If you’re hungry for a career change and you’ve already got an interest in financial markets, then your next career path may be closer than you think. With an estimated 9.6 million traders in the world, online forex gives you the opportunity to do something that is fast-paced, fulfilling, as well as potentially lucrative.
What is Forex Trading?
Forex refers to the marketplace where multiple currencies are actively traded each day. Forex traders primarily spend their time speculating on the direction of a pair of currencies, each relative to the other. Traders buy and sell currencies, often interacting with multiple types in a given day.
The forex market is known as the most liquid market in the world, with trillions of dollars being exchanged each day of the year. Regardless of location, this type of career involves working within a system formed from a network of institutions, brokers and banks.
Types of Traders in Financial Markets
There are many types of traders in the market, each with a particular style that is suited to their personality. Your trading style matters, as it dictates your trading strategy. The five most common types to explore are Swing, Position, Event-Driven and Algorithmic traders, as well as Scalpers.
Swing Trader
Swing traders work to benefit from forex price swings that take place in the short-term, often over a few days or a week or two. With a mindset for quick profit gains, this type of trading is analysis-heavy, with less of a focus on changing economic or political variables, which have an ongoing effect on forex rates.
Swing traders are generally focused individuals who are risk averse and able to make buying or selling decisions independently of volatility triggered by current events.
Position Trader
Position traders take somewhat of an academic approach to forex trading, with a greater focus on macroeconomic and geopolitical changes, occurring over a longer period of time. These traders tend to be clued up on global affairs and knowledgeable about the effects of current policy changes.
This becomes important as they tend to hold trades over a longer period. Technical tools will be your friend if you adopt this trading style, and often those with a more holistic view of world events and a fair share of patience end up making the best position traders over time.
Scalper
Scalpers are hustlers, with a view towards profits based on immediate price changes, multiple times a day. Constantly evaluating price action, these types of traders are great at managing risk and turning short-term gains into bigger opportunities.
Because of the rapid nature of the scalper strategy, these traders are required to have a strong sense of emotional discipline. This type of trading is risk-heavy, though those with the correct mindset for it will argue that potential returns will always trump the associated risks.
Event-Driven Trader
Event-driven traders focus on volatility within a given day, which is usually triggered by volatility resulting from changes in global events. These types of traders find profits in the readjustment of market consensus in instances when expectations are not met.
To be good at this type of trading, you need an interest in statistics, need to keep a close eye on global news announcements and policy changes, and you also need a knack for speculating on the decisions and actions of leaders from developed and developing economies.
Algorithmic Trader
If you like working with algorithms, this type of trading may be for you. Algorithmic traders make decisions to buy and sell using coded software that is either personally designed or commercially licensed. If data gets you excited, you’ll be flabbergasted by the amount of information these programmes are able to generate to help you improve your trading.
Algorithms largely mitigate risk, removing a discretionary element to live trading by making decisions using history as its compass. No software is ever going to be 100% accurate, so it’s worth noting that this type of trading requires you to be flexible, just like your algorithm is over time.
Discovering Your Trading Type
With so many styles to choose from, you may now have somewhat of an idea of which one is suited to you, but you might not be sure just yet. If you want to know which style suits your personality, you can take this quiz to find out for sure.
Designed by DailyFX, the quiz is aimed at helping new traders to find the style most suited to them before they enter the market. Equipped with the knowledge of your trading type, you can join others in starting a forex trading company from home, get going on your strategy, and take the plunge into the exhilarating world of online forex trading.
