Common Trading Styles

There are various trading styles used by traders. Most experienced traders stick to the single trading style, but new and inexperienced traders keep changing their trading styles in the beginning but when they know how to adapt a trading style that suits them they stick to it. The trading style is also directly proportional to your investments, if you are a new trader and entering into markets with small amounts such as $50, then small term or intra-day trading style is most common. Big investors use long term strategy and they wait even months to earn bigger returns.

Day Trading :

This is the most common trading style adopted by novice as well as experienced traders during intra-day markets. Traders open short term trades, having a small duration such half an hour to 4 hours and also close any open position by the end of the day i.e. before 22 GMT. The reason for short term trading is to used to yield small profits and save big losses. Novice traders do not like going into stressful sleeping hours, much to their relax and peace of mind, this style is well known for beginners.

Swing Trading :

Longer time frames involve swing trading style since the experienced traders like to remain calm and invest big money and yield high profits. Swing trading style can go to 4 hours to days and weeks to months. Traders analyze the market trends and news data, forecast the results and open trades for lengthy periods.

Technical Trading :

Traders who closely analyze market trends using technical tools looking at price charts, graphs and measure the strength and weakness of currency pairs using technical studies such as Moving average, Fibonacci calculator, Bollinger bands, and various other calculation methods. Traders look for the trade signals and execute the trades.

Automated Trading :

This style is totally software dependent where trader sets rules for entry and exit points for each trade, later the software looks for predefined values and triggers the trade execution and closes a trade when it reaches its stop loss or takes profit limits. Traders add an automatic script in an MT4 trading platform, which is also known as ‘Expert Advisor’ or EA when any EA added to a currency pair, it automatically opens and closes the trades according to the script commands.

Fundamental / News Trading :

Financial and economic news and big events in the world put good or bad effects on a currency pair, stock markets, and other exchange-related businesses. Traders keep a close on eye on the various upcoming news and taking advantage of the news outcome, they open trades.

Trend Trading :

Traders usually analyze the momentum direction of an asset or instrument toward higher highs or lower highs, if direction suggests an uptrend (Higher Highs) trades follow the trend until it ranges or moves in reversal. This style is widely suggested by experienced traders and has a high success rate.

Range Trading :

This style involves price movements and congestion points on the chart, looking at support and resistance levels of the asset, traders sell an asset at the resistance level and buys at a support level.

Scalping :

It is a very popular style among novice traders for short-term trades, ranging from 1 pip to 10 pips. Traders open and close trades so fast earning small profits. Most brokers forbid scalping and set a minimum time for closing a trade around 180 seconds. It is not a recommended trading style since it involves a higher risk of losses due to volatile nature of a market. Scalpers often lose huge sums of money.

Join the Conversation

My favorite part of doing these reports / articles is participating in the conversation they provoke. Each week, I ask one question. This week, it is this:

Question: What is your favorite trading style?