The Different Types Of Trading
If you want to be a trader, you need to know the different types of trading. Why?
That's because different types of trading will involve different skills and different time frames. You need to chose the trading style that suits your personality and your time availability.
Below are the types of trading that you will encounter.
That's because different types of trading will involve different skills and different time frames. You need to chose the trading style that suits your personality and your time availability.
Below are the types of trading that you will encounter.
Day Trading
Day trading is where you open and close your positions within a single trading day. You will buy and hold stocks from a few minutes to a few hours. However, by the end of the day, you will sell the stock. Day trading requires intense concentration and you need to sit in front of the computer during opening hours.
Depending on your day trading strategy you can trade and finish your work in less than 30 min a day. Some traders just trade the open, while others trade late in the day. Some trade the whole day. Day trading is not for those who have a full time job. When you day trade, your full time job will be a trader.
A day trader uses intraday charts with a time periof of 5 min or 15 min to look for stocks to trade.
Depending on your day trading strategy you can trade and finish your work in less than 30 min a day. Some traders just trade the open, while others trade late in the day. Some trade the whole day. Day trading is not for those who have a full time job. When you day trade, your full time job will be a trader.
A day trader uses intraday charts with a time periof of 5 min or 15 min to look for stocks to trade.
Swing Trading
In swing trading, you typically hold a stock overnight and sell it anywhere from 2 days to a week. Sometimes a bit longer. But usually less than 10 days. Swing trading is perfect for those who do not have the time to watch a stock all the time. It is also suitable for someone who a full time job.
You can scan for setups after the close of the trading day and instruct your computer to buy a stock when it trades above a certain price. You can also place a stop loss or a profit taking target and instruct your computer to do the work for you monitoring your stocks while you are away from the computer.
If you are someone who does not like to stare at computer screens the whole day but still want to build wealth in the markets, then you should be a swing traders. A swing trader uses the daily and weekly charts to look for swing trading setups.
You can scan for setups after the close of the trading day and instruct your computer to buy a stock when it trades above a certain price. You can also place a stop loss or a profit taking target and instruct your computer to do the work for you monitoring your stocks while you are away from the computer.
If you are someone who does not like to stare at computer screens the whole day but still want to build wealth in the markets, then you should be a swing traders. A swing trader uses the daily and weekly charts to look for swing trading setups.
The chart above shows how a swing trader would trade the markets. For example, the trader would buy the stock of BAM when it is near its 50 MA support and hold it for 9-10 days. Then he sells the stock near the previous high. This swing trading strategy is suitable for those who do not want to stare at the computer screen for the whole day. You can monitor the stock at the end of each trading day and instruct your computer to sell your stock when it reaches a certain price.
Position Trading
Position trading is a longer version of swing trading. Instead of holding the stock for a few days, the position trader might hold the stock from weeks to months. The position trader will use daily charts and weekly charts to find trading opportunities.
Position trading is perfect for those who really don't want to look at the markets every day. He or she can look at the market once or twice a week to monitor their trading positions. You can go travel and still be able to make money.
Trend Trading
A trend trader is someone who look for stocks or markets that are trending. They do not like to trade sideways markets. They will either choose a market that is trending up and buy the stock or look for a stock that is trending down and short the stock. The trend trader will remain in the position as long as the trend lasts.
In the chart above, a daily trend trader might buy AMZN stock and hold it as long as the stock is in an uptrend. AMZN is still in an uptrend in the chart above, so he will not be selling it yet.
Trend followers can also work in other time frames. Such as the 60 min timeframes. In the chart above, a 60 min trend trader might buy the stock of AMZN in July 1 and hold it all the way till the stock ends the 60 min uptrend around 15 of July.
Some of the best and greatest traders are trend followers. They will enter a stock or market when the it looks like it is beginning an uptrend and hold them as long as the stock is in an uptrend. They may even add more positions as the stock moves higher.
Some of the best and greatest traders are trend followers. They will enter a stock or market when the it looks like it is beginning an uptrend and hold them as long as the stock is in an uptrend. They may even add more positions as the stock moves higher.
