Successful Forex Traders: Which Type Are You?

by : Harold Hsu

There are not many people in the World that actually make money in Forex trading. However among these profitable traders, there are a variety of different trading methodologies that they use. It is thus important for a new trader to first choose the type of trader he wants to be.

The Type Determines The Method

Once you’ve decided on the type of trader you are, you’ll need to follow the trading methodologies that are appropriate for you. If you’re a day trader for example, you’ll want to focus more on technical analysis techniques such as support and resistance levels. Day traders don’t particularly pay attention to the general economic climate or too much about fundamental analysis.

On the other hand, swing traders will want to pay extra attention to the bigger picture. Fundamental analysis data may sometimes be ignored by a day trader, but may be crucial for a swing trader.

Another seldom talked-about topic is the choice of your trading broker. Day traders will prefer to trade with brokers that offer smaller spreads because they typically enter into multiple trades in a single day. Long-term traders (or investors) however, won’t mind the pip spread as much as day traders will.

Not Always Different From Each Other

Although it may be tempting to think that different types of traders use completely different trading techniques and data sources, it will do you well to remember that this is not always true.

For example, although a day trader may only execute his trades in the short time frame of 24 hours, it doesn’t mean that he won’t look at the weekly or even monthly trading charts.

A day trader may find it useful to analyze the trends of the past week (or month) to supplement his market knowledge and improve the chances of winning by trading in the direction of the longer-term trend.