If you have some spare money to invest, there are many different ways you can go about it. For example, you could head into the city centre to simply put it into your bank savings account, or, if you have a considerable sum you could find a property in Liverpool to invest in. Another way in which some people put their money to work is by forex trading. This huge global financial market sees over $5 trillion made in trades every day as people try to predict where the price will head for various currency pairs. While you do need to know what you are doing, it is a tempting prospect for many on Merseyside with some spare money to invest.
Knowing what you are doing is the key to successful FX trading. Although the basics of how to trade and how the market works are pretty simple to understand, forex trading itself is a complex subject when you really get into it. From remembering to check broker ratings to trading plans and reading charts, there is a lot of work and time involved. One important thing to decide is what kind of trader you are. That will then help you to trade in a way that you find enjoyable and which works best for you.
What type of trader are you?
There are four kinds of forex trader which people in Liverpool are likely to be. The key thing is to choose the one you are most comfortable with and that fits your lifestyle. Do not just copy others – this is a personal thing which you need to decide for yourself.
But what are the four common types of FX trader?
Scalper
This may sound scary and remind you of old films about the Wild West, but it is actually a type of trader. This style is good if you have the time to sit in front of your PC during the day to manage your trades. It is also a good fit if you want lots of action and excitement when trading. Scalpers only hold onto trades for a few seconds at a time after opening them. The main goal is to close them as soon as the price heads in the right direction for lots of small profits. This style of trader usually employs the shorter timeframe charts of one or five minutes.
Day trader
If scalping sounds too hectic for you, you could be a day trader. This is less fast paced than scalping and is good if you do not want the emotional rollercoaster that can bring. Day traders will analyse the markets when they log on in the morning and place any trades they deem appropriate. They then leave the trades to play out before closing at the day’s end. This type of trader usually uses the higher timeframe charts and will not be able to sit in front of their computer all day to trade.
Position trader
If day trading seems too much for you, you could be what is known as a position trader. Position traders like to be in it for the long haul and will open trades that last for several weeks or months. They analyse the markets for the long term based on fundamental themes which they think will eventually win out. Naturally, this kind of trader will use weekly or monthly charts to review what the currency market is doing. If you want to set and forget trades or do not have the time to be constantly trading every day, then you could be a position trader.
Swing traders
As with some of the other types, you might be a swing trader if you cannot monitor your open trades and the charts throughout the day. Swing trading sees you open and hold trades for a few days at a time to give them the opportunity to move in your direction. Usually, you would spend a few hours each night on analysing the market before making your decisions to act. You would then simply forget about them until the next night when you would review your open trades again. If this sounds boring then you are probably not a swing trader, but it is good if you want an easy, less time-consuming way to trade which still lets you be involved in the markets on a regular basis.
Find out which type you are – before trading!
The main thing is to think about your own personality and how you would most like to trade. If waiting around bores you, then position trading will simply not work for you. If, however, you like lots of action and will be trading full-time as your job, you could be a scalper. Once you discover which type of FX trader you are, the rest of your journey in the world of forex will be easier and more productive.