Types Of Trading Styles | Which One Is For You?


Different Types Of Trading Styles – Which One Is For You?

The world of trading has a lot of variety in terms of opportunities. Due to the vast variety of opportunities that exist in the dynamic mechanism of the stock markets, many different types of trading styles can be applied. It is very important to choose a trading style which suits your personality and preferences. It is also heavily dependent on your psychology. To become successful you will need to prioritize a style according to how your mind works. It basically depends roughly on,
  • Time you have 
  • Money on want to invest 
  • Knowledge you possess 
Once you become Master, You will not in need of anyone’s advice to invest your hard earned money. You can deal all these types all by yourself.

Intraday Trading

Most commonly practiced among retail traders in the Indian stock market, positions are squared off before the closing hours of the market. Intraday trading philosophy is that overnight exposure is risky. Traders book profits or losses quickly and do multiple trades every day.

It suits people who are least bothered about fundamentals or the things that are considered important to be a successful investor in the long-run. To them, it’s all about money management, timing entries & exits and position sizing appropriately. You can be trading the momentum. Intraday trading involves taking on additional leverage to generate higher returns. They are always looking to make higher returns than other trading formats. 

It is also among the most aggressive types of trading styles. Intraday trading format thrives on high volatility as the number of opportunities go up during such times. A successful intraday trader understands the importance of consistency and the power of compounding returns on a short-term basis. If consistency is maintained, then returns can be compounded on a monthly or quarterly basis. 

Intraday trading is only suitable for those who can dedicate a fair amount of time tracking the movements of stock markets regularly.

Swing (Short-term) Trading

The principal difference between intraday trading and swing trading is the timeframe. Swing traders attempt to predict the short-term fluctuation in stock prices overnight. So positions can last anywhere from 1 day to a few weeks.

The leverage used by Swing traders is generally lesser than intraday trading. Due to overnight risk, stockbrokers in India charge SPAN + Exposure margins. In a way, it enables traders more firepower to withstand overnight price movements and hold positions for longer hence trying to book higher profits per trade. If you like to analyze short-term price movements using technical analysis, then this is your ball game. 

True swing trading also involves a great deal of money flow analysis. If this is what you like doing then stick to this trading style. It is rewarding and the price movements are more predictable. However, risk management will need to be more sophisticated. In this style, you must be able to ignore minor intraday fluctuations without breaking a sweat or getting worried. 

However, most swing traders also do intraday trading so it is one style which can be merged but, it is important to draw a line somewhere and focus on specializing in one particular trading style.

Positional (Long-term) Trading

This is a type of trading style which ignores the minor short-term fluctuations that swing traders are fully focused on. Positional trading involves lesser leverage than swing trading. The holding timeframe of each trade is higher as these traders anticipate a big price movement in the coming future. 

Timing the market is not the top priority for this category of traders as they are willing to weather the storm and wait out a few months to see a large gain. Their focus is usually a hybrid of technical and fundamentals. To be able to hold positions for a longer time period, they feel like they have to be sure of what’s happening within the company. They’re usually looking for the underlying stock to gain more than 20% in the near future. Positional traders have the aptitude and inclination to lean more towards investing in the long run.

Read Next: Time Frame Explained in Detail
Types Of Trading Styles | Which One Is For You? Types Of Trading Styles | Which One Is For You? Reviewed by Admin on July 20, 2019 Rating: 5

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