Planning and risk management
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
Holding period: Weeks / months / years
Trading activity: Low
Holding period: Days to weeks
Trading activity: Medium
Holding period: Intraday
Trading activity: High
Holding period: Seconds to minutes
Trading activity: Very high
We'll take a look at each in more detail over the next two lessons.
- 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
What is a trading plan?7 min
How to make a trading plan10 min
What is risk management?6 min
Ways to manage risk: part one7 min
Ways to manage risk: part two7 min
Choosing your trading style3 min
Position and swing trading10 min
Day trading and scalping10 min