There are multiple trading styles that are popular among forex traders around the world. Finding what fits you typically requires isolating your strengths (and weaknesses), as well as taking into account the general personality specs associated with each of the trading styles. Knowing your type can be a big help in dictating your trading strategy as a whole.

Additionally, knowing what currency pairings are best suited to your trading style can be the thing that puts you ahead of your competitors, whether you're just learning about forex trading or you're an experienced trader looking to update your style.

The 5 Different Types of Traders in Financial Markets

Currently, there are over 13.9 million online traders in the world, and each one typically adopts a particular trading style. Below are five of the most common trading styles, as well as an indication as to which currencies pair best with them. 

1) Scalper

Scalpers take a short-term view towards profit, banking on swift action following price swings. Entry and exit parameters may be fairly strict for this type of opportunistic trading. Scalper trading can be high pressure and very risky, but it presents a good opportunity for those who can keep their cool amidst volatility. You will be well suited to this type of trading if you're good at making fast decisions. 

Typically, some good currency pairs for scalpers to focus on include AUD/USD, USD/CHF and USD/JPY.

2) Swing trader

Swing traders focus less on price swings over the course of a given day, taking a view towards turning a profit over the course of a week or two instead. They pay close attention to the news and have a knack for predicting price changes from macroeconomic policy changes. These well read traders tend to be less ‘short sighted' and unlikely to be thrown off by daily changes in price. 

Strategic thinkers make great swing traders, and there are a few currency pairings that are best suited to this type of trading, including AUD/USD, USD/CHF and USD/JPY.

3) Position trader

Position traders are unemotional and somewhat academic about their trading strategy, contemplating long term political and economic themes and holding trades for weeks, months or even years. Fundamental analysis is the cornerstone of their approach to trading, and technical tools can help with risk mitigation.

Historically, this type of forex trading is best suited to the following currency pairings: AUD/USD, USD/ZAR and USD/CAD. If you're level-headed and prefer to study long term trends, this type of trading might be for you.

4) Algorithmic trader

Algorithmic traders make buying and selling decisions via an automated algorithm - or software - which is usually set up with precise signals and parameters. Risk management is a top priority for this type of trader, so much so that decisions are rarely - if ever - made based on instinct alone. The key to success in this field is to keep learning as you go, ensuring that the software is continually updated. 

This type of trading has seen success with multiple currency pairings, including AUD/USD, NZD/USD and USD/JPY.

5) Event-driven trader

Event-driven traders tend to be good at spotting volatility spikes as a result of macroeconomic or political events. This requires a focus on economic statistics, having multiple alerts set up for monetary policy announcements around the world, as well as keeping a close eye on current affairs at all times. 

This strategy doesn't benefit from the volatility spike itself, but rather from the readjustment of market consensus after the spike. Contrarian? Yes. Risky? Absolutely. You can mitigate a bit of the risk by starting with these currency pairs: EUR/JPY, USD/CAD and AUD/USD.

Exploring Trading Styles and Currency Pairings

Whether you've recently considered a career as a private financial trader or reading a few of the descriptions above has given you a lot to think about as an existing trader, there is a simple way to learn more and to officially discover which trading type best suits your personality. DailyFX's DNA FX quiz was designed to give new and existing traders a better idea as to their ideal trading type, while also suggesting popular currency pairings to explore based on their results. 

By discovering more about your trading style and learning about notable currencies for you to consider trading with, you ultimately lay a foundation that gives you the best possible shot for long term success.