In forex, traders know four different trading styles, but what is the best trading style.? This may be a silly question because each trader has their suitability in choosing a trading style. But of course, each trading style has its advantages and disadvantages.
Whether it’s scalping, intraday trading, swing trading, or position trading, they have advantages and disadvantages. Choosing this trading style is very closely related to trading psychology which is also an important part of shaping a trader into a skilled trader.
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Contents
Trading style explained
The trading style is the approach that a trader takes to trade. Trading style is closely related to the duration or length of time a trader is in the market when an order is executed.
For example a few minutes, a few hours, a few days, or a few months. Everyone has a different personality and point of view. These conditions can affect one’s trading decisions.
In forex or stock trading, traders know there are four common styles. Scalping trading, Intraday trading, Swing Trading, and position trading. We discuss one by one.
It may be necessary to understand that trading style is not the same as a trading strategy. Often there is a misunderstanding about this.
To illustrate, whether you are a short-term trader or a long-term trader, it is style. While the trading strategy is more about how to enter and exit the market.
Type of the trading style
As already mentioned that there are four kinds of trading styles that are known by traders, now we discuss them one by one.
Scalping trader
Scalping trader refers to a trader who executes orders very quickly, it may be in just a few seconds or minutes. Not all brokers allow scalping trading.
You have to make sure that the broker you are using allows scalping trading. Due to some trader’s experience when using a broker that does not support scalping, the profit earned is canceled by the broker.
This trading style is usually with high-frequency trading. Usually, this trading style targets a market that is liquid and tends to be less volatile.
Scalpers use more technical analysis than fundamental analysis, by choosing the minute chart and hourly chart timeframes.
Intraday trader
Intraday trading refers to a trading style that opens orders in less than a day. Day traders taking daily average targets. Traders execute buy and sell on the same day. No trading positions are held until the next day. The time range is from a few minutes to several hours per trade.
In conducting the analysis, they mostly use technical analysis, but they will also look at the fundamental side, with hourly and daily timeframes.
Swing trader
Swing trading refers to a trading style in which a trader executes and holds it for more than one day, it can be several days, weeks but not more than one month.
Usually, swing traders have a balance of technical and fundamental analysis. The timeframe used from daily and weekly for general analysis reference.
Position trader
This is a trading style in which the trader executes orders and holds positions for more than one month, even that can be up to a year or more. Traders are more familiar with this is a long-term trading style.
Most traders who use this style are more inclined to use fundamental analysis, which affects the currency in the long term. Position trader usually uses timeframe weekly and monthly for general analysis.
How to choose the suits trading style
Choosing a trading style is closely related to the trader’s psychological condition on each trader.
Scalping suits for
Scalping is more suitable for active traders who are looking for profits in a short time without any hesitation. This trading style is not suitable for impatient traders.
This requires a high level of concentration, and focus on the market, missing opportunities will lose potential profits. Broker execution quality support is critical to trading speed.
If you can’t focus and concentrate, scalping is not for you.
Intraday trading suits for
This intraday trading style is more suitable for traders who have a busy day. Or those who cannot concentrate at all times to monitor market changes.
For example, you are a busy housewife in the kitchen, or you are painting your wall space. You can open orders in a few hours, and don’t let you sleepless by closing orders on the same day.
Swing trading suits for
Swing trading is suitable for traders who have less time to monitor market changes. This is a fairly relaxed trading style compared to scalping and intraday trading.
This trading style may not be suitable for traders who like to be nervous when holding orders and away from the computer. Swing traders mostly use a wide stop loss as anticipation of risk.
Position trading suits for
Position trading is suitable for traders who have large funds because their targets reach thousands of pips and hold orders for several months or even years. This strategy is not suitable for traders who like low targets say 20 pips daily.
This style is only suitable for very patient traders. Even traders who use this style rarely monitor market changes.
