CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Planning and risk management

Lesson 6 of 8

Choosing your trading style

One of the reasons trading is so popular, is it can be carried out in a variety of different ways to suit your personal preferences. As well as choosing to trade the markets that interest you, you can also pick a trading style that makes the best use of your skills and fits your personality and lifestyle.

When we talk about different trading styles, we're basically referring to how often you place a trade, and how long you keep those trades running. So your style of trading will be strongly affected by how much time you can commit and your attitude to risk.

For example, if you think you can spend several hours a day sitting in front of a computer studying charts and market trends, then you may find you're suited to making a large number of short-term trades. But if you're a very busy person and can only afford to spend around 30 minutes per day researching the markets, then you'll probably be more comfortable placing just a few longer-term trades.

Your personality will also have a big influence over your trading style. If you enjoy trading for the excitement and the buzz, you'll be more likely to enjoy short-term trading. If you're calm and patient, you may prefer to sit back and monitor your trades over the long term.

With that in mind, there are four main trading styles to choose from:

The four main styles

Position trading or investing

Timeframe: Long term
Holding period: Weeks / months / years
Trading activity: Low

Swing trading

Timeframe: Medium term
Holding period: Days to weeks
Trading activity: Medium

Day trading

Timeframe: Short term
Holding period: Intraday
Trading activity: High

Scalping

Timeframe: Very short term
Holding period: Seconds to minutes
Trading activity: Very high

We'll take a look at each in more detail over the next two lessons.

Lesson summary

  • A trading style describes how often you place a trade, and how long you keep those trades running
  • Your style is usually determined by your personality, attitude to risk and the amount of time you can commit to trading
Lesson complete