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Which Forex Trader Type Are You?
A career in trading can be a fascinating prospect for people from all walks of life, as indicated by the growing number of traders across the globe. Each has adopted a particular style based on their skills and inherent strengths.
Once you’ve worked your way through the list of tips for new forex traders, exploring the many types of trading styles should be your next step, especially as your type plays an important role in dictating your trading strategy.
The Diverse Range of Forex Trading Styles
Traders have a multitude of strategies available to assist them with better interpreting price movements and market changes. Some of the more common types for you to consider as you begin your career include event-driven, scalper, position, swing and algorithmic.
The Event-Driven Trader
Event-driven traders place a great emphasis on volatility spikes related to economic and political landscape changes when making buying and selling decisions. They primarily seek returns from the readjustment of market consensusespecially where expectations haven’t necessarily been met.
These types of traders are well versed in foreign affairs and have a good general knowledge. Event-driven traders are always thinking about how political and societal decisions may impact day-to-day life as well as the broader market performance.
The Scalper Trader
Scalpers tend to be seen as hustlers, opting for returns based on short-term price swings. Keen evaluators of price action, these competitive traders have strict entry and exit parameters calculated with a view towards compounding financial returns over time.
Scalpers require high emotional diligence, as well as the ability to make decisions under pressure. They work long hours, and are always plugged in, especially as they need to be mindful of any unforeseen price swings that may lead to large short term gains.
The Swing Trader
Swing traders operate within a timeframe of a week or two, focusing less on day-to-day fluctuations and more on bi-monthly changes. These traders are interested in technical analysis, rather than focusing on changing political or economic climates.
Swing trading requires good timing and patience, with an open mind and the ability to learn from small losses. Part-time traders like this style, as it isn’t as time-consuming as some of the other techniques out there.
The Position Trader
Position traders are seen as somewhat more rigid and cerebral in their approach, buying and selling based on long term macroeconomic and political landscape developments and predictions.
Some of these traders hold positions for up to a year, basing decisions on fundamental analysis; they tend to place a heavy focus on technical tools to manage risk. Theory buffs are a good match for this style, and those with a love for learning (and continuing to learn) tend to be better suited to this style.
The Algorithmic Trader
If you’d like to leave less up to individual interpretation, algorithmic trading may be the one for you. These traders use algorithms from pre-coded or in-house software to make their trading decisions. This kind of software helps to make buying and selling decisions without too much human input.
If you love technology and love working with analytics, this could be the style for you. Trusting technology while still working on improving the software you are working with is essential for this particular trading type.
Which Trader Type Suits Your Personality?
You should now have a clearer idea of which trading type may best suit your personality, particularly if you resonated with one of the styles described earlier.
If you’d like to be sure of your type, DailyFX has set up a short quiz, which was designed specifically to help budding traders find out which forex trading style they are best suited to. Once you know your type, you can turn your attention to strategy. Before you know it, it’ll be your first day as a forex trader.
When learning how to become a successful forex trader, it pays to know which trading style is best suited to your personality. Each trader type has a distinct set of attributes they can use to their advantage as they go about executing their strategies. The more you build experience and get to know what works and what doesn’t, the more you’ll perfect your strategies, increasing the likelihood of having a long and fruitful career as a forex trader.
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