A 2 minutes intro…
Financial trading deals with the buying and selling of financial assets in order to profit from changes in their price. Those financial assets can be stock, currency, derivatives (e.g. CFDs, futures, and options), and bonds. No matter the traded financial asset, the aim of financial traders is the same and it is to make a profit.
While financial trading is generally known to be risky and complicated and that most traders actually lose, a sound understanding of it and its concepts can, however, set you apart. For example, of the four trading styles, scalping, day trading, swing trading, and position trading, you should know and use the one most appropriate for your needs. Here, you will find out.
Scalping
Of the different trading styles, scalping is the fastest. It is a short-term way of buying and selling financial assets by seeking to profit from small intraday fluctuations in price. Because they hold their positions for just a few seconds or minutes and target small price changes, scalpers have to place multiple trades in a day before they can accumulate substantial gains.
However, scalping is stressful. It is also time-consuming. And if you are not comfortable with studying the charts for hours on end, you should stay away from it.
Day Trading
Day trading is the most popular trading style. In fact, it is so popular that whenever people are talking about active trading, chances are that they are talking about day trading. Because day traders hold their positions for just minutes or hours, they enter and exit all their trades within the same day, thereby eliminating the risk of unexpected overnight market moves.
Therefore, day trading is most suitable for individuals who are not comfortable with both the ultra-fast nature of scalping and the prospect of having to leave positions open overnight which is characteristic of swing and position trading.
Swing Trading
If you have a full-time job that would not allow you to regularly sit at your computer to analyze the charts and monitor your trades, then swing trading is for you. It is a style whereby positions are held for several days or weeks in order to capture short-term market moves. Swing trading is most popular with traders seeking to trade only within their leisure time.
Nevertheless, as a swing trader, you will still have to dedicate some hours to analyze charts and monitor your trades from time to time.
Position Trading
Position trading is the fourth style of financial trading. It is the longest, with its practitioners having to hold their positions for weeks, months, or even years. Usually, position traders use long-term time frames such as weekly and monthly in their chart analyses and attempts to predict potential market moves.
Position trading is for patient folks. Its practitioners do not concern themselves with minor price fluctuations. Instead, they concentrate on profiting from long-term price movements. As a result, also, they only have to occasionally monitor their trades.
