The forex market can be one tricky maze filled with booby traps at every corner. Yet the vast foreign exchange market is highly profitable and one can realize his or her financial dreams in the shortest time possible.

To be a successful trader in the long run, one needs to find a trading style that suits him or her. There are many different trading styles to choose from. The best one for you should match your unique personality.

A trading style is simply the set of rules and regulations you choose to follow in determining your trade entry and exit points and how you manage your trades.

The following are short descriptions of some of the more popular trading styles in currency trading.

Automated Trading

There are computer programs commonly known as forex robots in which a trader can input their rules or trading parameters, and the robot automatically enters, manages, and exits trades automatically on the trader’s behalf.

The robots operate on the broker’s platform 24 hours a day without the need for the trader to be at the workstation to monitor the market or the trades.

Carry Trading

Carry trading involves the trader purchasing a high interest currency and selling a low interest currency.

The broker then pays the trader the interest difference between the two currencies in the currency pair daily for as long as the trade is set on a positive interest direction.

Continuation and Reversal Trading

This is a form of trend trading whereby the trader waits for the currency to form a strong price trend. When the currency forms a reversal signal then continues on the previous price trend again, then that is the trade entry signal.

Day Trading

A day trader typically buys and sells currency within very short time periods. Usually, this is within a single day. A day trader never holds overnight or weekend positions.

Discretionary Trading

A discretionary trader will use his or her own previous trading experiences to decide on his or her trade entry and exit points. The trader will typically rely on his or her intuition to make trade decisions.

Fundamental Trading

Fundamental traders in the fx market rely on financial news and other events that are likely to affect currency prices in the short term.

The release of economic reports, such as employment data, act as a basis for determining which currencies to buy and which ones to sell. Click here to learn more on fundamental analysis in forex trading.

Technical Trading

A foreign exchange technical trader typically watches price charts and analyzes price movements for technical signals and patterns and uses that to make trade decisions. Click here to learn more on technical analysis in forex trading.

Buy-and-Hold Trading

A buy and hold trader usually uses fundamental analysis and studies long term price charts to make trade decisions. The trader may hold a position for many weeks, months, and even years.

The buy and hold trader’s objective is usually to seek long term capital appreciation while at the same time earning interest on the rollover. A buy and hold trader will typically average between one and ten trades per year.

Position Trading

A position trader typically holds a trade position for between medium and long term periods. The trader may hold the position for a week or even 3 months.

The position trader invests with the objective of earning quarterly or monthly income trading medium to long term trends or clearly defined ranges through a market cycle or quarter.

Range Trading

Range trading is a simple trading method with clearly defined risk-reward parameters.

A range trader will clearly define the support and resistance areas and focus on congestion points and price movements on the charts. This style allows forex traders to ignore news flows.

Scalping

A scalp trader typically relies on frequent short term trades. Scalping is one of the most discussed methods in currency trading online and is not recommended for new traders.

Expert traders with wide experiences however have learnt how to profit very lucratively from very short trades with high volatility. Scalping involves having very tight targets and very wide stop losses.

Social Trading

Social trading is a fairly new concept that is very quickly gaining popularity amongst traders. Less experienced or knowledgeable traders follow the trade movements of the more experienced traders to maximize their profit potential. Social trading has opened up large markets for people who lack the technical know-how to actively engage in forex trading profitably.

By following a social network that has leading traders, one can take advantage of the cumulative knowledge of the social network to place some very good trades and consistently earn impressive profits even with little knowledge of the forex market.

Swing Trading

A swing trader makes her/his profits by trading during short to medium term trend swings. Such trend swings last anything between a few hours to weeks or even months.

Trend Trading

Trend trading dispels the premise that successful traders buy low and sell high. Trend trading works on the concept of buying at high prices and selling at higher prices. Trend traders typically wait for the currency market to form a trend.

Fortunately, most currency prices are usually on a trend and thus the trend trader will always find opportunity to trade. However, for the less experienced trader, one should avoid the short trends and wait for trends that last over a longer time frame.

Trend trading is one of the most highly recommended trading styles and traders are advised not to go against trends.

Summary

We all have our unique personalities, our different tastes, our different styles, and our different time schedules. This means that what works for someone else will not necessarily work for anyone else.

This is especially true for forex trading online. Therefore, every trader should early in his/her trading life find out which trading style best suits him/her and use it to his/her full advantage.

In determining your best suited trading style, you have to define your ideal trading timelines and your forex trading strategy.

You should also choose the type of forex market analysis you will be using when making trade decisions.

A combination of different analysis methods may also work but one should take care not to confuse themselves by using a highly complex combination.

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