When you are headed to become a trader with a thorough strategy, it is wise to learn as much as possible about how financial markets work, collect any information about assets of your choice, and finally — adopt some rules or discipline. The kernel of your trading discipline is a trading style. Read further and find a matching one for yourself.
We will cover the four main styles here: day trading, swing trading, scalping, and position trading. The key difference between them is the period for each trade. For example, positions a scalper makes last from a few seconds to a few minutes, while swing trades may be several days long.
Why stick to a specific trading style, if I can switch them? Of course, you can switch. But our suggestion is to patiently follow your organized schedule. This way you can achieve measurable and predictable results and avoid spontaneous decisions. Now, let’s finally talk about these strategies.
- Day Trading. As follows from its name, your deals take up to one day in this style. Let’s say you feel uncomfortable leaving your trades open overnight and want to fix the results of your trading daily. Then, this style is for you. The period of a deal is longer than in scalping so that you can use intraday trading ideas, but still shorter than swing trading. Intraday trading is also cheaper in terms of swaps charged for keeping a forex position overnight.
- Scalping. The fastest of all four. This trading strategy is based on an assumption that every trading instrument will complete the first stage of a movement. Whether you feel that it is going to be ascendant or descendant, choose buy or sell type of a deal. After the graph spiked, fix your profit immediately. This approach is very different from “let your profits run” and requires your trading sessions to be somewhat cautious and high-attentive. Using scalping as a primary trading style may be tricky, because, as mentioned before, constant chart control might cause fatigue. A scalper tends to use one-minute charts and instant executions of orders to keep the trading flow as close to real-time as possible.
- Swing Trading. Swing trading is a solution for you if you are willing to wait. Profits come fairly quick though, especially if you don’t tend to neglect stop-losses. A stop-loss should be noticeably larger in deals of this type which makes sense because large profits usually assume greater risk. The same is for a prolonged period: the trend may switch from bullish to bearish several times before the price reaches your take-profit.
- Position Trading. Position trading is for the most patient ones. It is better to call it investing since the duration of trades may reach several years. Your decisions within this trading style should rely on clear and long-term insights. Imagine you have a special idea about some asset growth outlook. For example, you open a short position on USD, being sure the USA economy is going to slump with a full-scale recession soon. It won’t happen in seconds, days, or maybe months. But you wait patiently as long as the initial scenario seems inevitable for you. While the chart runs forward, you hesitate to react to small trends. If this isn’t true and you experience stress each time the graph runs in the opposite of your desired direction, then your choice probably should be a shorter-term trading style.
Choosing the right trading style is crucial to trade with comfort. Listen to your mind and trade according to your appetite for risk. Harsh and daredevil moves may result in huge losses and soon burnout. So, consider adjusting your trading fashion to your individual pace of living. In the next articles, we will tell you about these trading styles separately and in more detail. Until then, we wish you a prosperous trading week. Stay tuned!