investment. However, you’re not likely to make a lot of trades each day. Movements can be 50-300 pips so there is money to be made here.
3. Swing trading involves trades which last for days and even weeks. You’re usually looking for big movements in the markets, targeting hundreds of pips per trade. This is a more laid back version of trading and it suits a lot of people who are more of the investor type than the trader type.
To be a swing trader you need to have the ability to distance yourself from the market and your open trades every once in a while. It’s not easy for some people, especially when you have big open trades, but unless you’re willing to do just that, don’t be a swing trader.
4. Position traders can hold a trade open for months and even years. This is usually done by financial institutions which bet on long term trends in the global economy. I often think that position trading isn’t for us “mortals” small time personal traders, but I’m sure that some people would say that I’m wrong.
The thing to remember about position trading is that your money is in the trade. You can’t use it until you exit the trade. Therefore, a position trader does without this money for months, something not too many private traders are likely to go for.
So, it’s time for you to choose your style. Give it some thought but don’t take too long. Just choose a style and become an expert in it. You can always switch later if you have to, but try to find a style that suits you.
