Trading Forex without a strategy is like driving a car with your eyes closed. While you may get lucky for a while, it will end disastrously. There are many trading strategies, which can be categorized under four trading styles. The main difference is the intended length of the typical trade’s lifespan.
Traders must find the trading style that suits them most and then choose or develop a trading strategy to fit it. Trader must also learn to execute and trust it, which takes research, back testing, and forward testing.
What are the four trading styles?
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Scalping for ultra-short-term traders (from a few seconds to minutes)
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Day Trading for short-term traders (intraday trading)
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Swing Trading for short-to-medium traders (from a day or two to a couple of weeks)
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Position Trading for long-term traders (from a couple of weeks to months)
What is the Best Trading Style for Beginners?
There is no one best trading style for everyone, as it all comes down to the individual trader finding a strategy that best suits them. Beginner traders should evaluate each trading style, then select one they like, and then find a trading strategy for beginners in that style to test. It is certainly true that there are some trading strategies that just are not profitable, so do not make the mistake that all strategies are equally valid.
The only trading strategies that are both profitable over the long term and which have simple non-discretionary rules, are trend trading strategies in major Forex currency pairs such as the EUR/USD and USD/JPY. Many Forex brokers and websites publish trading strategy rules based on applying indicators to short time frame price charts on any currency pair or cross. These strategies do not work and anyone following them is bound to lose money.
Regarding discretionary trading strategies, learning to identify reliable support and resistance levels, and then using them to trade based upon what the market is doing on higher time frames, can also work well in Forex.
Returning to the topic of trading styles, it will take time, trial and error, and losses along the way to find the best style for you, but the benefits will yield positive long-term results. You may find that your personal circumstances dictate your possible trading styles. For example, if you have an extremely busy schedule, you may just not have the time to implement a very short-term trading style, unless you are willing and able to use automated trading.
What is the difference between a trading style and a trading strategy?
A trading style defines the trade duration and mentality of the trader, and four distinct trading styles exist. Each trading style can be expressed in countless trading strategies. They follow the rules of the trading style but use different variables to identify when to enter new trades and exit them.
What are the trading costs associated with trading…
Read More: The Complete Guide to Trading Styles & Strategies