You might have heard this being said plenty of times that you ‘need to figure out the trading style that works best for you’. If you are a new trader you probably have no idea how to do this.
In this article we are discussing exactly this so that you can think of ideas besides blowing your account while trying everything.
Most traders end up trying a bunch of different things and the thought process is that we have to start somewhere. While it is true that it will take some experimentation to get you to where you are you need to be, you don’t have to move between a wide range of styles.
If you have carried out an effective initial analysis of your trading style then there will be no need for too much experimenting.
So let us get right into the things you need to focus on to identify your trading style:
1. Your account size
This is the first thing that you should take into account.
Your account size will determine what kind of risks you can take. For example, people with bigger accounts usually do not risk more than 3%. However, the more you risk the bigger the reward is too.
Those who have been struggling for a long time and who have a system in place for how they will trade, are usually fine with a small but steady amount of profit.
On the other hand, those who are trying to grow their accounts and are starting really small take bigger risks when they see a potentially profitable trade coming so that their accounts grow faster. Of course, this has to be a calculated risk however.
So consider your account size first and plan accordingly.
2. Your temperament
This has more to do with psychology than numbers.
Are you an impatient person? Can you hold your ground or you end up acting out of stress? Are you a decisive person?
There are many types of traders. Scalpers and day traders have to be quick thinking and decisive. While swing traders and position traders have to be patient and their trades are backed by deep analysis and solid understanding of the market.
So take a closer look at yourself and see what will best suit you.
The time frames you choose to look at for your analysis will also be dependent on your understanding of your trading style.
3. Currency pairs
What currency will you be trading? What is your account made of? Which other currencies is it paired with generally and does it make for a profitable trade?
These and other questions like these you need to ask yourself.
No one can tell you the answers to these questions though. That is because they don’t know what you trading goals are and what your profit expectation is.
Therefore, make sure you do your research and decide which pairs you need to focus on. It is better to keep some focus currency pairs and not be all over the place.
4. Trading strategies
Finally we come to trading strategies. Do you understand support and resistance, supply and demand, and bullish and bearish markets?
Your strategy does not need to be too complicated. You don’t have to use a whole lot of technical indicators and come up with customized ones right from the start either.
Keep it simple. Rely on what you fully understand and take it from there.
Eventually you will get the hang of it and then you can move on to the more advanced strategies.
We hope this will have brought you one step closer to figuring out what your trading style should be and what your trading niche is.