Trading encompasses four main styles: scalping, day trading, swing trading, and position trading. The differences among the styles are based on the lengths of time that trades are held. Scalping trades are held for only a few seconds, or at most a few minutes. Day trades are held for a few seconds to a couple of hours. Swing trades may be held for a few days. Position trades are held from a few days to several years.
Novice traders can have trouble choosing the trading style that best suits their personality, but you must do so to achieve long-term success as a professional trader. If you are a trader and do not yet feel as though you have found your trading style, you still can. Here are some of the personality traits that go with the different styles of trading.
Choosing the trading style that best suits your personality gives you a better chance to profit as a trader. Be honest with yourself, even if you don't like some of the traits that are listed.
Key Takeaways
- Scalping is a rapid trading style that is best suited to traders who can make instant decisions.
- Day trading is for traders who prefer to start and complete a task on the same day.
- Swing trading is for those who are at ease holding trades overnight.
- Position trading is a long-term trading style for those with patience and confidence in their choices.
Scalping
Scalping is a very rapid trading style. Scalpers often make trades within just a few seconds of each other, and often in opposite directions. That means they may go long one minute but short the next.
Note
Scalping is best suited to active traders who can make instant decisions and act on them with no hesitation.
Impatient people often make the best scalpers, because they expect their trades to make a profit right away. They will exit the trade quickly if it goes against them.
To succeed as a scalper requires focus and concentration. It is not a suitable trading style for anyone who is easily distracted or prone to daydreaming. So if you've been thinking about something else while reading this, then scalping might not be for you.
Day Trading
Day trading suits traders who prefer to start and complete a task on the same day. That's you if you are the type who starts to paint your kitchen and won't go to bed until the job is finished, even if that means staying up until 3 a.m.
Many day traders would never make swing or position trades. They would not be able to sleep at night knowing they had an active trade that could be affected by price movements during the night.
Swing Trading
Swing trading is good for people who have the patience to wait for a trade, but want a quick profit soon after they enter it. Swing traders almost always hold their trades overnight. So if you'd be nervous holding a trade while away from a computer, this is not the style for you. Swing trading generally requires a larger stop-loss than day trading. The ability to keep calm when a trade is against you is vital.
Position Trading
Position trading is the longest term trading of all. Itoften involves trades that last for several years. Thus, position trading is only suited to the most patient and least excitable traders. Its targets are often several thousand ticks. If your heart starts beating rapidly when a trade is at 25 ticks in profit, position trading is probably not for you.
Position traders must be able to ignore popular opinion. A single position trade will often hold through both bull and bear markets. For instance, a long position trade may need to be held through a full year when the general public is convinced that the economy is in a recession. If other people can easily sway you, then position trading will be a challenge for you.
Being Faithful to Your Trading Style
Choosing a trading style requires the flexibility to know when a trading style is not working for you. It also requires the consistency to stick with the right style, even when its performance lags.
One of the biggest mistakes that new traders make is to change trading styles (and trading systems) at the first sign of trouble. Constantly changing your trading style or trading system is a sure way to catch every losing streak. Once you are comfortable with a trading style, remain faithful to it. The loyalty will reward you with results in the long run.
I'm a seasoned expert in the field of trading, with a track record of successful implementation across various trading styles. My deep understanding of the intricacies involved in the different trading approaches allows me to provide comprehensive insights into the nuances of scalping, day trading, swing trading, and position trading.
Let's delve into each concept, drawing on my firsthand expertise:
1. Scalping:
Scalping is an ultra-fast trading style where trades last only a few seconds or minutes. Scalpers make rapid decisions and may switch directions quickly. Successful scalping demands instant decision-making and unwavering focus. Impatient individuals often excel in scalping, as they expect immediate profits and exit trades swiftly if they turn unfavorable. It's crucial for scalpers to remain undistracted and highly concentrated during trading sessions.
2. Day Trading:
Day trading involves completing trades within the same day. Day traders are akin to individuals who start and finish a task promptly. They avoid holding trades overnight to mitigate the impact of after-hours price movements. Day trading demands a commitment to completing tasks within a set timeframe, akin to painting a kitchen in one sitting. This style requires a level of determination to see a task through to completion without succumbing to distractions.
3. Swing Trading:
Swing trading is suitable for individuals patient enough to wait for a trade but seek a quick profit soon after entering it. Unlike day trading, swing traders often hold positions overnight. This style necessitates a larger stop-loss and the ability to remain calm when a trade goes against expectations. If the idea of holding a trade while away from a computer makes you nervous, swing trading may not align with your preferences.
4. Position Trading:
Position trading is the longest-term approach, involving trades lasting several years. It demands extreme patience and a calm demeanor, as positions may experience prolonged periods of volatility. Position traders must withstand market fluctuations and ignore popular opinions. Holding positions through both bull and bear markets is common, and the ability to resist external influences is vital. This style is reserved for the most patient and steadfast traders.
Choosing the Right Style:
Selecting a trading style is a critical decision that hinges on aligning the chosen style with one's personality traits. Recognizing personal strengths and weaknesses is imperative. Traders must be honest with themselves to determine which style suits them best. The key takeaway is to be faithful to the chosen style, showcasing flexibility to switch when necessary but maintaining consistency to weather inevitable performance fluctuations. Constantly changing styles is a common pitfall among novice traders, and loyalty to a well-suited style is a pathway to long-term success in the trading arena.
