An important part of trading and learning to trade is being able to find your own trading style. If you do not and instead try to simply copy someone else’s, you can run into a large number of issues that could set you back quite a long time and a lot of work. When people start out they normally see a style, try it and that is what they stick with, regardless of the fact that there are many other styles out there that may actually be more suitable for that trader. Without knowing that they are there, they carry on none the wiser. We are going to be looking at a few of the different trading styles that are available and who they are best suits for, so you can hopefully find the one that is right for you.
The first thing that we need to clarify is the difference between a trading style and a trading strategy, while they may sound pretty similar, they are actually quite different. The trading styles that are most known are day trading and swing trading, there are of course the two other main styles that are growing in popularity which are position trading and scalping. Trading style refers to the way in which you trade, or at what speed to make trades, a trading strategy is about how you make your trades, what you reply to enter and exit your trades, and the rules that you use. So while they sound the same, they do have very different meanings.
So let’s take a look at what some of the main different trading styles are, we can divide them up into two categories, long term styles, and short term styles. The long term styles would include swing trading and position trading while the short term styles would include day trading and scalping.
Swing trading is often considered as a part-time style. The style often has the trader open up a large or medium-sized trade and then leave it there for a considerable period of time, sometimes for days or even weeks. The main problem with this style and the reason why a lot of people do not like it is the fact that a lot of brokers will add on some charges known as swap fees for holding trades overnight, this can add to the cost and depending on the pair and the broker it can be quite expensive. This is a style of trading that can be seen as a little more sensible for those traders who want to trade less frequently, or that do not necessarily have enough time to be constantly checking the markets and their trades. As with any style, risk management will be key to help prevent a trade from going way into the negatives once you have set it and walked away.
Position trading is kind of a more extreme version of swing trading, so with string trading, you are holding something for days or week, with position trading you can be holding it for months or even years. A position trader is not interested in small movements, instead, they are looking for some huge movements, the sort of movement that can make history. Traders using this trading style do not need to watch the markets much at all, instead, they need to have a belief that the markers will go up or down in the long run and so they let it do its thing rather than constantly monitoring it.
Day trading is often referred to as the opposite to swing trading, people who are using this style of trading will open up multiple positions throughout the day and will close them before the end of play each day. This style of trading will take a lot of dedication and can result in you being in front of the computer for extended periods of time. You are required to be quick to spot opportunities to take and it can often be quite hard to find times to do this as they can occur at any time during the day, easily missed when making some food or popping to the toilet. It is a very popular trading style and many people like it due to the ability to compound any profits in order to earn a little more each time.
Scalping is a more extreme version of day trading, scalpers can make a lot of trades per day, sometimes even in the hundreds. Every single movement in the market is an opportunity to make a trade and to make a little bit of money, they are not looking for big profits, they are looking for little bits at a time. It is a very intense style that takes a lot of concentration but if it is done well, it can be very profitable, and much like day trading, the profits can be reinvested in order to help increase future profits. This style of trading is growing in popularity, especially through the use of expert advisors and it is something that a lot of people are now starting to take notice of.
So those are the four primary styles of trading, but how do you know which one is right for you? The first thing that you need to do is to decide whether you want a long term or a short term style of trading. The problem is that it is not exactly an easy question to answer, as what may suit you one time may not suit you the next week. It is important that you get a little bit of experience with each of them and get an understanding of what is actually involved in them. You should also consider the requirements, the longer the trades for a style often means that they also require more capital in order to trade them, they are bigger trades being held for a long period of time and so require the money in the accounts to cover that.
Short term trading styles require a lot less patience, and less capital, the profits are also received a lot quicker and so can be compounded in order to increase the amount of profit or trades next time around. The trades are generally smaller in size so the account balance in the account does not need to be quite as high.
If you are an impatient trade that does not want to wait, then the shorter-term trades are best for you, if you have a lot of time on your hands then the shorter styles could again be a good choice for you. If you want to set and forget, then the longer-term styles would suit you a lot more. Remember to keep things simple though, something being more complicated or giving you more to do does not necessarily make it any better.
Having said all that, you should certainly try each style at least once, there may be one that you are certain you would not enjoy, but once you actually try it, it feels natural to you and is the one that you want to go for. It is hard to judge exactly how much time you will spend on each one, but you should feel straight away whether one could potentially be good for you or not, just ensure that you try them all. Some people swap between different styles depending on the markets, so having a choice of multiple is not always a bad thing.
Whatever you chose to do, try and stick with it for a longer period of time, simply trying something for a week is not enough to get a full understanding of what it is that you are doing. Of course, if you are absolutely hating it then it is better to change earlier than later as it could put you off trading completely. Once you have found the style that is right for you, make sure that you set up a trading journal, that you are recording what you are doing. This is completely new to you so you need to work out what your natural habits are and this can be done through a journal, only then will you be able to start adapting the style of your trading to better suit you and the markets together.