In the world of forex trading, there are different
types of traders and different types of trades. Every trader has a particular
method or style of trading that suits his or her goals. Some incorporate two or
more methods to employ the benefits of one that may not be present in another.
Understanding each forex strategy is important for discovering
which method works best for the individual trader.
Forex proprietary trading is a method of trading
with one’s own capital. Most individuals in the forex
market are proprietary traders because they trade using
their own money. The risk is entirely on the shoulders of the trader.
Some experienced traders may work with forex
managed accounts. Managed accounts offer the trader a much greater potential
for profit and less risk because the money in those accounts are from other
investors. Also called OPM (Other People’s Money) trading, forex
managed accounts are generally the realm of the highly experienced trader.
People will not trust their forex investments
to just anyone. Most traders in this category have developed his or her
education to the point of unconscious understanding of the market and have a
proven record of success.
Entities like banks and financial institutions trade
OPM, although there are exceptions. Financial institutions are in the business
of investing the capitol of other people. Generally, these entities have a
responsibility and commitment to trade specifically for their customers and
clients. Sometimes, a financial institution will trade using its own capital in
an attempt to make up for a loss on another account.
Banks and their ilk are fundamentalist
traders. A fundamentalist trader is one who focuses on trading only in response
to fundamental announcements. Fundamental announcements are essentially forex
news briefs that provide traders some insight on the direction of the market at
the time of the announcement. A fundamental announcement can – and often does – have a significant impact on how the
market moves and works. Fundamentalist traders depend on this information as
the trading day evolves, generally waiting for the report to come out and then
acting on the information it provides. Some individual traders are also
fundamentalist traders; however more commonly, banks and other financial
institutions are in this category.
The forex trading strategy that works for one
person may not necessarily work for another. Study and dabble in each strategy
to determine the path that works best for you.
Forextips.com is committed to educating the forex
trader in all aspects of foreign currency trading. Click hereto get information on a free forex webinar to help
you maximize your success in the forex market.
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