So the first question you need to ask yourself before you start trading is “What type of trading would suit me best?“ Naturally, your trading system needs to factor in how much time you can dedicate.
Let’s look at the different types of trading and what they require…
Scalping is the fastest type of trading, positions are held from a few seconds to a few minutes. Scalpers aim to get a small profit per trade countless times throughout the day. This style requires you to be glued to your screen and requires intense focus and quick thinking to be successful. As a scalper, you’ll be looking to make small profits that accumulate in the long run.
We do not scalp ourselves, because this area is dominated by computer algorithms that can make instantaneous decisions and be far quicker to react than any human.
If you’re a day trader, you’ll be entering and exiting trades throughout the day, but much less regularly than scalping. You need to keep a regular eye on the markets, and many day traders will constantly have the charts up when in trades. Karl day trades between 7 am – 5 pm most days, however sometimes will hold a position a little longer depending on market conditions.
Day trading is suited to traders who have enough time throughout the day to analyse, execute and monitor a trade. Day trading isn’t suited to people who already have a day job.
Swing trading is longer term that requires you to hold your trade anything from a few days up to 3 weeks. If you don’t have the time to monitor the charts all day this style of trading could be for you. Swing trading only requires around 30 minutes to 1 hour per day to analyse the markets, usually at the end of each day.
We swing trade on the daily time-frame with our Bollinger Band strategy (we’ll explain this later in the course). Swing trading is suited to those who already have a full time job or who cannot regularly check the charts throughout the day. You may also choose to swing trade because of the emotional side, as you can simply place and leave trades.
Position trading is a long term style. Positions are usually held from a few weeks to several years. This style requires a lot of patience and a good understanding of fundamentals. You’ll need thick skin as at times you’ll see huge swings in the market and you’ll need to have absolute trust in your system.
We rarely hold positions longer than a few weeks. This is simply because our systems aren’t designed for it. Once you start holding positions more than a few months it becomes more like investing rather than trading.
You can trade any combination of the above types, it is a personal choice. We would recommend either day or swing trading. The rule of thumb is to check the charts as often as the time-frame you trade on; if you trade on the 1 day chart then you need to check the chart once per day.
Consider how often you can and want to be checking the charts and then decide what type of trading you would like to get into.