Forex Trading Styles

What is a trading style? It’s simply what a trader or speculator enjoys or feels most comfortable doing while interacting with the market. They can be valid for both long and short term trading, and for different styles different indicators and technical patterns have greater significance. Nonetheless, we should always keep in mind that the market is not bound to submit to our choice of style. The day trader could easily find himself in a swing trading situation, and the swing trader may end up following the trend, depending on how the market decides to behave.

What is the proper style for a beginning trader?

There are in fact only two types of trading: long-term and short-term. While the beginning trader is excited about his “debut”, and desirous of maximal profits over a short period of time, the fact is that at his level of experience and knowledge, he’s the least suited to a short-term trading method. Because of the shorter periods of exposure to the market’s whims, scalping or day trading may sound like the surest ways to success for the beginner. But, because the market’s behavior is more or less random in the short term, the habitual day trader or scalper may in fact be exposing himself to much greater risk by minimizing foresight and predictive capability. It’s hard to know what the next move will be when dancing in the arms of the bipolar short-term market.

The beginner may benefit from some short-term, very low-risk trading activity to gain understanding of the various trading concepts and tools of technical analysis. But, as soon as he’s willing to embark on serious activity, he’d be well-advised to focus on trading psychology, rather than trading style.

Of course, once the trader feels confident that he knows what he’s doing and has a reasonable amount of experience and knowledge about the markets, he can make his own choices about which trading style, which indicators and which currency pair he’s most interested in trading. But, it’s important to keep in mind that the best style is a flexible style, and that adaptability and humility are better than any preconception about the kind of trader we’d like to be. Let the market make the choices. How much control do we have over its decisions, anyway?

Let us take a look at the several different kinds of trading styles for short term activity.

Further Reading

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Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.