There are millions of investors on the stock market, with millions of investing strategies, all hoping to gain an advantage over one another. This can be done through different screeners, scanners, methods for finding good stocks and many other ways. But they all stem from the trading style you choose, and how it fits with the strategy or strategies you’ve chosen. Here are the 4 primary trading styles and there Uses:
Position Trading/Long term
When position trading, you are planning for the future, looking to slowly but safely build your capital, by investing in solid companies with bright futures. Considering its the longest time frame for any of the styles, You are doing large amounts of research into the company, its CEO, its company model, and its earnings reports, to make sure the stock will be worth the long-term marriage to it. Very low risk, due to the precautions and research did, that yields low to medium gains, depending on the time period and success of the companies chosen.
Swing Trading
One of the most used styles, Swing trading requires you to hold a stock for a much shorter time then Position trading, while still capturing modest gains. It leans heavily on the buy low sell high saying, tracking a stocks chart pattern to determine which time to buy, how long to hold, and approximately how high it will climb before its time to sell. Positions are held for days or weeks, usually with a stop loss in place, as you generally won’t be closely watching a swing trade each day. A recommended Trading style for Both new and experienced investors.
Day Trading
Day trading contains its usefulness in its name, it refers to entering and exiting a position on the same day. Day trading avoids any overnight holds, cutting the risk of unfortunate Afterhour or premarket surprises. Day trading investors will create watchlists of stocks they are looking at each day, and will purchase a position in one of them should a buying opportunity present itself. They often set tight stop losses and profitable sell limits, looking to limit losses and capitalize on gains made. Highly profitable if done correctly, not recommended for newer investors, as it can be the cause of large loses, quickly, if done incorrectly.
Scalp Trading/Momentum Trading
An Ultra Profitably strategy with large amounts of risk, Scalp trading requires your full attention and time to be able to execute properly. A scalp or momentum trader will watch the biggest gainers, Newsfeeds, and interday price charts, watching for stocks that are moving north or are about to. They then will quickly purchase a position, all while having their finger on the sell button, watching the movements of the stock closely, looking for when to quickly capture gains or cut loses, depending on the stock’s movements. They often make dozens of buys and sells a day, often multiple times in the same stock, in order to amass small gains that accumulate throughout the day. Used usually only by Highly experienced investors with a good trading set up with fast computers.
Trading styles start here, with investors often choosing one of these 4, and then altering the style to fit how they wish to trade and how it will be profitable for them. Often investors will even switch styles throughout there investing career. 90% of investors lose money, so it’s important to choose a style that works best for you and what you are looking to accomplish in the market. We are always happy to help, feel free to chime in the chatroom, or email us, to help figure out the best trading style for you. We also offer investing teaching sessions, to learn how to perform each trading style and much more. Contact us to learn more and to sign up!