Types of Trading – Which Type Suits You

There are different varieties of trading that are based on the trading behavior, length of the trade and the type of the analysis one goes with, etc. but there are three most important types of trading – scalping, day trading and swing trading. Not that the other types are irrelevant, but these three specific types of trading are important because of how they fit well with different types of human personalities.

Scalping is the type of trading where the trades are open for less than a minute. It is an intense form of trading which requires a huge amount of concentration for short bursts. The scalpers generally follow tick charts or 1 minute charts, study the price movement and make decisions on whether to go long or short and whether to continue with the trade or close it. Depending on the time spent for trading, the scalpers could do anywhere between 50 and 500 trades a day, much more if they use a software program to trade.

Day traders are those who are happy with profits at the end of the day. They generally put in money at the start of the day and would like to withdraw their profits at the end of the day. They usually follow the 5 minute and 15 minute charts and make less than 50 trades a day. It isn’t as intense as scalping but it could be as risky or rewarding as scalping.

The final type is swing trading. Swing trades are those that last several days. Some trades remain open for several weeks and sometimes months as well. As you can see, it’s a pretty relaxed form of trading where the trader uses the daily or weekly charts to analyze a trade and probably spends much less time trading than the day traders or scalpers. But again, the risks and the rewards are no less.

So, which type of trading suits you?

Unlike what most traders think, the type of trading that suits you isn’t the one that matches your office clock or your need for success/money. The trading style that suits you depends more on your character than on any other factor. If you are aggressive and are a go-getter by nature, scalping and day trading would be more suitable for you. If you are laid back and calculative in nature with lots of patience, then swing trading is more suitable for you.

One of the major mistakes that traders make is that they try to bend their character to suit the trading style that they have chosen. This is like putting the chariot in front of the horse. The trader should choose a style that blends and complements his character. There are a lot of traders who are aggressive by nature but they choose to do swing trading either due to the fact that they are busy or they have their office work to take care of. But they fail in the long run. They just cant change their mindset to just sit around and twiddle their thumbs while the swing trade does its job of running into profits. They need action. So, they cut off the swing trades early leading to huge losses.

Likewise, patient traders find the intense job of day trading and scalping too much for their emotions and ultimately fail.

 

Rather than fighting your instincts, try to embrace what you have and what suits you. Trading style is like your career and life partner which comes along with you all your life. Unless you are in sync with it and get along smoothly with it, it will only end in failure. Determine what kind of a person you are and choose the appropriate trading style to match that. Success will follow.