Scalping, day trading, swing trading, and position trading are the four main trading styles. The length of time that trades are held determines the difference between the styles. Scalping trades are held for only a few seconds or minutes at most. Day trades last from a few seconds to a few hours. Swing trades can be held for a few days at a time. Position trades are held for a period of time ranging from a few days to several years.
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Novice traders may have difficulty determining which trading style is best suited to their personality. However, in order to achieve long-term success as a professional trader, you must do so. You can still find your trading style if you are a trader and have not yet found it. Here are some of the personality traits associated with the various trading styles.
Choosing the trading style that best fits your personality increases your chances of profiting as a trader. So be honest, even if you don’t agree with some of the traits listed.
- Scalping is a fast trading style that is best suited to traders who can make quick decisions.
- Day traders are those who prefer to start and finish a task on the same day.
- Swing trading is for those who are comfortable holding trades overnight.
- Position trading is a long-term trading strategy for those who have patience and trust in their decisions.
Scalping is a fast trading style. Scalpers frequently execute trades within a few seconds of each other, and frequently in opposite directions. That is, they may go long one minute and then short the next.
Scalping is best suited to active traders who can make quick decisions and act on them.
Because they expect their trades to make a profit right away, impatient people often make the best scalpers. If the trade goes against them, they will exit quickly.
Success as a scalper necessitates focus and concentration. It is not a trading style for those who are easily distracted or have a tendency to daydream. So, if you were thinking about something else while reading this, scalping is not for you.
Day trading is ideal for traders who prefer to start and finish a task on the same day. That’s you if you start painting your kitchen and won’t stop until the job is done, even if it means staying up until 3 a.m.
Many day traders would never engage in swing or position trading. They would be unable to sleep at night if they knew they had an active trade that could be influenced by price movements during the night that caused opening gaps.
Swing trading is ideal for those who have the patience to wait for a trade but want to profit quickly once they enter it. Swing traders almost always keep their positions overnight. If you’d be nervous holding a trade while not in front of a computer, this isn’t the style for you.
Position trading is the most long-term type of trading. It frequently has trades that last several years. As a result, position trading is only appropriate for the most patient and least excitable traders. Position trading targets are frequently in the thousands of ticks range. Position trading is probably not for you if your heart starts racing when a trade is 25 ticks in profit.
Position traders must have the ability to disregard popular opinion. A single position trade will frequently hold in both bull and bear markets. For example, if the general public believes the economy is in a slump, a long position trade may need to be held for a full year. If you are easily swayed by others, position trading will be difficult for you.
Sticking to Your Trading Style
Choosing a trading style necessitates the ability to recognize when a trading style is no longer working for you. It is also necessary to be consistent in sticking with the right style, even when its performance lags.
One of the most common mistakes made by new traders is to switch trading styles (and trading systems) at the first sign of trouble. Changing your trading style or trading system on a regular basis is a sure way to catch every losing streak. Once you’ve found a trading style that works for you, stick with it. Long-term results will be rewarded for your loyalty.