There are four primary categories of trading: Scalping, day trading, swing trading, and position trading. Depending on the timeframe and length of the trade’s open period, several trading strategies may be used.
TRADING STYLE
TIME FRAME
TIME PERIOD OF TRADE
SCALPING
DAY TRADING
SWING TRADING
POSITIONAL TRADING
SHORT-TERM
SHORT-TERM
SHORT TO MEDIUM-TERM
LONG-TERM
SECOND OR MINUTES
1 DAY MAX
ABOVE 1 DAY
WEEKS, MONTHS, YEARS
Scalping
The shortest-term type of trading is scalping. An individual who executes dozens or hundreds of trades daily in an effort to “scalp” a modest profit from each transaction is known as a scalper. Scalp traders don’t open positions for more than a few seconds or minutes. These quick trades aim to capture modest intraday price changes. The idea is to execute a large number of rapid trades with lesser profit margins in order to spread out the day’s profits over a larger number of contracts.
Additionally, they frequently limit their trading to the busiest periods of the trading day, the overlap between trading sessions, when there is a higher trading volume and frequently higher volatility. Due to their frequent market entries, scalpers seek the narrowest spreads possible as paying a wider spread may reduce their prospective earnings.
The fast-paced trading environment of trying to scalp a few percentage points as many times as you can throughout the trading day can be challenging for many traders because it demands high skill in trading and only professionals can play it well. This is because you must focus on charts for extended periods of time.
Day Trading
Day trading may be appropriate for people who don’t feel comfortable with the rigours of scalping but still don’t want to hold positions overnight.
Day traders take positions and close them on the same day, eliminating the danger of any significant overnight movements. They close their position according to trading plan at the conclusion of the day, with a profit or a loss. Since trades are typically maintained for a few minutes or hours depending on whether they are a goal or a stop loss, there must be enough time to analyse the markets and periodically check positions throughout the day. Day traders, like scalpers, rely on periodic, tiny profits to increase profits.
Swing Trading
Swing traders often keep positions for a few days, albeit occasionally for as long as a few weeks, as opposed to day traders who hold holdings for less than one day. Trades are not continually being watched by traders throughout the day because positions are kept for a length of time to catch short-term market movements.
Swing Trading is a popular trading method to capture the swings or momentum of price for those who want to trade in their spare time. The markets still need to be studied for a few hours each day. Swing traders also need a trading system like day trader as per their time frame that suits their trading style.
Positional Trading/Investing
Like other traders, position traders also require a trading system. Positional traders focus mostly on sector-specific long-term price movements and aim to profit as much as they can from material price shifts. Deals typically persist for several weeks, months, or even years as a result. Weekly and monthly price charts are commonly used by position traders to analyse the markets and identify potential entry and exit opportunities.
Unlike those of other trading systems, positions held by position traders do not require continuous monitoring. Positions are rarely evaluated because the primary focus is on stocks with strong fundamentals in a thriving industry.
