Advanced Forex Blog

Trading style – What Type of Forex Trader Are You?

December 9, 2020 | 6:22 am | Advanced Forex Blog
December 9, 2020 | 6:22 am
Advanced Forex Blog
Trading style – What Type of Forex Trader Are You?

How to decide what type of trader you are 

A lot of people consider trading to be the best form of making money, so it comes as no surprise to learn that a lot of people learn about financial markets through this avenue. 

There’s a lot of forex traders that do not have a clear strategy and trading plan, so they do not know what kind of trader they are, or what their trading style is.

The inability to formulate a work plan, causes them to be scattered in their trading and causes them to enter into trades instinctively and lose money.

We have helped numerous fully funded traders find their trading style and are going to discuss some of the best ways to find one that works for you. The best way to find out what type of trader you are and most importantly, what your trading style is, is to look at the following:

  • The length of time you intend to be in a trade
  • The time of your entry
  • The frequency of the trades

You can choose your own timeframe as a trader to indulge in trading, but you should know that it will impact your trading style.

The length of time you intend to be in a trade

The larger TF (timeframe), the longer you will be into a trade. Expect to be more than a few hours in a trade. Smaller time frames will require less time in a trade, from minutes to some hours.

The time of your entry

Smaller TF will give you more entry opportunities as well as intraday entries.

Larger TF will give you an opportunity to enter at the end or beginning of a day or week.

The frequency of the trades

Smaller TF will give you much more entry signals, this will require active management from your end.

Larger TF will give you less trading opportunities, but usually better ones.

 

Different trading styles

So, first, let’s check out the different trading styles, so you can find out what type of trader you are:

Trend trading

Trend trading is about identifying a trend and then trading in the same manner as the trend is heading towards. Long-term fund managers were traditionally identified as trend traders, but you can become a trend trader by trading at any timeframe you want.

Technical trading

Technical trading is difficult since you will need to analyze, enter, manage, and exit your trading based on technical analysis. This form of trading can be done in any timeframe, but technical traders tend to favor intraday timeframes. Long-term forecasting also uses technical analysis.

Swing trading

Swing traders look to trade on the swing of a chart hoping to catch a major move in the market. The most popular timeframe for swing trading is to enter on the daily chart and then hold the position for multiple days, and weeks. The 1-hour charts are popular, as you can hold a position for several hours, overnight, or even for a few days.

swing trading webinar

Scalping

There are different forms of intraday trading, and scalping is one of the common ones, where you are essentially glued to the screen. It is a popular style because it offers greater potential for profits, but it is one of the most difficult trading styles to master. Scalping requires a lot of patience from the trader, but a lot of newbie traders still prefer choosing this style.

Scalping Webinar

Position trading

Position traders will hold their position for long-term rewards. They can hold their position for weeks, months, and even years, because they are trading for long-term benefits. The traders will not move from their position, even if there are short-term fluctuations, because they have a long-term forecast in mind, which will smooth out any fluctuations.

Swing and position traders tend to use pending orders to enter the market, and they don’t need to be staring at their screens when they enter or exit their trades.

News trading

News traders are specialists in ‘Red News’ events and will only trade when there is an important news release. If there is a surprise figure released, there can be extreme volatility in the markets, but that rarely happens. However, there are many opportunities to make profits over a short time, due to the volatility. There can also be long-term consequences due to important news that may interest macro traders, who are trading on long-term trends.

Intraday trading

Intraday traders tend to open and close trades on the same day and place greater emphasis on the technicalities of trading, instead of the fundamentals. There are various forms of intraday trading, which every fully funded trader must master to achieve trader growth.

Fundamental (Macro trading)

Macro traders use fundamental information or financial models to gauge the strengths and weaknesses of a stock, market, country, or currency to anticipate the price value in the future. Information sources tend to vary between Forex and stocks since they are affected by the internal news of organizations.

EOD (End of Day)

This is one of the most popular trading styles around and it involves traders analyzing the markets on a daily and weekly basis. They must set pending orders to catch evolving price moves, and don’t need to watch their screens when triggering orders. If you have a busy life, then you can choose this method, since it doesn’t require time in front of the screen to manage or analyze trades.

 

Which trading style best suits you

There are a lot of different factors you must account for as a forex trader, which will determine which trading style best suits you. These factors include the following:

Risk tolerance

Scalpers, news traders, and short term traders are more exposed to unexpected volatility and risk. These styles suit better traders with high-risk tolerance.

Position traders and all long term trading styles will require less risk tolerance.

Personality

Quiet people should opt for long term trading styles since they will not be very active in the markets. Aggressive traders can choose to trade aggressive styles such as scalping or news trading.

Level of trading experience

The more decisions you need to make, the higher the trading experience level required. If you are starting out, choose a more quiet trading style on a large time frame.

As you get more experienced, you can go down to a smaller time frame.

Amount of time that can be dedicated to trading

The less time you have available for trading, the larger TF (timeframe) you need. They will require you less time in front of the charts.

If you have some good hours to be in front of the computer, then go for lower TF trading styles.

As a trader, you find there is a complex relationship between the amount of time you must devote to the market and the trading time frame. For instance, position traders must spend a couple of hours every week to manage and evaluate trades. In scalp trading, traders have a full-time job and must spend every minute behind a screen to manage traders actively.

A lot of fully funded traders or other traders or investors don’t fit into one trading category or style. For instance, a lot of long-term investors are also traders, but there are also those that only day trade with a couple of swing trades sometimes. It will take you experience and time to figure out the trading style that best works for you, and as you achieve trader growth, you will find the answer.

 

What fully funded trading account use

Fully funded traders use various strategies to identify and capitalize on any opportunity in the market. A lot of traders choose to enter and exit multiple trades in a day, while others prefer to hold their positive for several weeks or months. It all depends on the trading style you choose, but a lot of inexperienced traders find it difficult to choose a trading style that suits their personality. However, it is essential for the long-term success of a trader to find their trading style.

A lot of traders will improve their trading style over the course of their career this is known as trader growth. When you are a new trader, you will think that you have found your trading style multiple times, but it is important to experiment with all the different trading styles, so you can find one that is compatible with your personality traits. It is imperative that all traders find a trading style that matches their personality to become a profitable trader.

 

Trading style bottom line

 It’s true that you do not have to trade only with one trading style, but you must have a solid plan.

Every trader needs to understand what works for him and under what conditions, if he wants to be constantly profitable.

If you are not there yet, this is exactly the time to start working on a trading plan, if you want to belong to the percentage that profits from trading, this should be your first step.

 

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