Choosing Your Trading Style

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There are four main styles of trading, namely scalping, day trading, swing trading, and position trading.

Technically, scalping is a form of trading within day trading, but scalping is very different from all other forms of day trading.

The difference between the styles is based upon the time frames that are traded.

Scalping trades are only held for a few minutes. Day trading trades are held for anywhere from a few minutes to a couple of hours.

Swing trading trades are usually held for a few days. Position trading trades are held for anywhere from a few days to several weeks.

Choosing the method that best suits their personality can be a tough for new traders, but it is necessary to their long term success as a professional trader.

If you are a new trader that does not yet feel you have found your style, the following are some of the personality traits that are compatible with the different styles of trading. By choosing the trading style that best suits your personality, you will have a better chance of being profitable , so be honest, even if you don't like some of the personality traits that are listed.

Scalping

Scalping is in and out trading. Scalpers often make trades within just a few seconds of each other, and often in opposite directions (i.e. they are long one minute, but short the next). Scalping is best suited to active traders that can make immediate decisions and act on those decisions without hesitation.

Impatient people often make the best scalpers because they expect their trades to become profitable immediately, and will exit the trade promptly if it goes against them.

Being a successful scalper requires focus and concentration, so it is not a suitable trading style for people who are easily distracted or who often find themselves day dreaming (i.e. if you've been thinking about something else while reading this, then scalping is not for you).

Day Trading

Day trading as a style most suitable for traders that prefer starting and completing a task in the same day.

For example, if you were painting your kitchen, and you would not go to bed until the kitchen was finished, even if that meant staying up until 3:00 AM.

Day traders would not consider making swing or position trades because they would not be able to sleep at night knowing that they had an active trade that could be affected by price movements during the night.

Swing Trading

Swing trading is compatible with people that have patience to wait for a trade, but once they have entered a trade they want it to become profitable quite quickly.

Swing traders will hold their trades overnight, so it is not suitable for people that would be worried holding a trade while they were away from their computer (i.e. overnight, in the shower, at the movies, etc.).

Swing trading requires a larger stop loss than day trading, so the ability to keep calm when a trade is against you is a must.

Position Trading

Position trading is the longest term trading of all, and often has trades that last for several years.

Therefore, position trading is only suitable for the patient and least excitable traders. Position trading targets are often several thousand ticks, so if your heart starts beating fast when a trade is 25 ticks in profit, position trading is probably not suitable for you.

Position trading requires the ability to ignore popular opinion because a single position trade will often hold through both bull and bear markets.

For example, a long position trade may need to be held through an entire year when the general public is convinced that the economy is in a recession.

If you are easily swayed by other people, then position trading will be difficult for you.

Being True to your Method or Style of Trading

Choosing a trading style requires the flexibility to know when a trading style is not working , but also requires the consistency to stick with the trading style even when it is not performing optimally.

One of the big mistakes that traders often make is to change trading styles (and trading systems) at the first sign of trouble.

Always changing your trading style or trading system is a sure way to catch every losing streak.

Once you are comfortable with a trading style, stay true to it, and it will reward you for your loyalty in the long run.

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