Exploring Different Trading Styles

Are you interested in learning different trading styles? Trying new strategies will help you improve your skills and increase your trading opportunities. The most popular styles are day trading, swing trading, position trading, long-term trading, and scalping. Learn more about these styles and try them out on our FXOpen platform.

Types of Trading Depending on the Timeframe

There are several styles you may want to consider. Let’s learn more about them.

Day Trading: Fast-Paced Trading for Intraday Profits

Day trading involves making multiple trades with one or more assets within a single day. It will require you to make quick decisions and take advantage of intraday price fluctuations. As a rule, day traders use technical analysis to identify short-term trends and trade on momentum. While this approach may be profitable, it also involves a high level of risk and requires discipline and focus.

Scalping: Taking Advantage of Small Price Movements

Scalping focuses on small price movements. It’s common for traders to confuse day trading and scalping; however, there are differences. Scalpers usually hold positions for a few seconds or minutes and aim to make over 20 trades a day, while intraday traders may hold only 3-5 trades a day. Scalping requires a lot of discipline. Such traders need to make lightning-fast decisions and cut losses quickly. Scalping involves a high level of risk and requires diligence, attention, and a very high level of emotional control.

Swing Trading: Profiting from Short-Term and Extensive Price Swings

This type of trading refers to holding positions for several days to capitalise on price swings. Just like day traders, swing traders use technical analysis to identify current trends. This style requires patience and discipline, as it’s necessary to wait for the right opportunities to enter and exit positions. Swings can be found on any timeframe. Therefore, this approach is widely used by traders. While it can be less stressful than day trading, it still requires careful risk management.

Long-Term Trading Styles: Investing for the Future

Position trading is used for long-term investments. During position trading, traders hold positions for days, weeks, and months, sometimes even years, to make money on long-term trends. Position traders use fundamental analysis to find undervalued assets and trade on the expectation of future growth. This approach requires the ability to plan for the long term and be prepared to overcome fluctuations with a significant budget. It might be calmer, but it still requires a risk assessment.

Don’t Confuse Position Trading with Long-Term Investing

While position and long-term trading have some commonalities, they are not the same thing.

Position trading involves holding positions to take advantage of long-term trends, while long-term investing involves holding assets for several years or decades with the expectation of future growth.
Position trading is more focused on short-term price movements and may involve more action than long-term investing.

Types of Traders Depending on the Instruments They Use

There is a set of tools and types of analysis that you may use to identify the most likely future price movements to make decisions about whether to enter or exit a trade. There are three groups that we’ll talk about below.

Fundamental Traders

Fundamental traders base their decisions on the underlying economic and financial factors affecting the market. They analyse financial statements, economic indicators, and other market data to determine the intrinsic value of an asset. Fundamental traders tend to trade on news releases.

Technical Traders

Technical traders use charts and technical analysis tools to identify patterns and trends. They rely on technical indicators such as moving averages, support and resistance levels, and momentum indicators. Technical traders trade on different timeframes and in various markets, optimising technical analysis tools.

Price Action Traders

Such traders rely on price movements and patterns to make accurate and reasonable decisions. They analyse changes in prices to find potential buying or selling opportunities. Price action traders typically have a short investment horizon, and they need to be focused and careful.

How to Decide on a Trading Style

It’s important to choose a style that suits your investment objectives, risk tolerance, and personality. When choosing a style, consider your aims and time horizon.

If you are looking for long-term growth, a long-term or position trading style may suit you.
If you are comfortable with volatility and want short-term trading opportunities, you may choose swing trading, day trading, or even scalping.

Explore TickTrader to learn about tools and assets you may want to use for free. There you’ll find many useful instruments that will make analysing much easier for you.

Final Thoughts

Each style we discussed has its own strengths and weaknesses, and it is up to you to decide which one is right for you. Whichever style you choose, remember to be disciplined. You’ll have to put effort and time into learning.

You can open an FXOpen account and start practising. Regular trades and hypothesis testing with a basic or demo account will help you become more confident. Over time, with patience and persistence, you’ll be able to discover the trading style that suits you the most.