Aggressive Forex trading - pros and cons
One way or another, but any trader, especially at the initial stage of development, has to make a choice between aggressive trading on Forex and conservative trading methods.
Which of the two approaches is better? This is how beginners often ask the question. Of course, one could say at once that aggressive trading methods are vicious, and you should not even think about using them. Trade with a risk of one to three percent of the deposit, in each single transaction, and you will be fine. But such an answer would be too simple, and would not correspond to the existing realities. So let's try to go deeper into the subject and make appropriate conclusions as to whether aggressive trading on Forex is worthwhile or not.
Ways to trade on the currency market
So, Forex trading can be carried out using various methods:
1. Conservative or passive trading. 2. aggressive trading. 3. Moderately aggressive trading.
Although forex trading methodology is conventionally divided into three types, the main ones are conservative and aggressive methods. These approaches are most often discussed and analysed in detail.
- Aggressive trading will be considered trading that involves large volumes. The risk in one trade here will be as high as 10-20%.
- Passive trading is a type of trading activity when the risk component in one transaction varies from 1%, up to 5% maximum. It allows withstanding a large number of losing trades, one after another, without much damage to the deposit.
In order to determine which trading style you should consider the pros and cons of each of them.
Conservative forex trading
Let us first take a short look at conservative trading. This style is usually preferred by traders who have already achieved something in exchange trading. Advantages of such methodology:
- Firstly, by working conservatively in the market, the trader does not experience a lot of psychological stress. He makes the right decisions and lives a full life, earning money at the same time.
- The probability to lose deposit when trading passively is close to zero. If everything is well thought out, the trader works in accordance with the system and following the money management rules, then his chances of losing the deposit are insignificant.
- Stable capital growth. The profit in such trading is small but stable.
It means such trading allows a person to be sure in the future. He can afford to increase the capital and rely on the money earned.
If we speak about disadvantages of conservative methods it means scanty profit with small deposits. As practice shows, conservative trading can be afforded by traders, whose deposit size starts from 5000 US dollars.
But what about trader who has on his account 50, 100 or even 500 dollars? Often such trader takes a certain risk and starts trading more aggressively. Whether it is good or bad, it is hard to say. Sometimes there are traders who trade very aggressively in the market and have considerable funds in their accounts at the same time. In this case it is a style that has been developed over years, and there is no need to break it.
Aggressive trading style
The main advantage of the aggressive trading style is the money, a lot of money that can be earned in a relatively short period of time. But this trading style also has its disadvantages.
- Aggressive trading requires higher psychological control. A trader must not only be confident in his abilities, but also have considerable experience in trading.
- Aggressive trading demands great concentration and responsibility. Miscalculations and mistakes are inadmissible. The slightest error in such trading will lead to the total losses exceeding the profits.
- Aggressive trading takes much more time as compared to sedate, conservative trading activity. The trader in such trading consumes much more energy and nervous energy.
Keeping all these pros and cons in mind, you should choose the trading style that best fits your beliefs based on your specific situation.
Which trading style should I choose?
So, what advice can you give to a beginner, when you are choosing how to trade? Of course, if you first set yourself up to gain small but stable profit and follow the plan you will in time make a proper trader out of a beginner.
But if the initial deposit is small and the trader is aware of the fact that he can lose the money at any time, the choice of aggressive trading may be justified. In case of failure such trader will not blame the broker, will not refer to the circumstances, and will not see on the currency market only fraud. It is his choice and the unsuccessful result is due to inexperience and high trading risks.
Suppose, in the course of aggressive trading, the trader managed to increase his deposit and on his trading account grew up, for example, to 5000 US dollars. What to do in such a case? Should the trader continue trading on the market aggressively or change tactics and switch to more conservative trading? The best solution in such case will be passive trading. It may be hard to make oneself trade in a conservative manner with minimal risks. But you have to try, especially if the aim of trading is not immediate profit, but a stable income for the long term.