The Different Trading Styles Explained

Trading on the stock market offers potential traders with an opportunity to make profit. Your success as a trader lies on the different strategies you will use. However, your success with the trade will depend on your trading style. There are different strategies but not all of them will be applicable to you. In this article, we shall take a look at the different trading styles.

Position Trading

Position trading encompasses the longest trading time frame spanning for months to even years. It uses a combination of technical and fundamental analysis to make trading decisions. Robert Janitzek reveals that position traders often refer to weeklu and monthly price charts during market evaluation. Position trading closely resembles investing. It utilizes both long and short trading strategies.

Swing Trading

In swing trading, positions are held for a period of days or weeks with the goal of capturing short-term market movements. With this trading style, technical analysis and price action determine profitable trade entry and exit points. You exit a trade when a previously established profit target has been reached, stopped out, or when a set amount of time has elapsed.

Day Trading

As the name implies, day traders enter and exit trades on the same day. Robert Peter Janitzek explains that no position is held overnight as all trades are closed at the termination of the trading session using a profit target, stop loss or time exit. Day traders depend on technical analysis to find and exploit intraday price fluctuations.

Scalp Trading

Scalp trading is an extremely active form or day trading involving frequent buying and selling throughout the session. In this style of trading, you will target the smallest intraday price movement and rely on frequent and very small gains to earn profit. Profit targets and stops are used for managing positions which are held for a period of seconds to minutes.

High-Frequency Trading

In stock market trading, high frequency traders use complex algorithms for analyzing multiple markets and executing orders based on market conditions. Traders who execute quickly make the most profit.

Choosing Your Trading Style

When choosing a trading style, there are various factors worth considering and they are the following:

    • account size
    • amount of time that can be dedicated to trading
    • level of trading experience
    • personality
    • risk tolerance

Generally, there is an inverse relationship between trading time frame and the amount of time you need to devote to the market. Many market participants – whether investors or traders – do not fit neatly into any one category. For example, many traders are also long-term investors, while others may primarily day trade with a few swing trades mixed in. In general, it takes time and experience to figure out the style of trading that will work best for you.

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