Most traders are familiar with the concept of trading styles. However, it is not clear if most traders really understand their own trading style or how they can improve on it.
We all have our own distinct personality traits that go into making us who we are and in fact, these same traits often find their way into our trading decisions.
For example, we have come to the conclusion that successful traders fall into three broad categories :
1) Market Timers or trend following traders. These are your classic buy-and-hold folks who don’t mind holding long-term positions. They are best known for their ability to go with the flow of markets which isn’t always easy to do.
2) Swing Traders or trading ranges. These folks like to find low-risk, high-probability setups and apply them with strict stop losses. Their success relies on their ability to hit home runs with smaller position sizes over a long period of time.
3) Day Traders or scalpers. These traders look for short-term moves in one day or intraday timeframes. They apply a lot of leverage and go for smaller gains, often taking very small losses if any. They must also be able to manage their risk carefully at all times.
It is important to remember that even though we all have a pretty good idea of what these categories entail, they are really just loose definitions and each category has many sub-categories. For example, day traders can be either momentum or range-bound traders. Market timers can either trade without stops or take profits very quickly once they turn.
So we can see that we all generally fit into one of the above categories, but it is important to recognize where our strengths and weaknesses lie. By classifying oneself as a particular style, traders can begin to understand their own behavior and find new ways to improve it.
The key for traders of any style is to better understand themselves and how they behave as traders. This is probably the first step to becoming a successful trader.
What’s important is at the end of the day, they follow a strategic forex trading method and utilize a reliable forex trading platform like Meta Trader 5.
Each trading style (if you will) has its own strengths and weaknesses but the crucial factor is the trader must understand his/her own behavior in order to succeed.
What do you think about these styles? Do you feel that your trading style fits into one of these categories or would you like to add another? Let us know in the comments section!