All trading involves risk. Losses can exceed deposits.

Types of trading strategy

A guide to four popular trading strategies

All trading involves risk. Losses can exceed deposits.

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Trading strategies are established approaches to trading, designed to give you the best chance of achieving a profitable return

A trading strategy should suit your attitude to the markets. Before you settle on one, consider whether it works with your time to trade, risk appetite and technical knowledge. Here are four major strategies to consider.

Day trading

The main tenet of day trading is that none of your positions should remain open after the market closes, therefore avoiding the added costs and risks often associated with holding a position overnight.

A day trader will try to generate quick profits from small price movements. That means this type of trading is only really suitable for full-time traders, who have the time to pay constant attention to the markets.

Position trading

Position trading involves holding onto a particular asset for a long period of time. This can be several weeks, or even longer.

Position traders will make far fewer trades than day traders, which each trade carrying a greater potential for profit. However, holding a position for a long time also increases its inherent risk.

Trend trading

Trend traders attempt to profit from market trends. Positions are kept open as long as the trend continues, meaning that trend trading can be a short, medium, or long-term strategy.

Swing trading

Heavily focused on technical analysis, swing trading involves finding short-term price patterns to trade. Swing traders tend to focus solely on price, paying less attention to value when finding an asset to trade.

Positions can be held from one to several days: longer than day trades but shorter than position trades. And swing traders will sometimes trade against the trend, if their analysis shows an opportunity.

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