What Is Your Trading and Investing Style?

In this article, you will learn more about these different trading and investing styles:

Traders and investors approach their financial goals in their own way, but in general there are five different styles to choose from. The following styles apply to the forex and stock markets, ETFs, and indices.

day trading

Day trading is also known as intraday trading.

On weekdays, trading hours cover the Asian, European and US time zones. This means you can trade at any time. Day traders typically limit their trades to a 24-hour period, entering and exiting trades on the same day.

Trades placed using this style can take several hours and are often based on a four hour or hourly time frame when researching using technical analysis charts. The feature of day trading is frequent trading. During day trading, trades and investments are usually closed at the end of a 24-hour period in the context of their time zone. The idea behind this is to prevent overnight losses due to unexpected volatility.

The goal of day trading is to take advantage of short-term movements in the market, which is why this style of trading requires a lot of time and attention. Risk management techniques such as stop loss are important to consider here.

scalp trade

Scalp trading is a part of day trading, except that scalpers enter and exit trades much more quickly, sometimes in minutes or seconds. The purpose of scalping is to enter and exit market positions while taking advantage of short-term opportunities. Gain experience by practicing on a demo account and using demo funds before trading your capital.

Like day trading, scalping requires a lot of time and attention, as well as research, risk management and experience.

swing trading

Once a swing trader enters a trade, it can take several days for them to exit. The goal is to take advantage of individual opportunities across broad market movements, such as a clear downtrend or uptrend. In the case of a downtrend, a swing trader may try to enter a short position as early as possible and exit during a downtrend. In an uptrend, the idea is to open a position at the lowest possible price and exit the position at the highest possible price in the trend.

Fewer trades are made in this scenario, which means swing trading doesn't take long, but like any other trade, it requires attention, research and risk management for long-term success.

position trading

Position traders tend to take long-term positions over months or years and ignore the short-term ups and downs in the market.

Positioning can also refer to taking a strategic position during cyclical market movements or making strategic trades during an initial public offering (IPO). By cyclical market movements we mean sectors that move up or down with the economy, such as construction or real estate.

Precision trading can also be referred to as positioning. In this case, traders can take positions when the market opens in each region to take short-term profits from institutional trading by hedge funds and central banks. The flow of resources from institutional trading can move the market in the short term. Central banks in particular have an interest in trading gold and currency instruments because these serve as reserves for the financial system.

news trading

Another important trading style is trading on news events. Whenever a country announces an update on its economic performance, forex traders see it as an opportunity to take positions based on results. News trading events occur every weekday and coincide with other trading styles such as day trading and swing trading. Business news events can have a short-term market impact during their launch, but over time they reflect long-term trends in the economy.

The time it takes depends on the frequency of trading events each trader chooses to trade, but like all styles, good risk management and research are essential to improve performance.

Finally, there are several other factors to consider. Choose your goals carefully, keep them realistic and understand your own risk tolerance so as not to burden yourself as a beginner.