Is there a flawless way to trade? Yes, the one that always adheres to rules and a deep understanding of what you have in hand. Stock market operations are subject to the vicissitudes of the markets and to our profile, but obviously you can never act in an anarchic manner.
If you do, you buy the passport to go directly to losses sooner than you think. For this reason, in this article we are going to analyze the different existing trading styles, giving the keys to what they are and which one can best suit your profile.
How many trading styles and strategies are there?
Whoever operates in this way does so with very short-lived operations, not lasting more than a few minutes and can be up to seconds. Ideal for those active investors that works very well opening many operations at the same time, and closing them quickly. We understand it better if we translate the term from English, and what it means “resale”.
Advantages and disadvantages of scalping
The main advantage of this system is that these operations do not require a thorough analysis of the reality surrounding the markets, since the life of the operations is very short. It does not usually generate very high losses, and the profits may be on the contrary high.
As a great disadvantage is that it requires a very high degree of concentration and that you be able to control many operations at the same time.
Not everyone is capable of operating this way.
This modality keeps the operations open only during the day, closing them before the night arrives. The duration time does not have to be as short as the previous style.
Advantages and disadvantages of day trading
Perhaps the most obvious advantage is that once you close the positions you can forget about trading during that day, which avoids the uncertainty that the night causes for many investors.
The same thing that happens to scalping stands out as a disadvantage, the need for high concentration and being able to make quick decisions in a very short period of time. The time you dedicate to operating in this way must be exclusive and without anything bothering or distracting you.
If we take as reference the origin of the word swing, oscillation, this style of trading takes advantage of the fluctuations of the market itself to take advantage. The previous study of these oscillations will be used by the trader to operate at a specific time. It does not have a term as short as the previous styles, and it can take several days for a transaction to be completed.
Advantages and disadvantages of swing trading
Being a much less aggressive trading style than the previous ones, you can take it more calmly and, therefore, it is an ideal way of operating for those who have stock market investments as a complementary activity.
If we have to highlight any disadvantage, it is that the results may not be immediate, so if you decide to trade in swing style, you must be patient. Take it easy, because the swing requires some time and, above all, patience.
It is the style that occurs in the longest term, and operations may be open for several months. It does not require such permanent attention, because the essence of this way of operating is to pick up the big stock market trends and go in that direction.
Advantages and disadvantages of position trading
The pressure is not so high, so those who operate in this way can dedicate themselves to another activity while they have their operations open. It does not generate high stress, since the expectations are not extremely high either, although we will never lose the objective of making money.
It is not a trading style for those who want immediate results or are impatient, so its main disadvantage is that of having the capital stopped for a long time.
It is a very simple concept, the trailer that operates under this style does so by trying to take advantage of the trend of a position in order to take advantage of it. They are positions that remain open until there is a change in trend that no longer favors us.
Trading against the trend
It is a style that takes advantage of situations, generally temporary, in which there is a reversal within a trend. If you are able to analyze the turnaround of a price, you will be able to take advantage of that situation, which is why you have traded against the trend. For this, it is necessary to understand the graphs well, and thus be able to identify these situations to take them to your field.
Contrary to what one might think, there is nothing anarchic about this style of trading.
We say that it is discretionary because it does not have a systemic nature, so the trader will take advantage of using a lot of his intuition and a deep knowledge of a specific market.
This means that operating under this style should be done when you know a specific market very well. Over time, the trader is able to identify when a situation may arise from which he can profit. Perhaps it is one of the most useful styles when you already have enough knowledge of what you have in hand. Discretionary trading is largely the result of experience. If you opt for this option, it is the one to which you will have to dedicate the most time and study.
In conclusion, we can say that there is a trading style adapted to each investor profile, so choosing one or the other will be determined by our expectations, availability and time that we can dedicate to carrying out operations. As always, it should be noted that when operating in the markets we must have a serious approach, be strict and never try to open operations that do not make sense. You must think that what is at stake is your capital, so a good time operating in demo format is the starting point when you do not have the necessary knowledge to execute actions with guarantees.
If you are thinking of investing, we recommend joining NAGAwhich offers an account DEMO with $10,000 so you can do the tests you need, before using real money.
In addition, you can earn money by helping others earn money, sharing your trades, or copying the trades of more experienced traders. Discover the benefits of social trading.