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How To Tailor Your Forex Trading Style To Your Personality

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As anyone who is beginning their forex trading journey will know, there is a huge amount of new information to take on board. Developing an understanding of the markets and getting to grips with technical and fundamental analysis is a steep learning curve, and it takes a lot of time, mental focus and commitment. 


This process is essential so that you have a good foundational knowledge of what forex trading is all about and how it works. Understanding the key technical analysis tools and the bearing of geopolitical and economic events on the markets is crucial to putting together a solid trading strategy.


However, no matter how well-informed you are and how carefully you have thought about your trading plan, there’s one very important element that you may not have considered: yourself. If your strategy sets you against your natural personality traits, then you will always be fighting these tendencies and it will impact on your performance as a trader.

To give yourself the best chance of success, it is important to spend some time on self-reflection and identify your core personality traits. This will help you to harness the power of your natural ways of thinking and emotional responses to your advantage, rather than setting them up as continual obstacles to overcome. 


Here are some tips to help you personalise your approach to forex trading, and give you a unique edge that will help your energies and abilities to flow naturally. 


Make an honest appraisal of your personality


If you are not totally honest with yourself about your natural strengths and weaknesses, you will always be jumping from one trading style to another without developing prowess in any. You will struggle to make consistent profits and may even become so discouraged that you decide that forex trading isn’t for you.


However, it’s much more likely that you just haven’t found a trading style that matches your personality. There are a variety of ways you can assess your personality. For example, it is possible to take in-depth psychological and personality tests at an assessment centre or online, although you will need to pay for these and make the time commitment. 

It may be worth investing the time and money if you are interested in a formal and systematic assessment that has been designed by a psychologist. These types of tests are commonly used by large organisations to help them make decisions when hiring staff, to make sure that the candidate is a good fit for the role.


The tests are designed to measure aspects of personality and behaviour such as introversion and extroversion, temperament, motivation and resilience. They can be useful because no matter how well we think we know ourselves, most of us have blind spots or biassed views of ourselves based on outdated information. 


By taking a personality test from a recognised source, such as the famous Myers-Briggs test, you will be able to get a rounded view of your personality that is less subject to your own interpretation. This could be useful if you have limiting beliefs about yourself that were formed in your childhood or youth, or shaped by a negative past relationship. 

The test might help you to recognise strengths that you weren’t fully aware of, and to understand your weaknesses better. A weakness isn’t necessarily something you could or should overcome, it’s just a useful pointer that might suggest you are more suited to one particular trading style over another. 


The personality test can increase your confidence by helping you to better understand where your strengths lie, and to let go of subjective psychological baggage that has been holding you back. There are some free online assessments, although these may be rather generic and superficial in nature, but it may be a good starting point.


If the concept of a personality test does not appeal to you, then spend some time in self-reflection. Ask yourself questions such as whether you enjoy working under pressure, how patient or impulsive you are, your attitude to risk, and whether you have a methodical mind with an eye for detail, or if you prefer to think about the bigger picture. 


It can help to write down your thoughts and feelings rather than just keeping them in your head. Daily journaling can help you to identify patterns of behaviour that you weren’t aware of. 


You may wish to ask the opinion of trusted friends, family members or colleagues. However, they may not be completely honest for fear of causing offence. If on the other hand they do not offer criticism in a constructive manner, it could knock your confidence and upset your relationship with them.


Understand your risk tolerance

Risk tolerance refers to the amount of money you are prepared to lose on each trade. This will depend to a large extent on the amount of capital you can spare without compromising your personal finances. It also depends on your attitude; some people are naturally conservative and cautious, and others are bolder and can handle uncertainty well.


Risk management is a cornerstone of successful forex trading, and it’s strongly linked to emotional intelligence. Read up on trading psychology, which goes beyond personality and explores the reasons why financial trading can elicit powerful emotions, and how they can impact on our trading decisions.


Successful trading requires you to think clearly and objectively, and to step back from subjective and emotion-led decisions. 


Select your trading style

Now you have a better understanding of your personality and your risk tolerance, you can think about what trading style might suit you best. 


Scalping


Scalping is a fast-paced trading style that involves making trades within a few minutes or even seconds of each other. It suits traders with sharp lively minds who thrive on making quick decisions under pressure. It requires energy, focus, and a good balance between confidence and over confidence.  

This trading style may suit people who tend to be impatient but are highly focused and motivated. Because of the fast nature of the trading, it requires a high level of risk tolerance and emotional awareness. Some impulsive people can be driven by their emotions rather than objective thinking, so be aware of this.


Day trading


Day trading involves completing a trade within one day. If you are a highly focused and organised person who doesn’t like to take big risks, then this trading style might suit you. It takes away some of the uncertainty and waiting time of swing trading, but is less pressured than scalping. However, you’ll still need to feel confident with making quick decisions.

Day trading is quite time consuming. Most forex traders do not have 100 per cent of their time to commit to trading and will combine it with another job. Consider whether you are able to fit a whole day of intensive trading into your lifestyle.


Swing trading


Swing trading involves holding a trade over a few days or even weeks. This requires self-discipline and patience, and a phlegmatic personality type who enjoys identifying patterns and is strong-willed enough not to panic when a trade appears to be turning against them. 


Position trading


Position trading involves holding trades open for several weeks, months, or even years. It requires a good understanding of fundamental analysis so that you can keep ahead of market movements and plot the best time to complete your trades. It may suit traders who do not have very much spare time, because day to day you don’t need to do a lot. 

As you can imagine, this style of trading suits people who have the patience to hold the trade through turbulent times without being swayed by geopolitical events or public opinion. It may suit introverted people who are independent thinkers and have an aptitude for fundamental market analysis.  


Be flexible in your approach


Even after a lot of self-reflection and forward planning, it may be impossible to predict which trading style will suit your personality until you have tried out one or two approaches. Remember that your style may evolve as you become more experienced and confident, so stay open minded and flexible.


However, give each style a fair trial and don’t chop and change every time a trade doesn’t go your way. All trading styles have their advantages and disadvantages, and it’s impossible to find a watertight formula that will work for you every time.  


Be aware of your strengths and weaknesses, work on your emotional intelligence and ability to manage risk, and be prepared to learn from others. Above all, make sure that you have a trading style that you enjoy, find rewarding for more than just financial reasons, and fits in with your lifestyle. 


This way you are more likely to build a sustainable forex trading career that will soon be generating a steady income. 

FTUK Funded Account Disclaimer

CFTC Rule 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

All our funded accounts come with a fixed equity stop out level. Once the account equity level gets below this fixed stop out bar, we will close all running trades and disable trading and access. The stop out level is a fixed value for each funding level, this means that any profit which has been made by the trader increases the loss allowance.

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