Have you ever heard the saying 'every head has its own way'? Well, this also applies in the trading world. There is no one trading style that is the most correct or the most wrong. It all comes back to you, as the trader. Just like choosing clothes, some like casual styles, some formal, some sporty. Trading is the same, there are many 'outfits' you can try!
Sometimes, we hear people say, 'Wow, A is always profitable because he's a day trader!' or 'B is just relaxed swing trading, and the results are decent.' Then we start to think, 'Do I have to follow their style to be profitable too?' Wait a minute! That's actually a fatal mistake often made by beginners.
Why can't I just follow along?
Every trading style has different risks, potential profits, and time demands. It's like being a racer. Some are great at short tracks that require lightning speed (that's scalping!). Some excel at medium tracks that need perfect timing strategies (day trading or swing trading). There are also those who prefer long-distance racing that requires endurance (that's position trading or investing!).
So, what type are you?
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Getting to Know Various 'Outfits' of Trading Styles
To make it clearer, let's get to know some popular trading styles:
The Flash: Scalping
Imagine you are in a 100-meter sprint. As soon as the start goes off, you run as fast as you can, and as soon as you finish, you stop. Well, scalping is similar to that. Scalp traders usually only hold trading positions for seconds to minutes. They aim for small profits from price movements that only 'blink', but they do it very often.
Suitable for you if: You have plenty of free time to watch the charts, enjoy quick action, and don't easily panic.
What you need to remember: Transaction costs can be your main enemy if you're not careful.
The Daily One: Day Trading
This one is similar to office workers. Start in the morning and go home in the evening. The trading position is opened and closed on the same day. So, there are no positions that stay overnight. This is suitable for avoiding the risk of market 'surprises' that can happen while you sleep.
Suitable for you if: You have specific time during the day for trading, enjoy technical analysis, and want to control daily risks.
What you need to remember: Requires high focus and discipline.
The Relaxed One: Swing Trading
Well, this is a style that many like because it's more 'relaxed'. Like a swing, swing traders try to take advantage of larger price swings, which can last from days to several weeks. They don't need to constantly watch the charts.
Suitable for you if: You have other commitments, like analysis that isn't too rushed, and are willing to hold positions longer.
What you need to remember: Still need to be patient waiting for the right moment and ready to face short-term price fluctuations.
The Long-Term One: Position Trading
This is the most relaxed of all, similar to an investor. Trading positions can be held for months or even years. They aim for big trends and are not bothered by daily or weekly fluctuations. Their focus is more on the big picture of the economy and the fundamentals of the asset.
Suitable for you if: You have 'idle' capital that can be kept for a long time, enjoy fundamental analysis, and don't easily stress about small price movements.
What you need to remember: Even though it's relaxed, you still need in-depth research and extra patience.
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How to Find the Right Style for You?
The answer is just one: Try and get to know yourself!
How much time do you have? If you can only look at the charts for an hour a day, maybe scalping or day trading isn't the best choice.
How resilient is your mentality? Do you panic easily if the price drops a little? Maybe the fast-paced scalping will stress you out.
How much capital are you ready to allocate? Some trading styles require a larger capital buffer for risk.
Do you like to learn details or the big picture? Complex technical analysis is suitable for day traders or scalpers, while position traders focus more on fundamentals.
The point is, don't rush to imitate others' styles. Try to learn one by one, adjust to your personality and lifestyle. Start with a small capital first, and if you're comfortable and it fits, then increase it! Trading is a journey, not a sprint. Enjoy the process!