Trading Styles Guide

Trading Styles Guide

June 3, 2022
22 days ago

Trading Styles Guide

Is there a flawless way of trading? Yes, the one that always adheres to certain rules and a deep knowledge of what you have in your hands. Stock market operations are subject to the vicissitudes of the markets and to our profile, but obviously you can never act anarchically.

If you do, you buy your passport to go straight to losses sooner than you think. For this reason, in this article we are going to analyze the different existing trading styles, giving the keys to how they are and which one can best suit your profile.

How many trading styles and strategies are there?

Scalping

Who operates in this way does it with a very short life operations, not extending more than a few minutes and can be up to seconds. Ideal for those active investors who work very well opening many operations at the same time, and closing them quickly. We understand it better if we translate the term from English, which means "resale".

Advantages and disadvantages of scalping

The main advantage of this system is that these operations do not require a thorough analysis of the reality surrounding the markets, since the life of the operations is very short. It does not usually generate very high losses, and profits can be quite high.

As a great disadvantage is that it requires a very high degree of concentration and that you are able to control many operations at the same time. Not everyone is able to operate in this way.

Day Trading

This mode keeps trades open only during the day, closing them before nightfall. The time frame need not be as short as the previous style.

Advantages and disadvantages of Day Trading

Perhaps the most obvious advantage is that once you close the positions you can forget about trading for the day, which avoids the uncertainty that night trading causes for many investors.

The disadvantage is the same as with scalping, the need for high concentration and being able to make quick decisions in a very short period of time. The time you spend trading in this way must be exclusive and without being disturbed or distracted by anything.

Swing trading

If we take as reference the origin of the word swing, oscillation, this style of trading takes advantage of the fluctuations of the market itself to take advantage. The previous study of these oscillations will be used by the trader to operate at a specific time. It does not have as short a time frame as the previous styles, and may take several days for a trade to be completed.

Advantages and disadvantages of swing trading

As it is a much less aggressive trading style than the previous ones, you can take it more calmly and, therefore, it is an ideal way to operate for those who have stock market investments as a complementary activity.

If we have to highlight a disadvantage, it is that the results may not be immediate, so if you decide to operate in swing style you will have to be patient. Take it easy, because swing trading requires some time and, above all, patience.

Position trading

It is the style that occurs in the long term, and the operations can be open for several months. It does not require such a permanent attention, because the essence of this way of trading is to pick up the big stock market trends and go in that direction.

Advantages and disadvantages of position trading

The pressure is not so high, so the person who trades this way can devote himself to another activity while having open trades. It does not generate a high stress, since the expectations are not extremely high either, although we will never lose the objective of making money.

It is not a trading style for those who want immediate results or are impatient, so its main disadvantage is to have the capital stopped for a long time.

Trend trading

It is a very simple concept, the trailer that operates under this style does it trying to take advantage of the trend of a position to be able to take advantage of it. They are positions that are kept open until a trend change occurs that no longer favors us.

Trading against trend

It is a style that takes advantage of situations, generally temporary, in which a reversal occurs within a trend. If you are able to analyze the reversal of a price, you will be able to take advantage of that situation, so you have performed a counter-trend trading. This requires a good understanding of the charts, so that you can identify these situations and take them to your own territory.

Discretionary trading

Contrary to what one may think, this trading style has nothing anarchic about it. We say that it is discretionary because it does not have a systemic character, so the trader will take advantage of using a lot of his intuition and a deep knowledge of a particular market.

This leads to the fact that trading under this style should be done when a particular market is well known. Over time, the trader is able to identify when a situation may occur from which he can profit. It is perhaps one of the most useful styles when you already have sufficient knowledge of what you are dealing with. Discretionary trading is largely the result of experience. If you choose this option, it is the one to which you will have to dedicate more time and study.

In conclusion, we can say that there is a trading style adapted to each investor profile, so choosing one or the other will be determined by our expectations, availability and time we can devote to carry out operations. As always, it should be noted that when trading in markets we must have a serious approach, be strict and never try to open operations that do not make sense. You must think that what is at stake is your capital, so, a good time operating in demo format is the starting point when you do not have the necessary knowledge to execute actions with guarantees.

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