How to improve the trading style
To start improving your trading style, when you have chosen a trading style that suits your personality, try to follow some of the following tips.
- Choose your trading strategy, on how to enter the market and exit the market.
- Record all transactions that you make each time you enter the market in a trading journal. Make sure your entries are trading based on trading strategy.
- Evaluate trading results by reviewing all past trades.
- Check your mistakes, whether they are caused by your poor strategy, or caused by your own mistakes.
- Sometimes market conditions are beyond expectations, realize that there is no perfect strategy.
- Try and try again by choosing another strategy and starting over. If your first trading strategy is unprofitable.
Which type of trading is best for beginners?
Beginners are traders who are completely new to trading, they are people who only know at a glance that trading can generate income. But they have no idea how to start.
To start a beginner must learn from scratch about how the forex market works, how a trader can profit from trading. Broadly speaking, the steps for beginner traders to start are:
- Learn basic forex. Babypips is a good place to learn.
- Try practicing with a demo account. Some suggest at least six months of learning to trade with a demo account. But looking again at the progress, if it often fails, it can increase the time to learn demo trading.
- Start with small funds by choosing a micro account. Follow your progress.
What trading style suits beginners?
Beginners are usually very excited when they are just starting, but they lack experience. Unstable emotions need time to get to know their personality to adjust their trading style accordingly.
Is scalping suits for a beginner?
Scalping may not be suitable for beginners because it requires a lot of patience and concentration. One disadvantage when beginners do scalping usually makes emotions escalate quickly.
Once a loss may still be tolerated, but twice a loss beginners may start to lose the main strategy. And maybe increase the size of the position because you want to recover quickly.
Beginners must remember that trading is not an easy get-rich-quick method, recovery is more difficult and requires extra patience because he has lost some of his capital.
Is intraday trading suits for a beginner?
If you don’t find emotional stability with scalping, intraday trading is more relaxed for beginners. They can learn intraday trading to determine entry and exit on the same day.
Plan one or two trades per day put the risk in the plan. Beginners need time to learn to manage their mindset, because there may be beginners who can’t sleep when they have active orders.
Try to learn discipline even though you can explore your way of trading. If you have achieved a trading plan, don’t be influenced by your thoughts to try again because you want a bigger profit. The market doesn’t always go the way you think.
Is swing trading suits for a beginner?
Beginners mostly have low emotional control, although it depends on the personality of the trader. Swing trading is a style of trading by opening and holding positions for more than a day.
If this style makes beginners feel comfortable, that’s not a bad thing to do. Swing trading can train you to have more patience in completing a trading plan.
Is position trading suits for a beginner?
Maybe none of the beginners want to use this trading style. Because they are always curious about their trading position.
If at the beginning he wants to start to try position trading, maybe when he looks back at the charts and open positions it will make him change his mind.
Some floating profits make them close positions for fear of having to change losses. Or close the position because you are worried that the floating loss will get bigger.
What is the most profitable trading style?
Of the four trading styles that have been described above, the one who makes the most transactions is the scalping trader.
In a day they can make orders more than 100 times. This is because their target is low between 5-10 pips or even after seeing floating profit immediately cut profit in just a few seconds.
In a tournament, we once saw a contest winner using scalping style. This is by looking at the history of trading profit which is only $ 1 or $ 2 in each order.
Another advantage if you follow the rebate system, it will get a return of half or a quarter of the trading commission from the Introducer broker as an additional profit.
However, what is important is that every trader has different matching skills. You may need to find yourself the most profitable trading style.
Conclusion
Finding a trading style is trying out which one makes the trader feel comfortable in trading.
But it is also important to find the best trading strategy. This requires trial and error over a long time.
It is recommended that in a demo account a beginner does a trial trading strategy within a few months. Or they can use a strategy tester to test their trading strategy using past price data.
Note: This article is just information and personal opinion, not investment advice, forex, crypto, and CFD trading are risky, each investor is responsible for their investment.
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