What Type of Forex Trader are You?

Different Forex traders have different techniques and it's possible to determine your trading personality based on how you approach the market.

Traders in the foreign exchange market vary greatly in their approach. Some traders profit from small, day-to-day market fluctuations, while others wait for long periods of time before making a move. Your unique trading personality determines what kind of trader you are. Whether you're a day trader or whether you follow a different trading time frame, there are a range of factors that contribute to your specific trading persona.

To begin, you can consider yourself a day trader if your trading strategy involves making trades within the time frame of one day. This routine usually involves studying the markets in the morning and completing all trades by end of day that evening. Day traders go home from work every day knowing precisely how much was won or lost.

Differing greatly from day traders are traders that engage in long-term trading. Such traders usually have another job outside of trading and, unlike day traders, they are unable to commit a lot of time to daily market analysis. This type of trading is often referred to as position trading because traders rely on the position of certain markets over the course of weeks, months or years to earn them long-term gains. Position traders study long-term fluctuations in the market and use their knowledge of seasonal trends to make trades.

Within the categories of day traders and position traders there are also a range of more specific trading types. For example, if you are a day trader who locates the end of a particular trend and makes your move just as the trend reverses, you're what is known as a counter-trend trader. Or, if you are a day trader that analyses patterns in trading graphs and makes trades when prices fall between the proper levels of support and resistance, then you are what is known as a breakout trader.

Finally, traders that aren't quite day traders but are also not long-term position traders are known as swing traders. Swing traders hold their trading positions for a period that can range from several hours to a few days. Swing traders make the most of short-term movements in the market rather than gradual trends or minor hour-by-hour shifts.

Thus, forex trading lends itself to many different types of traders. No matter what kind of trader you are, it is possible to benefit from the foreign exchange market. Once you are able to pinpoint the type of trader you are, you can find resources and develop strategies that are specifically suited to your trading personality.

The author of this article is a part of a digital blogging team who work with brands like Saxo Bank. The content contained in this article is for information purposes only and should not be used to make any financial decisions.