Styles Of Forex Dealers

Style of Traders

Through my years of trading, one thing I have found is that one strategy does not fit all. We all have different risk tolerances and monetary goals. One of my goals in each E-mini Futures class I teach is to show the students a strategy and have them take it home and use it as a foundational starting point for defining their own strategy. My style is to follow the trend and enter on pullbacks. You could call this style Intraday Swing trading. This works for me because it fits my personality, patience and discipline. I understand that trading is a business dealing in probabilities and that it takes a series of trades to make a trader, not just one or two trades. However, with that said, not everybody trades like me. Of course, that is a good thing because if we all traded alike then who would take the other side of our trades? So let's discuss some of the different trading styles and see which one fits you.

Position Trading

Position trading is the longest duration style of trading. This is usually done by Commercial traders in the Futures markets. The trades can last for months up to several years. Having very deep pockets (very well capitalized) is one of the requirements for this style. Many of the Commercials must use lines of credit with banks to sustain these positions. Position trading requires extreme patience and someone who does not excite easily. While holding these positions you could be buying while everybody else is selling. This is referred to as "scaling" into a position as opposed to "all in". While accumulating these positions the trader may also be hedging themselves until the move does start to go their way. One clue as to if you can Position trade is to look at your reactions when you have, say, $1,000 in profit. Are you ready to lock this profit in? Do you want to snug your stop up real close to the current market action so you don't give back much profit? Are you starting to see market signals against your position? If you feel any of these you probably would be a better Swing trader than Position trader. A consistently profitable Position trader will be looking for much, much larger profits before even considering exiting their position.

Using Stocks to Trade Forex

On Monday, October 13, 2008, the Dow Jones Industrial Average skyrocketed to its biggest point gain ever, a whopping 936 point move. The 11.1% gain was the biggest in percentage terms since 1933, and the fifth largest percentage gain in the history of the index. Similar moves were also seen on the S&P 500 and the NASDAQ, as the markets celebrated the end of capitalism as we know it. Now that the U.S. Treasury is buying bank stocks, I guess I should congratulate you, since you and I are now are the owners (through the use of our hard earned tax dollars) of stock in many of the nation's beleaguered financial institutions. Congrats, comrade!
The next morning, on Tuesday October 14, the markets were bidding up sharply again, after closing near their highs on the previous day's rally. A little bit of leftover euphoria if you will, but all was not well. If the government is now backing the banks, then why wasn't the TED Spread responding in kind by falling back to earth from its record levels? The TED spread measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The higher the TED spread, the greater the aversion to risk (for more information on the Ted Spread, click here)