One of the biggest problems for traders to be consistent is in choosing their way of trading, finding their place among the different Forex trading styles.
Forex is a great market that allows you to make a lot of money, but also to lose it.
As this business is set up the logical thing is that you lose money, not that you make money, you will be wondering why.
The reason is simple, the most abundant Brokers in the market are the Market Maker, they make money in two ways, with their commissions and with your losses.
Nevertheless, there are decent Market Maker Brokers and others who are “blacklisted”.
But leaving Brokers aside, keep in mind that when you win, someone loses. At least 50% of the market is waiting for you to lose.
The reasons that lead you into losses are several. A serious trader knows that part of his trades will be negative, and he assumes it.
What he wants is to lose a little and a few times. However, traders who start out tend to lose many times and a lot, what fails?
Ideally many things fail, such as not respecting stop losses, not having adequate mind control, but one of the biggest problems is having chosen incorrectly between the different trading styles.
The different trading styles have to do with the trader’s preparation (technical and psychological knowledge) and also with his available time.
A bad combination of these time-knowledge elements is the direct way to disaster.
We go with the different trading options you can choose, along with the demands on time and knowledge needed.
Scalping is the most demanding option in terms of time and knowledge of trading. Curiously enough, it is one of the most popular options for beginner traders.
Some have read that one of the greatest risks of trading is the market itself, that the longer you stay inside, the more you expose yourself to the risk of loss.
trading styles, scalpingLogically exposing yourself to the market is a risk, and as such you have to face that the longer you are in the market, the greater the risks … but also the profits grow in equal proportion.
To be a scalper you have to have a good knowledge about the price action. Scalpers do not usually use technical indicators, except volume, price, supports … if they use any type of indicator, is usually own, rarely is a classic indicator type MAC or RSI.
It is also necessary to be very aware of everything that happens in the market and the news that can move the price (economic calendar). Keep in mind that their mission is to make many operations, very short and that most are profitable, any news can move the market a lot in one direction or another, and they have to be prepared to take advantage of the movements and not be caught on the wrong side.
The level of psychological control and responsiveness must be very high.
Finally, the amount of time we need to be scalper is intensive. We are dealing with an operator, who has to spend several hours a day in front of the computer screen, awaiting the slightest movement in the market, concentrated and ready.
Do you think that if you get home from work at 3pm, eat and get in front of the screen, will you be able to operate?
A scalper, like a day-trader prepares the sessions.
Before starting the day reviews the market, is attentive to news that may move the asset or assets it trades, and once all those tasks are done, it is ready to spend at least two hours fixed in front of the screen, without moving and concentrated.
A trader who starts, cannot and should not be scalper.
Day trading leaves more freedom than scalping, at least it doesn’t require you to be in front of the screen completely glued.
However, if you require a high degree of concentration when searching for trades, you should also consider the working day. Like the scalper, it lives on price movements in short periods of time, in this case minutes to hours, being warned of any situation that may alter the market, is vital for success. trading styles, day trading
The technical and psychological demands are similar to a scalper, perhaps with less tension, as they do not usually perform hundreds of operations, doing one or two good is worth them.
In this case, day traders can have a trade open for hours, while a scalper is seconds.
That level of tension is different.
Doing a sports comparison, the scalper needs to prepare to win a big slam, while a day trader prepares to win the next match.
We come to swing Trading, one of the most recommended ways to do Forex Trading, but that follow fewer people.
It seems that you have to pay a rollover for having an open position, as we touch a little nose.
That’s why many prefer to be day traders, not to leave any open trade when they close the computer, limiting their exposure to the market and in addition, they do not incur financing costs.
A medium-term trader (swing Trading) can have a trade open for a couple of days, even a couple of weeks.
It seems that in Forex this is a barbarity, but it all depends on the trader’s temperament, his level of knowledge and the amount of time he can devote to his trading.
Swing trading can be algorithmic in its entirety, choosing a trading strategy as simple as a moving average cross. Its technical requirement is average, even if it seems that you need to know a lot about Forex, in reality it is not necessary, it is more important to have a good personal knowledge than technical.
Anyone who has been studying technical analysis for only a few days could successfully implement a system based on technical indicators.
Another great advantage is the time to dedicate, if we speak of graphs of 4 hours and daily, with reviewing once a day the operations is sufficient.
We could say that swing trading is very little demanding in time, and that it can be carried out with limited knowledge about trading.
If that requires, like all trading, a good discipline. Without discipline, there is no reward.
Position trading, within trading styles, is the least explored in Forex.
It is about capturing long term trends and it is evident that it is not simple, neither in Forex, nor in stocks, nor in indexes, nor in any other asset.
The difficulty lies in establishing when a trend is beginning, and when it ends.
In these cases, if the trend is more or less strong, it can influence the final profitability, because if we are going to be exposed to many financing costs. positión trading, trading styles
The advantage? the necessary technical knowledge is basic, and the level of stress to which we are subjected is low.
Personally, my recommendation is to focus on swing trading, which may be the easiest to complete. The idea is to capture a stretch of a trend, and we won’t have to endure the setbacks that a position trader would have to be willing to, nor the stress of the day trader or scalper.