Deciding on a trading style is a procedure that is rather more difficult than selecting a trading platform. There are four trading methods to pick: position trading, day trading, scalping, and swing trading.
The most reasonable trading technique for you is definitely the one that makes you more profit. However, while day trading offers more money-making opportunities than position trading, a massive 87% of traders quit day trading within 3 years of beginning due to massive losses.
This creates a dilemma, but you don’t have to fret. This article presents you with all you need to know about choosing a trading style, including
- The definitions of position trading, day trading, scalp and swing trading, and
- Who each trading technique is best for. Let’s get right in.
Position trading is a style in which trades are held for extended periods, stretching up to a year or even years. With this trading style, traders identify the asset’s long-term market trend and place trades following this trend.
The trend may be an uptrend or a downtrend, but the most important factor with position trading is that this trend plays out over a long-term period. This means, for instance, position trading on a predicted uptrend should play out over the long term, even when a bull market occurs within this period. This is the only way you make a profit.
Now, from our explanation above, there are certain points we would like to pick out.
Who Is Position Trading For?
The most obvious fact with position trading is that you need incredible patience to find success in it. Who wants to hold positions for 3 years when you need the money in 3 months?
Additionally, with the example given, many people panic when they enter a bull market within a positioned uptrend period. Some even sell off when they make a little profit that doesn’t add up to their target profit margin.
If you are a trader without the degree of patience and calmness to ignore your trades during stormy market conditions, then position trading is not for you. You require that conviction to ignore what other people say about the market and hold till your desired exit point.
Swing is an intermediate-term trading technique between the other long-term and short-term trading methods. It involves trades that are held for more than a day, days, or even weeks and gives traders extra opportunities to make a profit than position trading.
Although it needs a more serious degree of technical and analytic skills, swing trading also requires some level of patience, making it share some similarities with position trading. The only major difference lies in the length of time each trade is held.
Looking at this, how do you recognize if swing trading fits you?
Who Is Swing Trading For?
Swing trading is for individuals who have some patience but also wish to make a profit from their trading platform within a short period. These traders are not moved by daily reverse trends to what they predicted and can hold positions until their targets are reached.
If you don’t feel comfortable doing other things, like playing video games, while your trade has been open for days on your trading platform, swing trading definitely doesn’t fit you.
Day trading is a short-term method in which you enter and exit a trade within the same day. It is one in which you don’t take your eyes off the trade until your daily trade limits have been met or the trading day comes to a close.
This means that, even when it is sleep time, you don’t go to bed but keep monitoring the chart on your trading platform until you meet your thresholds.
Day traders may set either take profit or stop loss limits to limit the need to always monitor charts. However, they still don’t have that calmness to leave trades running for more than a day.
This may be due to the possibility of negative price gaps when new trading opens. So, is day trading for you?
Who Is Day Trading For?
Of course, day trading is a nice fit if you don’t have the patience to leave trades open for more than a day and want to have extra money-making opportunities than swing traders.
Sadly, with more money-making opportunities comes greater chances of losing money. You need greater technical analysis and risk management skills than swing traders to succeed with this trading style. This is why a majority of people don’t continue with it after just a month.
Now, scalping is the most energy and time-consuming trading technique among the four mentioned. At most, it is a rigorous style where you enter and exit trades within mere seconds or minutes.
It requires you to constantly monitor charts on your trading platform at all times and try to make a profit from every single price movement. For instance, depending on your technical analysis, you enter a long trade this minute and then a short trade the next minute.
Just as it offers you extra opportunities to make more money than other trading techniques, you also stand the chance of losing even more.
Who Is Scalping For?
Generally, scalping is a technique that fits the most experienced technical traders. You need a lot of concentration to successfully adopt the scalping technique.
If you don’t have that supreme technical analysis skill or the amount of time to continuously stay glued to charts, then scalping is not for you.
Scalping is probably for individuals that want to adopt trading as a full-time career, as a lot of focus is required.
Summary Of Trading Styles
Here is a table you may quickly run through to see which trading technique is best for which personality of traders.
|Trading Style||For You If…|
|Position Trading||You have the patience to hold trades and leave them to play out for years.|
|Swing Trading||You wish to make more profit by entering and exiting trades within intermediary-term periods. Here, you are required to have the patience to keep trades for days without worrying about negative reverse trends.|
|Day Trading||You don’t have the patience to let your trades roll over to the next trading day. You enter and exit all trades within the same day.|
|Scalping||You have excellent technical analysis skills and wish to earn more profit by holding trades for only a few seconds or minutes.|
When you pick a trading style that suits you, you don’t want to just abandon it when you make losses from it.
Success in trading is all about learning, and if you switch trading styles after every loss, you never reach that point where you are confident with your predictions and analytical skills.
Selecting a trading technique isn’t as straightforward as a lot of traders see it to be, and it all relies on your personality.
Are you a patient trader that does not need to check positions for over a year? Alternatively, are you one that can’t leave your trades running for over a day?
Choose the style that fits your level of patience and skills, learn along the way, and start attaining that level of success you’ve always wished for.
Photo by Anna Nekrashevich: https://www.pexels.com/photo/person-holding-a-smartphone-6801874/