There are different types of trading styles are present. Trading styles can be classified based on the time taken by the trader. From this blog post, you choose which trading style is suitable for you. Also, this will help you to understand the advantages and disadvantages of each trading style.
Different types of trading styles
- Scalping
- Day trading/intraday trading
- Swing trading
- Positional trading
We will go through all the trading styles in details
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Scalping trading
In Types of trading, scalping is one of the trading styles applied in the stock market. If a trade happens in a very short time it is mainly known as scalping trading. The time frame for scalping is very short term, it will be between seconds to minutes. It requires more skill and knowledge also it will contain high-risk factors.
Advantages of scalping trading
- High leverage
Scalping is the same as intraday. Buying and selling of stocks happen on the same day. So it has all the advantages of intraday. Leverage is one of the advantages of intraday. So scalping traders can utilize the leverage to maximize the profit.
- High profitability
The trader can perform multiple trades because the time duration of the scalping is very less, which increases the profitability.
- Less screen time
Traders do not need to watch the market for a long time because the trader will close the trade in a very short time.
Dis advantages of Scalping
- High-stress level
Scalping contains a high level of stress because buying and selling of stocks happen in a very short time. Scalping will help when the market is in high volatile. The trader should know about the right entry and exit else it will cause a huge loss.
- Requires extreme expertise
It requires more knowledge. Expertise in technical analysis helps the trader to buy/ sell the stock at right time.
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Intraday trading / Day trading
In Types of trading, Intraday or day trading is another type of trading method which allows the trader to buy and sell the stocks on the same day. It has the benefit of using leverage. The time frame for intraday is within one day and it can be between minutes to hours
Advantages of intraday trading / Day trading
- High Leverage
For intraday traders can use the benefit of leverage. It allows the trader to buy a huge quantity of shares using the small capital amount, which will lead to more profitability from the trading
- High profitability
Intraday trading has the benefit of using leverage and it will help the trader to get more profit. Also, the trader can perform multiple trades that will help to get more profit
- No overnight tension
One of the important benefits of intraday trading is there is no overnight tension. All the risks traders face end up in the day itself. A trader can start the next day as a fresh start.
Disadvantages of intraday trading / Day trading
- Stressful
Intraday is more stressful, the profitability of shares completely depends on the market volatility.
In intraday, the trader uses the benefit of leverage, if the strategy is going the wrong trader may face a huge loss as well which leads to being more stressful.
- Requires technical analysis skills
A trader should be more expert in technical analysis that will help to understand the trends and all. Without these technical skills, traders may face huge losses.
- High screen time
Intraday requires complete screen time. If you are working in some other company it very difficult to handle these. It requires more attention else won’t be able to make a profit. A trader should be ready for the right time to enter or exit.
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Swing trading
In Types of trading, Swing trading is one of the trading styles which most people perform nowadays. The trader will hold the stocks from a few hours to a few days. The time period for swing trading is between 1 to 7 days. This will allow the trader to get a good ROI (Return on investment). Swing traders mainly depend on technical analysis for their investment. In swing trading traders looks for opportunities then they will find out the perfect entry and exit point using the technical analysis.
Advantages of Swing trading
- Less screen time
In Swing Trading, traders should not spend much time on screen to watch the market.it should be very less compared to intraday/day trading.
- Able to catch the gap
If the market increases the trader can wait to increase profit and sell the shares. It will help the trader to maximize the short-term profit potential.
- Less stress full
Compared to Intraday trading / Day trading it’s very less stressful. The trader will rely on the technical analysis, it will simplify the trade to be easier.
Disadvantages of Swing trading.
- Worries about the overnight risk
In swing trading, the huge risk is involved due to overnight risk and market risks. Overnight risk will impact the profitability of stocks. Suppose if you are invested in a particular stock, suddenly one bad news came about the company that will impact the stock price and it may get fall. This will affect the profitability form that trade. Compared to intraday/day trading overnight risks are huge in swing trading. News about the company, government policies can result in statistical losses to the trader
- No leverage
Compare to intraday trading/day trading the trader can’t use the leverage. That means traders should have some amount of money to perform well in the market. If the trader doesn’t have much capital profitability also will be less
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Positional trading
In Types of trading, positional trading is one of the trading styles in which the trader holds the stocks for an extended period of time. The time frame of positional trading is between weeks to months. Positional trading has the advantages of breakouts, profitability, and elasticity nature of the stock market
Advantages of positional trading
- Less screen time
It should be the same as swing trading, trader doesn’t need to spend much time on the screen.
- Maximize the profit
A trader can utilize the benefit of market potential to increase profit.
- Less stress
It will be the same as swing trading traders can wait if the shares go down. So it will be less stressful.
Disadvantages of positional trading
- News about company and government policies will impact the profitability
- Need more capital to invest and gain more profit
Conclusion
There are 4 types of trading styles are present, scalping trading, intraday trading/day trading, swing trading, positional trading. Which style of trading is better is completely dependent on you. If you are working in some other company and you have enough capital with you then you can choose swing trading or positional trading. If you have less capital but you can spend more time in market watch, then you can choose scalping trading or intraday trading. Knowledge and practice in the stock market help you gain more profit from the investment. It should be better if you have good knowledge in technical analysis skills when you choose scalping and intraday trading.