fx Trading for dummies styles options to help you pick a time frame to trade
fx Trading for dummies styles options to help you pick a time frame to trade
An important step in your forex trading career in deciding which trading strategy you intend to trade, things that need to be considered are your ability to manage open positions around your work and personal life. It is not worth testing a system that is designed as a day trading system if you cannot go ahead and take trades it generates each day. So as a trader you are going to fit into one of the categories below.
Trading styles are usually categorized into 3 types:
1. Long-term
2. Short-term or swing
3. day-trading
1. Long Term Trading
Long term traders will normally trade daily charts looking for the larger moves in the market. Trades can last many weeks or months determined by your strategy. This strategy has an advantage with as a rule higher winning percentage of trades as stop are larger to deal with the short term swings in the market.
The main disadvantage in this is a much larger account is required to comfortably handle the stop size in the market as stops could be 300 pips or more. Greater discipline is required for this type of trading strategy as you could potentially only take one or two trades every 3 or 4 months.
2. Short Term trading or swing trading
Short term trading is probably the most sensible place to start for most traders, these trades are in more positions than longer term trading so therefore easier for you as a trader to maintain their positions psychology with less time in draw down and smaller stops in place. Trades may be open for a day or possible to a week in an attempt to catch more of the pullbacks in the market. 4 hour and 1 hour charts are most likely candidates here if you choose this form of trading with the hour chart a great place to work out entry points in the market.
3. Daytrading
Day trading is probably the most popular type of trading. Traders may take several trades each day even several per session. This can be a very aggressive trading strategy and most people will try this as it potentially has more chance of making several percent of profit on a daily basis.
Small profits or losses are taken which could also greatly enhance your risk if you don't employ a systematic trade plan outlining your most number of accepted losses per day or even percentage drawdown per day. More losses generally occur due to small stop losses, which are taken out with the larger short term moves caused by news.