As a trader on any market you will come across many different ways to trade. Today we are looking at forex trading styles. The main difference between trading styles is the length of time that you hold on to the stock for. Also, the frequency that you trade at is also a determining factor for what style of trading you do.
There are no rules to what style of trading that you do, because there are ways to make returns on all styles. Although, some styles of investment are riskier than others. The longer you hold onto a stock for is the less risky that it is. News traders and Intraday traders trade within minutes, this is high-risk.
Macro, EOD and Trend traders take months to give up or buy in a position.
EOD (End Of The Day) Trading
EOD is most popular for people who work full time. They analyze the markets on a daily or weekly bases. An EOD trader will set prices as an investment evolves to ensure maximum profits. They will not be trading all day with four screens by their side.
Macro Trading (Fundamental)
Using essential (fundamental/basic) financial models to analyze the strength or weakness of a certain stock. The news of a company internally would impact a macro trader.
An intraday trader opens and closes a position on the same day. Using 1HR charts is classed as Day Trading. The technical side of investing comes before fundamentals when Intraday Trading. The types of Intraday trading are Scalping, News Trading, Swing Trading, Trend Trading.
During times of chaos in the news a trader will buy or sell positions. ‘Red News’ is news that cause a share price to increase or drop dramatically. For example, if a new CEO is appointed or a executive gets fired then news trading will ensue.
A position trader is a trader who holds onto a position for a long time, from weeks to months and even years. Position traders do not care for small dips and increases in a stock because they believe the stock will increase over time.. even if there are short term drops. Some position traders have full time jobs, because you do not need to check stock prices daily.
Scalping is a form of Intraday trading. Scalping is an intense form of trading where you stay focused on your screen like your life depends on it. The profits for scalping trading can be huge so it is the most popular form of trading. To be a master of scalping trading you must spend hours everyday glued to a screen with incredible discipline. The time required to be a good scalping trader is worth-while because you can earn much more than any other trader and risks are slightly lower.
As a swing trader you are trying to catch a big swing of a stock. Some people hold our on a stock for a few days or weeks. Although, some people use a 1 hour chart to work with.
With technical trading you analyse and enter a position using technical analysis. This can be carried out at any timeframe, so one hour, day, week, month or even years. Technical analysis can be used on long-term investments. Although most people do intraday trading.
When an investor trades and follows a pattern of other investors, this is Trend trading. It is common for large fund managers to use trend trading. Although anyone can be a trend trader as it gives security in an investment. If many people follow a similar pattern then the risk will in-turn decrease and if you are dealing with lots of capital then trend trading is the easiest model to follow.