There are 3 main trading styles in forex trading:
Scalping involves placing short-term trades (no more than couple of seconds long). It is a risky way to trade, since in order to make any profit you have to use a lot of lots. Scalping is definitely not suitable for panic-attack-victims, drama queens and no-money-to-spare traders.
2. Swing Trading
Swing traders hold trades for several days or even longer. It is all about long-time planning and analyzing.
3. Position Trading
Position trading involves placing trades for very long period of time – weeks and even months.
4. Day Trading
Day trading is all about entering and closing trading positions in the same trading session.
Another thing to consider when searching for a trading personality is the analyzing techniques. There are two main ways to predict the next trading moves:
· Technical analysis
Technical analysis involves looking at charts and using technical indicators to analyze the price movements in the past and hopefully predict the next current pair price movements.
· Fundamental Analysis
Fundamental analysis is all about reading economic news and releases, such as Employment data, political changes, CPI, GDP and other news that influence the economy and, therefore, a currency.
Personalities and Their Impact
The trading performance is strongly influenced by our behavior, emotional state of mind, ability to deal with stress and other psychological characteristics. The basic personality qualities seen in forex trading are:
1. Pessimism and Regret
A lot of forex traders are simply unable to move on once they lose. The regret and thoughts of all that money gone to drain suffocate the depressed trader, creating a negative attitude towards trading which, of course, affects the decisions and predictions.
2. Super Powers and Total Control
Some traders (especially the beginners) tend to believe that the market is in their control, that they possess telepathic abilities to predict the future and therefore, there is no need to focus much on indicators or economic news.
If guessing works in gambling, why can’t it work in forex trading too?! Well, no, guessing doesn’t work in forex, so keep your super powers for family holidays when you can show a magic trick to the kids!
3. Impossible Expectations
The need of perfection is a poison in trading. It is impossible to always win, or get profits right from the beginning of your trading career, or make couple of millions within a week. There are no optimal outcomes and forex market is not all about you. Lots of factors are involved in it, so even if you expect an impossible from yourself, you cannot anticipate other factors to go always go your way.
4. Adrenalin Seekers
Some of us just need action in life – whether rock climbing, swimming with sharks, rollercoaster riding, parachuting, drinking till-you-drop, gambling or, in our case, forex trading. After all, trading is very stimulating experience.
Adrenalin seekers usually possess aggressive and success-oriented attitude. It is, at first glance, a great attribute to trading, however, these traders seem to have negative emotional experience such as anger, depression, over-excitement, over-trading, revenge trading, guilt, anxiety etc., and the emotional breakdowns are the worst enemies in forex.
Risk-hater is more of a relaxed trader, who avoids risk, loss and regret at all cost (even if that means not trading today at all). Risk-hater tends to have non-achievement behavior and this seems to hurt the potential overall earnings, however the relaxed risk-averse traders seem to perform best in forex trading. The ability to think clearly brings out good decision making, good money management and trading profitability.
What Kind of Trader are You?
Even when traders may share common ideas and trading styles, they are still completely different! Each trader possess their own personality, different time schedule, unique risk-taking ability, diverse ability to stay focused in front of the computer, unlike past experiences (not necessary trading related), different marital status, distinct ways to deal with losses and stress, unlike financial situation, unique personal preferences, overall emotional state etc. This list can go on forever!
There is no uniform winner-scheme. The faster you figure out what kind of personality you possess and what other factors influence your daily life, the easier it will be for you to determine ways to your forex trading success.
Write down a trading journal and in it, analyze your thoughts and emotions towards each trade (winner or loss). The journal can help you tremendously to understand your strong and weak personality points. Once you know yourself better, you will be able to figure out why one trade was a winner and another was a loser. With some extra work, it is possible not only to control the weak points, but also not find yourself in a similar bad situation again.