How to Choose a Trading Style That Suits Your Personality

Trader conduct stock market analysis
••• Virojt Changyencham / Getty Images

Trading has four main styles. They are scalping, day trading, swing trading, and position trading. The difference between the styles is based on the length of time that trades are held. Scalping trades are held for only a few seconds, or at most a few minutes. Day trades are held a few seconds to a couple of hours. Swing trades may be held for a few days. Position trades are held from a few days to several years.

Novice traders can have trouble choosing the trading style that best suits their personality. But you must do so to achieve long-term success as a professional trader. If you are a trader and do not yet feel as though you have found your trading style, you still can. Here are some of the personality traits that go with the different styles of trading.

Choosing the trading style that best suits your personality gives you a better chance to profit as a trader. So be honest, even if you don't like some of the traits that are listed.

Key Takeaways

  • Scalping is a rapid trading style best suited to traders who can make instant decisions. 
  • Day trading is for traders who prefer to start and complete a task on the same day. 
  • Swing trading is for those at ease holding trades overnight. 
  • Position trading is a long-term trading style for those with patience and confidence in their choices.

Scalping

Scalping is a very rapid trading style. Scalpers often make trades within just a few seconds of each other, and often in opposite directions. That means they may go long one minute, but short the next.

Scalping is best suited to active traders who can make instant decisions and act on them with no hesitation.

Impatient people often make the best scalpers because they expect their trades to make a profit right away. They will exit the trade quickly if it goes against them.

To succeed as a scalper requires focus and concentration. It is not a suitable trading style for anyone easily distracted or who is prone to daydream. So if you've been thinking about something else while reading this, then scalping is not for you.

Day Trading

Day trading suits traders who prefer to start and complete a task on the same day. That's you if you are the type who starts to paint your kitchen, and won't go to bed until the kitchen is finished, even if that means staying up until 3 a.m.

Many day traders would never make swing or position trades. They would not be able to sleep at night knowing they had an active trade that could be affected by price movements during the night that cause opening gaps.

Swing Trading

Swing trading is good for people who have the patience to wait for a trade, but want a quick profit once they enter it. Swing traders almost always hold their trades overnight. So if you'd be nervous holding a trade while away from a computer, this is not the style for you. Swing trading generally requires a larger stop loss than day trading. So the ability to keep calm when a trade is against you is vital.

Position Trading

Position trading is the longest term trading of all. It often has trades that last for several years. Thus, position trading is only suited to the most patient and least excitable traders. Position trading targets are often several thousand ticks. If your heart starts beating fast when a trade is at 25 ticks in profit, position trading is probably not meant for you.

Position traders must be able to ignore popular opinion. A single position trade will often hold through both bull and bear markets. For instance, a long position trade may need to be held through a full year when the general public is convinced the economy is in a recession. If other people easily sway you, then position trading will be a challenge for you.

Being Faithful to Your Trading Style

Choosing a trading style requires the flexibility to know when a trading style is not working for you. It also requires the consistency to stick with the right style even when its performance lags.

One of the biggest mistakes that new traders make is to change trading styles (and trading systems) at the first sign of trouble. Constantly changing your trading style or trading system is a sure way to catch every losing streak. Once you are comfortable with a trading style, remain faithful to it. The loyalty will reward you with results in the long run.