#TradingTypes101 Types of Trading: A Basic Guide
The world of trading offers a variety of strategies and approaches. Here are some of the most common types, classified for easier understanding:
1. Based on Time Horizon:
- Day Trading: Opening and closing positions within the same day. High risk, high potential reward. Requires a lot of attention and experience.
- Swing Trading: Holding positions for a few days to a few weeks, taking advantage of short-term price movements. Less demanding than day trading, but still requires active monitoring.
- Long Term Investing: Holding positions for months or even years, focusing on the long-term growth of an asset. Less risk than day trading and swing trading, but with lower potential for quick gains.
2. Based on Strategy:
- Trend Following: Identifying and following long-term market trends. Aims to take advantage of significant and sustained price movements.
- Mean Reversion: Betting that the price of an asset will return to its mean or average value after a significant deviation.
- Scalping: Executing a large number of transactions in short time frames, seeking to obtain small profits from each trade. Requires great speed and precision.
- Arbitrage: Taking advantage of price differences of the same asset in different markets. Relatively low risk, but requires access to multiple markets and quick execution of trades.