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There are billions of people in the world and each of them is unique. Everyone has specific habits, talents, and passions. Because of our unique personalities, we trade differently.
Some traders are more aggressive and willing to take risks, while others prefer to take safer, though less promising bets. Some like to make multiple trades during short periods of time, whereas others don’t like to be in a hurry and thus lean in favor of longer-term trades.
A trading style is your general approach to trading. While a trading strategy consists of a set of rules to enter and exit the market, a trading style is a more general concept. It refers to the time you spent on trading, as well as the frequency and the duration of your trades. Each trading style allows using a lot of different strategies.
A key to success in trading is choosing the style that fits your personality so that you could make use of your strong point and enjoy yourself. Those who only start trading may find it difficult to choose the right trading style. In this section of our tutorial, we will take you through the various trading styles and help you find the one that matches your personal characteristics the best.
Here are the most common trading styles:
1. Position trading implies taking long-term trades, i.e. trades that last weeks and moths. The idea is to trade big trends. Such an approach requires the knowledge of both technical and fundamental analysis. This style fits patient traders who like to trade not so often but analyze the market thoroughly and get a big profit from each position.
Holding period: weeks to months
2. Day trading is a trading style for those who prefer buying and selling financial assets within the same day. This style is for you if you like to browse through the economic news and search for patterns on the charts. In addition, you will need at least a couple of hours a day to practice this approach.
Holding period: within the same day (no overnight positions)
3. Scalping is an approach for the most active traders who don’t want to wait long until the price reaches their targets. With this style, traders open lots of trades a day and each lasts only for several minutes. Scalpers need to have steel nerves and cat reflexes. It is by right considered one of the most emotionally difficult strategies. Yet, no one can argue that scalping is really exciting.
Holding period: seconds to minutes (no overnight positions)
Timeframes: very short-term
4. Swing trading is a trading style that makes traders use volatility caused by the end of one trend and the establishment of a new one. Such traders are on the lookout for the highs and lows of the price. They may trade both on the short-term and the long-term swings of the market.
Holding period: days to weeks
Timeframes: short-term, medium-term
Despite the differences between the trading styles, any of them may lead to the success and financial independence. Choosing the one that fits your personality is an intuitive process, somewhat akin to marriage. It’s perfectly normal if you test different styles before you find a match. And remember that practice makes perfect!