For new traders, choosing a trading style that best suits their personality can be a difficult task. Choosing the right style will greatly impact the long term success of your trade. For starters, there are 3 common styles of trading namely
Scalping, Day trading and Swing trading. Each of these styles has categories of people for which they are perfect and they all come with their pros and cons. Deciding which style to choose is highly dependent on the time that you have for trading and your personality. However, to simplify the process of choosing your style of trading, we will go into detail about what each type of trade is, the pros and cons of each type and which type suits you best.
Scalping, Day trading and Swing trading. Each of these styles has categories of people for which they are perfect and they all come with their pros and cons. Deciding which style to choose is highly dependent on the time that you have for trading and your personality. However, to simplify the process of choosing your style of trading, we will go into detail about what each type of trade is, the pros and cons of each type and which type suits you best.
Scalping is a very rapid form of trade with scalpers often making trades within a few seconds of each other. Scalpers normally hold on to their trades for just a couple of minutes, usually making as many trades as possible in just a single day. The trick behind scalping is making very quick decisions.
Scalping is intended for people who want to make profits very fast. Though the profits are small, making many trades in a single day will ensure that at the end of the day, you walk away smiling. Scalping is also ideal for the impatient people who expect profitable trades immediately. However, for you to be a successful scalper there is a need for focus and concentration.
Example: A scalper trading a 1 minute forex chart seeks to go long, checks and realizes the 5 minute chart is going up and then decides to buy the given currency pair.
Some of the advantages of Scalping over the other types of trading include:
There is usually a very high win rate
Profits come in faster than when using any other style especially for the experienced people.
Profits come in faster than when using any other style especially for the experienced people.
The disadvantages of Scalping include:
Requires a lot of experience and knowledge for you to succeed
Requires a lot of focus and concentration.
Very time intensive especially when done manually.
Requires a lot of focus and concentration.
Very time intensive especially when done manually.
Day trading on the other hand involves trading for a few hours but not exceeding a day. It is at times known as intraday trade. On average, day traders make 1-2 trades per day usually capitalizing on the busy trading periods to carry out their trades. This is ideal for people who are very afraid of taking risks and making losses and have the patience to wait longer and study the market trends before coming up with any decisions. Day Traders normally take longer periods (normally hours) to study the market before deciding to trade. For those interested in quick profits, this method is not ideal for them, as Day Traders normally take hours before trading.
Example: A Day Trader using 15 minute chart seeks to go long, he checks the 1 hour chart and realizes that the market trend is going up. The trader will then go ahead to purchase the currency pair.
Day trading has also got its advantages over the other types of trading and they include:
Low execution costs because of the low number of trades made per day.
There are no overnight trades so you don't have to sleep worrying about whether or not you will make a profit.
Less risky compared to scalping.
There are no overnight trades so you don't have to sleep worrying about whether or not you will make a profit.
Less risky compared to scalping.
The disadvantages of day trading on the other hand include:
The Trader must have a deep knowledge about the technical analysis of the market and when to trade.
Requires real time access to news services and data.
Requires real time access to news services and data.
Swing trading involves holding on to trades for a period of days usually not exceeding a week. Swing Traders normally make between 2-5 trades per week, usually holding on to the trades overnight. Swing trading suits people who are very patient in nature. It is for those who like to trade from home and is based on short term swings in the currencies. Swing trading is for people who do not want to trade for the whole day and those not willing to take large risks.
Example: A Swing Trader trading hourly charts decides to go short. He checks the 4 hour chart and realizes it's going down. He then decides it's fine to short the currency pair.
The advantages of Swing trading include:
Is a good style for new traders
Does not require a lot of time.
Does not require a lot of time.
The disadvantages include:
Some trades need to be held overnight
Profits are lower compared to scalping and day trading
Profits are lower compared to scalping and day trading
Regardless of the type of trading you decide to choose, it should be compatible with your personality if you are to see any tangible results of your trades.
If you would like to read more or want to learn how to trade come join us on http://www.thriyve.com a community of active traders learning how to trade together.
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