Different trading styles
There's 3 main styles in trading and investing. Finding a style that works for you is crucial in your trading progression. Finding your style will help give you an outline of what to learn, as well as help navigate you through these confusing markets.
Finding that perfect style will remove the fog in trading and investing. Getting you ahead of the majority of the traders around you.
In this blog I’m going to explain those 3 main trading styles and their pros and cons, as well which style fits who. Giving examples of each to make it easier for your brain to unfold, ensuing progression in these markets.
Swing Trading
Swing trading is a very common way of making money in the markets. It’s similar to intraday trading, which I’ll get into soon. Swing trading though requires the trader to hold their positions much, much longer than intraday trading.
So what is swing trading? Swing trading is essentially the attempt to catch major moves in the markets. This means your trades last very long compared to other trading styles. Swing trading is done on much higher time frames, using anything from the 4 hour to the daily, when looking for setups.
Pros Of Swing Trades
The gains from swing trading are typically larger but less frequent from other trading styles, since swing trades can range from days to even months. You’re catching the overall market's move, which results in the large gains associated with swing trading.
Who’s suitable for swing trading? Well really anyone who prefers to trade long term moves, rather than shorter moves which similar trading styles focus on. I’ll talk about these trading styles shortly.
If you’re someone who doesn’t have as much time to put into the markets, and can’t constantly be looking at a chart. Swing trading might be a good pick for you.
Cons Of Swing Trades
There are some disadvantages to swing trading though. Your positions can be impacted by overnight and weekend market risk, depending on how long your trades last. As well as strategy in swing trading.
Market reversals can also cause large losses in swing trades. This once again ties into what your strategy is and how you perform your trades.
Intraday Trading
I‘d argue this is the most common style of day trading. Intraday trading is probably what comes to mind when someone mentions day trading. You’ll be holding your positions in the markets way shorter compared to swing trading. It is a little more risky though compared to swing trading.
Intraday trading is the form of trading where your position opens and closes the same day. You’d be trading the market open and closing it before the market closes. In intraday trading you’re using lower time frames as well as some higher time frames, ranging from the 1 minute all the way to the daily. You’d be looking for setups using the 1 minutes to 15 minutes most likely.
Pros Of Intraday Trading
Placing positions with intraday trading is way more frequent compared to swing trading. You’d be trading everyday, maybe not placing positions everyday though. But you would be on the charts likely for a couple hours after the market opens. This results in the gains almost being daily.
Your positions would also be safe from the overnight and weekend risk, unlike swing trades. Majority of traders would also have access to increased leverage. Intraday traders would most likely learn quicker since they’d be in the markets everyday, and more experience the better you get.
Intraday trading is more suitable for people who have the time to be on the charts daily for at least an hour or 2 a day. If you’re someone who loves trading and is always trying to learn and gain experience then intraday trading might be for you.
Cons Of Intraday Trading
Which more time on the charts though and more trades taken does lead to more risk. Intraday trading does have more risk than swing trading simply because you’re executing off of lower time frames, while taking trades more frequently. If you choose to go on a margin account this can be even worse.
Some assets also become off limits, like mutual funds. This is a result of mutual funds only being able to be traded after the markets have closed for the day. Most people don’t trade mutual funds though, even if they have the ability too. If you are intrigued to trade mutual funds though, ETFs always exist.
Scalping
If I had to compare scalping to a different style it would be intraday trading. Scalping and intra are extremely similar. Scalping trades are very, very short though. That's essentially the difference between scalping and intraday trading. You could even intraday trade and get a scalp, that's how close they are.
Scalping is taking many small moves within the market. These trades could last from 30 seconds to 10 minutes, they’re relatively super short trades. Similar to intraday trading, they both move within the market hours, weekend and afterhours risk isn't a question. Setups would be found within 1 minute or even smaller.
Scalping is suitable for someone with lots of time, you’ll essentially be on the markets all day. If trading is your job or you have as much free time as possible, scalping could be ideal for you. As well as someone who has market experience, scalping can be difficult.
Pros Of Scalping
Scaling can be very profitable when done correctly. All the small wins you make throughout the day will compound into large profits, like I said though it needs to be done correctly.
Scalping and intraday trading essentially have the same pros. They’re both great trading styles to learn, it just comes down to which one you prefer. As well as how limited you are by time.
Cons Of Scalping
Scalping does require a large amount of leverage, due to the move you’re catching being so small. This can be a negative since beginner traders can get ahead of themselves and start going crazy with their trades.
Scalping should all be done at a profitable level of trading. Scalping is extremely risky when you don’t know what you're doing since you're taking so many trades, and the more trades you take, the more likely you are to lose.
Which one suits you the best?
Finding a trading style can be found by knowing your trading goals. Knowing these will help answer the question of “which trading style is meant for me”. If your goals with trading are to get as much experience as possible, intraday trading could be for you. Maybe you want to grow an account over time? Swing trading could be a good idea too. It really comes down to how you want to achieve those trading goals, and what your goals are.
Your style of trading can also come down to how much time you have. If you have a lot of time scalping might be for you, even intraday trading as well. If your time is limited then swing trading would best suit someone with no time.
Everything just comes down to you and how you want to trade. In the Whale Room you’ll find traders with different styles of trading, Kyle is a specialist swing trader with advanced perspectives on the macro environment in the crypto industry. His knowledge extends to the traditional markets in terms of stocks and commodities. Come learn from the best and be a part of the Whale Room!
