Forex Trading Style

Some of the most common Forex trading styles may include scalping, swing, position, discretionary, and automated trading. However, if you are a new investor it is better to first understand which forex trading style suits you best.

There are basically two types of Forex trading systems -- mechanical and discretionary, on the basis of which you can formulate your forex trading style. The trading signals that come out of mechanical systems are mainly based on technical analysis applied in a systematic way. In discretionary systems you use experience, intuition or judgment on entries and exits.

If you are methodical and not willing to invest until you understand every aspect of how the different political, economic, and psychological factors going to affect the currency rates then your Forex trading style is going to be based on trends. Now you can predict currency momentum trends by understanding all factors that affect exchange rates between different economies.

On the other hand, if you are typically looking for the highest profits in the least amount of time, your Forex trading style will be based on the strategies. For example, Scalping is a favorite currency trading strategy as it involves predicting future exchange rates a few hours or days into the future.

By mobilizing capital faster, you can buy in, make a quick but reasonable profit, and get out before the rest of the market has had time to adjust. So in this particular forex trading style you can make your profits before the markets can retrace and are known as counter-trend investors.

If your forex trading style is based solely on technical analysis you will focus upon the recent history of the currency exchange rate movements to predict future changes. In this specific forex trading style, you consider the fundamental indicators such as economic or political news as inconclusive and unreliable predictors of future price movements.

However, through technical analysis, it is possible to examine how similar political or economic news events affected past prices - and then you can formulate your own forex trading style to predict the future price movements.

You should not develop your forex trading style exclusively based on only one type of analysis. Although you will find that the trend investors and counter-trend advocates do differ greatly in their forex trading style, trend investors are expected to do better when they focus on fundamental factors and their potential effects on currency exchange rates.

Here, as an investor you are incorporating many factors GDP growth, interest rates, trade deficit/credit figures, and commodity prices and their impact in your forex trading style.

For example your forex trading style should choose the right currency pair. You must decide on how long you plan to stay in a trade. You should also have clear exit plan. You can place your stops and limits accordingly.

Your forex trading style should guide you in deciding how much you are willing to risk and how much you are looking to gain. Always keep track of important news and technical levels, which may be tested within your time frame.