What is particularly interesting about the world of trading is that it is possible to have several styles and even specialise in one and thus approach the financial markets in different ways. One of the most common mistakes that beginners make is the ability to position themselves in at least one trading style, as this is based on many elements, starting with your psychology and your goals. Here is a complete presentation of the different trading styles that you can find on the markets today.

1. Intraday

Intraday is a trading technique that consists, as the name suggests, of taking positions on a single day, and which must therefore be closed before the end of the session in the market on which you are positioned. Positions can last from a few minutes to several hours, depending on the objectives you have previously defined with your trading plan.

This is a methodology and style that is quite common and has the advantage of being suitable for many traders, especially those who unfortunately do not have the time to do in-depth technical analysis.

Most of the time, the trader who uses intraday trading will position with fairly short time units, usually in minutes or tens of minutes.

Among the advantages of using intraday as a trading strategy, there is first of all the possibility to seize opportunities every day with much more take profit than a trader who would be positioned on the long term. It is also a very good way to gain experience, since you have to redefine analyses every day. Another parameter is that intraday trading is mainly based on technical analysis, with short time units, which allows traders to save themselves the study, even if they still have to keep an eye on the fundamental aspect of the stocks they want to position themselves on.

Finally, one of the last advantages of this style of trading is that you can start with a small amount of capital, which is one of the techniques we recommend as it also requires the least amount of expertise. It will however require a mastery of the fundamentals of technical analysis and the establishment of a coherent trading plan to which you must adhere.

The disadvantages include the need to have a basic understanding of technical analysis and ideally to be able to face your screen to take a position. It is possible to program orders, but if you are a beginner, we advise you to be in front of the prices as much as possible in order to be as precise as possible and to understand what your automatic order will not be able to do, namely volatility and market sentiment.

It is also highly recommended to use a stockbroker that offers attractive fees, as you will still be taking several positions per day.

In this respect, we can recommend all brokers that offer no commission on shares, as is the case with eToro or XTB for example.

2. Scalping

Scalping is a trading strategy that is going to be used for very short-term objectives. It involves identifying trading opportunities, most often using the order book and more advanced techniques such as market profiling, in order to make multiple trips back and forth through the markets in order to sell and buy based on signals detected by price changes.

The time unit used for this type of trading can be in Ticks, 1 minute or 5 minutes. Most of the time, traders who use this type of strategy do so in CFD and Forex markets.

The advantages of scalping are numerous. Starting with the possibility, if you master this technique, of making very large gains every day. Also, the opportunities are present all day long, which can be interesting to generate a concrete profitability. Moreover, it is quite possible to test scalping with a small capital, because some brokers propose to position you with micro lots, which has the advantage of democratising this strategy.

The disadvantages are as numerous as the advantages. Indeed, the practice of scalping requires a real mastery of financial markets and a solid experience in order to make money with this type of strategy.

It is also a very stressful and energy consuming process, as you have to stay in front of your screen to follow the evolution of the prices on which you are in position, or even to detect opportunities. Unfortunately, not all brokers are interesting to carry out this type of strategy which, as you will have deduced, will require a broker offering very competitive spreads.

3. Swing Trading

Swing trading is finally the last existing trading technique and consists of betting on the long term. It is ideal for people who unfortunately have little time to devote to technical or fundamental analysis on the markets and who would still like to position themselves. The time frame for a swing trading strategy is a few days to a few weeks and most of the time a few months. The market to be prioritised for this type of strategy remains the equity market.

The advantages of swing trading include those who have a job in addition to trading and therefore do not have the time to study for opportunities in shorter time units.

Also, if you make the right choice in terms of long-term investments, the profitability remains quite interesting compared to scalping or intraday, which will potentially make you make more mistakes as you will be taking multiple positions. In this respect, swing trading is less emotional and therefore less potentially irrational.

It is therefore the least stressful trading style and takes the least time to set up. You will only need to spend about two hours a week analysing stocks and prices in order to place your trades.

As for the disadvantages, the first is that your profits will be less than with the other two trading styles.

It is also very important to choose a trading platform that offers competitive overheads, as you will potentially be running your position for days or weeks.

Swing trading also requires more capital to feel comfortable and have more expertise on all the fundamental aspects of the stocks you are going to position on, knowing that technical analysis even if it remains important is secondary.

Trading style : many elements to take into account

As you can see, in order to choose a trading style that suits you, a number of elements must be taken into consideration. Firstly, the amount of time you can devote to your trading activity.

The more time you have to devote to trading, the more time you can afford to spend on a time-consuming trading style, such as scalping. This should also be correlated with your personality, i.e. your risk aversion, and your ability to handle stress. Furthermore, the other important element that comes into consideration is your level, some trading styles are more suitable for beginners than others. Finally, the amount of capital you have available will be an important criterion, especially if you want to invest in the long term, especially in the stock market.