In order to take advantage of the opportunities the Forex market offers and find your Forex trading style, you must be aware of your trading strengths and weaknesses.

There isn’t only one proper way to trade and the market keeps changing over time. However, adults are unlikely to change their thinking ways. It is therefore wiser to adjust your trading scheme to your personality rather than conform to other traders’ ideas.

When looking for your trading style, you should ask yourself if you are comfortable with long term trading or short term time frames. Usually, traders who prefer to make trend-based trades will prefer to trade on longer timelines, while faders who look for quick turns tend to operate on shorter time frames.

Usually, the shortest time frames which are still profitable for short term traders are on the hourly charts with average gains/loss targets of at least 30 points, since the market’s spread nature makes time frames that are less than an hour ineffective. For example the USD/EUR pair which is the most liquid financial instrument in the financial world and usually trades three points wide on the ask/bid spread. A trader with a target of ten points and a ten-point stop will have to earn 13 points, but he would be forced to stop at seven points. This negative skew in the gain/loss equation will make it very difficult to make profits on short time frames.

​After you determine what time frames will suit your personality, you will have to ask yourself which kind of analysis you should use to make your trading selections.In general, the fundamentals tend to have a strong impact on long-term trades, while trading based on technical data is more useful in short term trades.

​Over the longer time frames the Forex market responds to major economic events such as EUR growth, account balances and interest rates. Take for example, the changes in the GBP/USD over 2005.

During this year the Federal Reserve Bank of NY raised the Fed funds rate by 200 basis points from 2.24% to 4.25%, while the Bank of England, which was facing a depressed consumer sentiment due to slowing economy, lowered the UK rates from 4.75% to 4.5%. The differential interest between these currencies lowered to nearly 0%.

While price action performs well during long time frames to fundamental factors, technical analysis performs well over shorter time frames. On reason is that the news flow information is not meaningful in smaller time frames.