The Different Types Of Trading

When one talks about trading, perhaps the first impression is a trader sitting in front of his computer from 9.30 am to 4 pm making loads of money. That is a misconception because there are so many types of trading. Day trading is not the only type of trading. There are some types of trading where you can be away from the computer for a whole day without any negative impact to your portfolio.

Day Trading

Day trading is the most intensive type of trading because you need to sit in front of the computer during the trading session. Some people trade the first 30 minutes of the day, other traders trade for the first 2 hours of the day and some traders trade the whole day.

Day trading requires intense concentration and the ability to stomach losses immediately. You will also need to look at news, level 2 quotes and be able to juggle many things at once. The pros of day trading is you are not exposed to overnight risks such as a gap down in the stock price.

Swing Trading

Swing trading is where a trader enters a stock and hold it for a few days. This is the type of trading that I prefer. I typically hold a stock anywhere from 1 day to 5 days, sometimes a bit longer. Very rarely will I hold a stock more than 2 weeks.

Pros:

  • You do not need to look at the computer the whole day
  • You can still make money in the stock market while holding a day job
  • Less stress and less concentration
  • You only need 30 min a day to do your analysis
  • You save on commissions because you trade less
  • Great style for overseas traders
  • Too long for day traders and too short for institutional investors. A special niche for individual self directed traders

Cons:

  • Your stock may gap down because of news


I'm a big fan of Swing Trading because of the many pros it offers. If you are someone living in Europe or Asia and you still want a piece of action of the US stock market, this type of trading is the best for you. Even if you are a US citizen, you can still travel the world and make money in the stock market through this type of trading.

Each week, there will be at least 3-5 stocks that will give us a nice swing trading opportunity. Offering us a great setup and a great risk to reward ratio.

Position Trading

Position trading has all the benefits of swing trading but the main difference is the time frame. Position trading takes a longer time because you will primarily work from the weekly charts. You will enter the trade and hold it for a few months before exiting the trade.

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