Forex Blog

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Two Approaches to Trading

October 22, 2012 by

From what I have read in books and observed myself in the FX trading community, there are two types of traders: those who treat the market as an entity that must fulfill their goals and those who view it as something almost random with unavoidable periods of losses.

The first group often mentions military terms in their description of trading process — they battle with the market to reach their goals. Usually, they set some daily or weekly targets for profit that they aim to achieve. Then they try to squeeze those pips out of the market. Such traders do not wait for the profitable conditions and opportunities to appear, they adjust their methods to get profit out of any conditions presented by the market. Needless to say, such an approach may lead to huge losses and disappointments. On the other hand, with a bit of luck or enough experience and developed intuition, this trading style will demonstrate astounding results. It is very important for such traders to be right in majority of trading outcomes as losses symbolize (and sometimes really mean) defeat. It is also a very active approach to market, bordering with overtrading at its extrema.

The second group is more passive in its trading and does not try to dictate its rules to the market but is rather following the opportunities presented by Forex pairs. These traders rarely overtrade but are prone extreme gun-shyness, missing some of the set-ups that would definitely trigger positions for the traders of the first group. Second group traders are not afraid of losing and do not expect every deal to come out as a winner, they are content with knowledge that their trading system has some edge and will be profitable overall.

I prefer to view myself as a member of the second group. But, of course, it is not all “black and white” — there is no clear border between those groups. Some currency traders may demonstrate behavior of both groups under different market or daily life conditions.

How do you treat the Forex market?

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