Trading Styles
Many traders employ different trading style in achieving their different trading goals. Let’s take a brief look at them and don’t be so quick to choose a particular style, as these styles are based on a person’s personality and preference.
Just have an open mind and continue your learning, your personality will detect your trading style. This can happen without you even knowing.
Scalping
There are so many definitions or description of what scalping is, and personally, I think of scalping as a trading style that is for the moment. Meaning, a trader is actively monitoring his/her trades and this can last anywhere between 1 minute to couple of hours. The psychology behind this type of trading style is to leverage on the volatility in the market and bag some instant profits. No trading style is perfect, each of these styles comes with its advantages and disadvantages and you are strongly advised to test what works for you before trying it on live account. This of course is one of the most popular trading styles as most traders’ desire instant profits especially beginners traders. People that trade this way are called scalpers.
Day Trading
Day trading is a term most people associate traders with, especially on the internet. But really, what is day trading? Day trading is defined as the purchase and sale of a security/instrument within a single trading day. It can occur in any marketplace but is most common in the foreign exchange (forex) and stock markets. Day traders are typically well-educated and well-funded. They use high amounts of leverage and short-term trading strategies to capitalize on small price movements in highly liquid stocks or currencies. People that trade this way are called day traders.
Swing Trading
Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. These traders may utilize fundamental analysis in addition to analyzing price trends and patterns.
Key Takeaways
· Swing trading involves taking trades that last a couple of days up to several months in order to profit from an anticipated price move.
· Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price.
· Swing traders can take profits utilizing an established risk/reward ratio based on a stop loss and profit target, or they can take profits or losses based on a technical indicator or price action movements.
People that swing trade are called swing traders.
Position Trading
Position trading refers to an individual who holds an investment for an extended period of time with the expectation that it will appreciate in value. The average time frames for holding positions can be measured in weeks to months, even years. They are less concerned with short-term fluctuations and the news of the day unless it impacts the long term view of their position. Position traders do not trade actively, with most placing less than 10 trades a year. Position traders are, by definition, trend followers. Their core belief is that once a trend starts, it is likely to continue. Only buy-and-hold long-term investors, who are classified as passive investors, hold their positions for longer periods than do position traders.
People that trade this way are called position traders.
Investment
The goal of investing is to gradually build wealth over an extended period of time through the buying and holding of a portfolio of stocks, baskets of stocks, mutual funds, bonds, and other investment instruments like crypto.
Investors often enhance their profits through compounding or reinvesting any profits and dividends into additional shares of stock.
Investments often are held for a period of years, or even decades, taking advantage of perks like interest, dividends, and stock splits along the way.
While markets inevitably fluctuate, investors will “ride out” the downtrends with the expectation that prices will rebound and any losses eventually will be recovered.
Investors typically are more concerned with market fundamentals, such as price-to-earnings ratios and management forecasts.
People that trade this way are called investors.
The table below shows the different trading styles and their time frames, and also shows their RRR (Stop Loss and Take Profit Targets).
The table only shows for Volatility 50, 75, and Step Index, this is because at the moment of creating this course they are the only Synthetic Index that I trade.
Maybe I might add more Indices to the list later, but remember less is actually better in trading.
Thank you for your time, I will see you soon.
Bye for now.
