Choosing your trading style

Before you can trade actively in the forex market, you need to determine how you are going to approach the market. The trading style you choose is the most important determinant of overall trading success. It has to be based on who you are, the time and effort you can put into market analysis, your understanding of the market, and more. Consider the following aspects of choosing your trading style:

Determine what trading style fits you best- The first thing you have to do is analyze yourself. What kind of risks are you willing to take? Some trading styles have caps at only risking 5%, or a certain number, while others are more risk oriented. What kind of time do you have? Is this how you are going to spend all of your time? What works for one person may not work for another. You can best determine a trading style by being honest with yourself.

Understanding the different trading styles- Of course, in order to truly choose the best trading style for you, you have to know the various trading styles, and what works for you. Do you want to trade with short term, high frequency day trading? If so you want to be sure to trade only the most liquid currency pairs, trade only during peak times of liquidity and market, only trade one pair at a time, preset default trade sizes, look for a brokerage firm that works well with this trade style, adjust your risk and reward expectation, and avoid trading around data release. However, if you are going to opt for a medium-term directional trading style you would need to trade with a view, with the technical's, based on events and data, and with the flow. If you opt for a long term macroeconomic trading style you would want to trade long, with higher yielding currency, and short with lower yielding currency.

Developing and maintaining market discipline- Regardless of the trading style you decide to go with, you need to have an organized trading plan. Without one, you will not get far, and your success will be minimal. In order to develop a plan you need to do some market analysis, and determine the market outlook, the organize an approach for trading within these parameters. This would include determine position size, where you want to enter the position, and having a set stop-loss and take-profit level. Make a plan, and stick to it. It can't work if you do not follow it.

Choose your trading style, learn all that you can about it, and then create a trading plan that requires some discipline. This is going to make or break you in the Forex market. If you really want to make money, you have to understand the various trading styles, and create a disciplined approach to trading within the one of your choice.