When it comes to trading, having a strategy is essential no matter what market you get into. Trading methods are used to guide you when trading. It acts as a map that’ll help you execute your trades along with a set of rules.
These rules vary depending on the strategy whether you prefer short, medium or long-termed trades. Sometimes it even depends on your profit objectives, whether you like multiple small incomes or a couple of massive gains.
As a newbie in forex trading, starting can be overwhelming since you have to undergo tons of things like picking out a trading platform, picking out a market and even picking out a strategy. To cut your worries short, we can help you choose a trading strategy quickly and easily!
So if you’re ready to find out what forex method suits you best, down below is a guide!
Step 1: Find out your trading personality
To make the following steps easier, you first need to determine what your trading personality is. Basically, there are 4 major types of trading personalities: The anxious trader, the greedy trader, the lax trader and the aggressive trader. To know each one better, here’s a rundown:
The anxious trader
An anxious trader usually overthinks and likes to act on things immediately. An example of an anxious trader is closing a trade as soon as the tiniest market movements occur.
The greedy trader
Greedy traders, usually they’ll try to take as much profit as they can but at the same time, they’re willing to wait if it means securing heftier profits.
A lax trader
This type of trader doesn’t take the tedious process of trading and prefers to take their time. Based on their name their attitude towards the trade is ‘lax.’
The aggressive trader
Last but not least is the aggressive trader. This kind of trader usually aims to profit fast, no matter how big or small the gain is. For as long as it’s a gain, it’s a win for aggressive traders.
And it’s possible that all 4 personalities can be found in one trader. In that case, all you need to do is figure out what personality weighs out the rest. Now once you’ve figured out your trading personality you can now proceed to step 2!
Step 2: Figure out your preferred trader frequency and time frame
Now you need to choose your preferred frequency and time frame when trading. This is important since trading strategies really do follow a certain frequency and time frame. So to be two steps closer to figuring out your trading strategy below are common trade parameters to consider:
Trade frequency:
- Opening and closing a trade various times a day.
- Opening and closing a trade various times a week.
- Opening and closing a trade various times a month.
- Opening and closing a trade various times a year.
Trade timeframe:
- Keeping trades on hold for 4 to 5 hours a day.
- Keeping trades on hold for days.
- Keeping trades on hold for weeks.
- Keeping a trade on hold for months to a year.
Once you’ve figured out your preferred trade frequency and time frame, you can now proceed to step 3!
Step 3: Find out what kind of trader you are!
For the final step, you now get to find out what trading strategy will suit you best. But remember if you resonate with 2 or 3 personalities and trade parameters, you can choose among them and find out which works for you the best.
- If you happen to be an anxious trader who prefers to open and close a trade various times a day. you’re a Day trader. As a day trader, you usually keep trades on hold for 4 to 5 hours a day.
- If you happen to be a greedy trader who prefers to open and close a trade various times a week, you’re a Swing trader. As a swing trader, you usually keep trades on hold for days to weeks.
- If you happen to be a lax trader who prefers to open and close a trade various times a month or a year, you’re a Position Trader. A position trader usually keeps a trade on hold for months to a year.
- If you happen to be an aggressive trader who prefers to open and close a trader various times a day to a week, you’re a Scalper. A scalper usually opens and closes a trade various times a day for up to a week.
Take away
A trading strategy is not a receipt for success, where people claim only a certain kind of strategy can become profitable. Because what might work for them, might not work for you and vice versa. And not everyone will have the same outcome! A strategy has to merge well with your personality and trading style for it to amp up your odds of gaining big.
So before trading in forex, focus more on finding your niche strategy! A tip to find out quickly without risking money is by practising on demo accounts. If you feel like a strategy isn’t working for you, try a different one and don’t be afraid to alter it.
