Blog #31 - Types of Trading

Types of Trading

What are the types of trading?

 

There are three types of trading, differentiated mainly by the time frame involved. These are:

 

Swing Trading:

Swing trading is the method which allows trading of tradable swings up and down. The length of time the trade is held could be from 3 to 4 days, to a couple of weeks.

 

 

Position Trading:

Position trading is used by traders, who trend to hold trades over multiple swings, not ending their trades on intermittent corrections. They could be holding trades anywhere from a couple of weeks to many months.

 

Types of Trading

 

Day Trading:

Day traders trade within the course of a day. They generally do not carry overnight positions. Day Trading, in particular remains one of the most difficult forms of trading to master.

 

 

There are successful traders of all three types. Choosing the type of trading approach appropriate for you is a function of many things, but most successful traders tend to adopt and try to master, any one of the three. The factors affecting your choice could be the size of your trading equity, your personality and probably the development of your own niche which a trader discovers after many years in trading.

 

 

Based on my style of trading, I like to consider myself a swing trader and in extraordinary circumstances of a strong weekly trend a position trader. The way I use technical analysis is:

 

Identify the trend of the market.

 

Measure the strength of that trend.

 

Look for a low risk entry into that trend. 

 

Use money management to determine the size of any position.

 

Use an appropriate stop loss. 

 

Keep following the trend till the market proves it has reversed.

 

Keep out of the market when the market is not showing any significant trend one way or the other.

 

I hope by the time you would be able to do all of the above effectively.

 

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