Trading Style: What Are The Differences? And Which One Is For You?
Find Your Winning Trading Style
What is a Trading Style?
One thing we often hear clients talk about is their trading style. Perhaps you are reading this and wondering what a trading style is? Or, maybe you have heard another trader talking about their trade style, but aren’t quite sure what they mean.
A trading style is the way in which you conduct your trading activities. It must provide a framework to design, structure, and implement your strategies. With a good trading style, you will be able to follow a certain process with all your trades.
Why Trading Style Matters?
We’re going to start by saying that a trading style is not a personality trait, nor is it an indicator of how “good” you are at trading. It’s simply a way to categorize the way you approach the market.
When you’re just starting out, it’s important to have a good understanding of your own trading style so that you can make smart decisions about what kind of account is right for you. That way, when things get tough and you feel like quitting, or when things are going well and you want to take more risks, you’ll know which side of the coin will benefit your account—and ultimately—your bottom line.
Day Trading
Day trading is a style of trading that involves buying and selling assets within the same day. Day traders are typically focused on short-term fluctuations in stock prices, but they also may trade futures and options contracts.
Day trading can be an exciting way to participate in the market, but it’s important to understand the risks involved before you begin. Day traders have to be able to maintain composure under extreme pressure and make rapid decisions based on limited information. If you’re looking for excitement, day trading might be right for you!
Swing Trading
Swing trading is a style of trading that involves holding an investment for a few days to several weeks. It’s considered to be a middle-of-the-road approach to investing, as it can be more aggressive than buy-and-hold strategies, but it’s not as risky as day trading.
Swing traders try to identify trends in the market and then buy or sell stocks when the trend reverses. They’re looking for longer-term gains and don’t want their investments to be impacted by day-to-day fluctuations in price.
Swing traders typically have a larger amount of money available for investment since they’re willing to take on more risk than other types of investors.
Position Trading
Position trading is a form of investment where you take a long-term position in a stock or other instrument, with the intention of holding it for several days or even months. Position trading is different from day trading because it’s not concerned with short-term fluctuations in the market. Instead, position traders focus on finding stocks that have good fundamentals and will increase in value over time.
Position traders typically use technical analysis to identify stocks that are likely to experience price appreciation within a certain time frame. Technical analysis involves analyzing price charts and studying historical prices to determine future trends.
The Scalper
The scalper is a trader who makes many small investments and exits them quickly. The scalper will watch the market closely, and then buy and sell in rapid succession—sometimes as often as a few times per minute.
Scalpers rely on making quick profits by taking advantage of temporary price discrepancies that occur when large orders are placed. Scalpers typically use technical analysis to identify points where they can make profit by buying low and selling high.
The Robo-Trader
The robo-trader is a program that will automatically execute trades on your behalf. You can simply set it and forget it, and it will do everything for you. It’s great if you are busy and don’t have time to sit in front of your computer all day watching the markets.
The pro of this trading style is that it frees up time for other things in your life, like running errands or spending time with family and friends. The con is that you have to trust this program completely—if there’s an error or something goes wrong, you could lose all of your money without even knowing what happened!
Get to know what style of trading suits you best by exploring all the different options, so you can get the most out of your trading.
Whether you’re just getting started with your trading or have been doing it for a while, it’s always good to acknowledge your style of trading. It helps you determine what sort of trade you should be making to suit your needs, and whether you want to stick with auto-trading or manual options. Some choose to even combine the two as a hybrid approach. Learning about yourself makes you more self-aware and better prepared for future endeavors, so take the time to find out what kind of trader you are!
