If you’re new to forex trading then one of the most important early decisions you’ll have to make is which trading type is the best fit for your lifestyle and personality. Some forex trading styles rely on split-second decisions and constant monitoring of the market, while others are far less intensive and can more easily fit around your existing professional commitments.
In this article, we’re going to take a closer look at two of the most common forex trading types to see if either of these strategies could be the perfect fit for you.
Which Trader Type Suits Your Personality?
Each trader type has a distinct set of attributes that you may already have. By aligning your competencies and traits with the requirements of different trading strategies, you can give yourself the best possible chance of forex trading success.
Scalper traders, also known as ‘scalpers’, are a unique group of traders who take a very short-term view of the market. They can conduct dozens or even hundreds of transactions with the aim of making a small profit on each trade that will ultimately add up to a substantial gain.
This trading type requires individuals to monitor the market constantly to identify new opportunities and determine when it’s the right time to get in and out of a position. This can be very time consuming, with traders often glued to their computer screens waiting for the slightest moves in the market.
The fast-paced nature of this trading strategy means scalpers tend to be high-energy individuals who think clearly under pressure and have the temperament to handle high volumes of trades. They are also confident decision makers who can react to market moves in a matter seconds to maximise their profits and minimise their losses.
Discipline is another important characteristic of the scalper trader. With so many decisions to make, scalpers often apply a rigid system to evaluate price action, with strict entry, exit and risk management parameters to ensure that winning trades outweighs losing trades over time. Get it right and this trading strategy can bring substantial rewards, although its fast-paced nature also makes it particularly risky.
Event-driven forex trading is a strategy that attempts to take advantage of periods of volatility following a major economic or geopolitical event. That can include elections, monetary policy announcements, economic statistics and much more. Two examples of such events are the ongoing Brexit negotiations, which are causing turbulence in the markets on a seemingly daily basis, and the recently escalated conflict and tension between the USA and Iran.
An event-driven trader must spend a considerable amount of time staying up to date with global and local events and be able to analyse how those events are likely to impact the financial markets. If you’re someone who enjoys keeping up to date with global news and has an understanding of the economy, this could be the trading type for you.
Event-driven trading is another inherently risky strategy. That’s because traders must draw their own conclusions about the impact an event will have, often going against market consensus. That means event-driven traders must be confident and informed enough to make their own decisions and rely on fundamental analysis rather than technical charts to determine their positions.
Other Trading Types
These are just two of the most common forex trading types. If you don’t feel like you’re a good fit for the scalper or event-driven strategies, take the DNA FX quiz from DailyFX to find the most appropriate trading type for you.
Although a forex trading strategy that’s well-suited to your natural attributes can put you on the right path, there is still no guarantee of success. However, when combined with intelligence, gut instinct and comprehensive research, it could help you build consistent account growth.