January 6, 2014

Your Personality and FX Trading Strategies

FX trading

Your success in FX trading depends on how comfortable you are with your strategies, methods, and techniques in the forex market. While there is nothing stopping you from picking up just about any strategy and running with it in the market, it is proven over the years that only those traders succeed who are completely comfortable with the strategies that they have chosen.

In fact, it is not just your personality that should be an important consideration for you while choosing an FX trading strategy but also various other logistical facets. Knowing how to go about this process with your personal characteristics and logistics in mind will help you be more structured and less random. Consider the following.

What Are Your Personality Traits?

Before you even consider picking FX trading strategies, you have to ensure that you know yourself in as much detail as possible. This means a number of things. First and foremost, you will have to figure out your temperament and how you react to various crunch situations.

You will face many critical situations while trading forex and will have to react to them in a measured and balanced manner. Therefore, you will have to ensure that you are objective about your feelings so that you can realise when you are emotionally compromised.

After this, you should figure out what your tolerance level is for losses. In different words, you will have to understand how much money you can stand to lose from the total risk capital that you plan to put up. Only after you have analysed these aspects can you begin the selection process for your ideal FX trading strategy.

Suitability to Your Timings

While selecting the right FX trading strategy, you should focus on how much time you can devote to trading in the market. Every trader has his own concept of how much time he can devote to this process, with some choosing part time trading and others going for full time trading. Even within these two categories, you will have to figure out how many hours you can realistically put into forex trading in a day and week.

Compatibility with Your Lifestyle

You should also keep in mind the time zone that you operate in. Your time zone is important because you will have to find currency pairs that suit your time zone. Every FX trading strategy is designed to target certain types of currency pairs.

Matching Your Risk Tolerance Levels

The reason why you have to figure out what your tolerance levels are for risk is that every FX trading strategy has a certain amount of drawdown which is the sum of money that it can lose in the worst case scenario. You have to make sure that the drawdown of your chosen strategy can be absorbed by your total account size.

Finding an FX trading strategy is not easy but if done right then it can pay dividends for the long term. After you have the right strategy, all you will have to do is focus on implementing it in the right spirit.



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