We already talked in another article of the specific traits of a professional trader. What we did not already say is that, even if you are a professional or a beginner, every trader has its own trading style.
The market offers to traders various opportunities and traders should take advantage of it to get the best possible result. To do so, he must know himself, his strategy, his strengths and his weaknesses. There is not a way of trading that can fit everyone and to develop a trading style that suits each personality is not so simple.
Every trader must build their own style to suit your trading needs and then to its strategy. Below, a list of trading style based on the time and how long a trader can keep his investment:
- Day trading: this type of trader, open and close positions in the same day. Usually they buy and sell in a short time and they can open/close a lot of trades during the day. Positions are closed during night so it is not possible to operate overnight. Usually, to open or close their positions, traders with this style use target profit and stop loss. Also technical analysis is very important because it allows them to discover better enter points in daily price fluctuation. Since trading is done in a short time, it does not allow big movements of capital so the profits will not be too high.
- Scalp Trading or Scalping:it is very active and it is similar to day trading, but in this case it occurs more frequent trades and in a shorter time. Target profit and stop loss are used to manage positions that last very few seconds. This trading style works on a lot and little movements, with minimum gains.
It is usually not recommended by professional traders because it is as like gambling.
- Swing Trading: This trading style requires a vision of the markets in the medium to long term because swing traders usually hold their positions for periods swinging from several days or weeks. This type of traders is usually looking for a minimum of 2 to a maximum of 10 trades in a month. To manage open and close positions, they use technical analysis and price action keeping in mind what fundamentals are. Each position, then, is closed when the profit target is reached, or after the time period has expired, or in the case of interruption for a failing trend. Swing trading is very popular within those traders that do not have time to monitor every day the market and its movements.
- Position Trading: this style fits to whom have a lot of time to manage their positions because they are kept for months to years. Who has this trading style has the possibility to use different tools to analyze the market making use of weekly or monthly data, before taking any kind of decision. So, short fluctuations of the market leave room for long-term data.
Here’s a diagram for a better understanding of the different trading tools.
Here the trading styles based on the trading tool:
- Discretional Trading: this style depends on the sensation and the experience of the trader to analyze the markets. It is a method more flexible than others but it requires a bit of a time to refine the abilities to trade like this. It is usual in professional traders because they know the market changes are very fast.
- Technical Trading: this style implies the analysis of a price fluctuations graphic before taking a decision. Technical traders identify the technical signals that help them to take advantage of the opportunity offered from the market.
- Fundamental Trading or News Trading: trader relies mostly on market news to make their own analysis and predictions. Many professional traders, however, prefer technical trading because fundamentals news not always influence the prices since there are people who buy or sell according their expectations.
As you can see, there are a lot of trading styles that a trader can adopt according to his needs and strategy. It is your choice to understand what style suits you most. Once you choose your style you can start trading and reach your goals.
Otherwise you can continue and discover what trading style suits you most with our short test.