A lot of people consider investments to be the best form of making money, so it comes as no surprise to learn that a lot of people learn about financial markets and trading through this avenue. Investing is about slowly building wealth over time and is done by implementing a buy-and-hold approach. You make investments like in mutual funds or ETF, stock and let the price increase over time.
Investors will weather the storm, which is the inevitable downtrends in the market because the expectation is that the market will rebound, and prices will increase in the long-term. After several years, the investment will start increasing in value, which is when the investor will start getting positive returns. The returns of long-term investments can be improved by compounding with reinvestment of dividends and profits. Investments are one of the best ways to build wealth and generate stable income in the retirement years.
Fully funded traders use various strategies to identify and capitalize on any opportunity in the market. A lot of traders choose to enter and exit multiple trades in a day, while others prefer to hold their positive for several weeks or months. It all depends on the trading style you choose, but a lot of inexperienced traders find it difficult to choose a trading style that suits their personality. However, it is essential for the long-term success of a trader to find their trading style.
A lot of traders will improve their trading style over the course of their career and is also known as trader growth. When you are a new trader, you will think that you have found your trading style multiple times, but it is important to experiment with all the different trading styles, so you can find one that is compatible with your personality traits. It is imperative that all traders find a trading style that matches their personality to become a profitable trader.
We have helped numerous fully funded traders find their trading style and are going to discuss some of the best ways to find one that works for you. The best way to find out what type of trader you are and most importantly, what your trading style is to look at the following:
- The length of time you intend to be in a trade
- The time of your entry
- The frequency of the trades
You can choose your own timeframe as a trader to indulge in trading, but you should know that it will impact on your trading style. So, first let’s check out the different trading styles, so you can find out what type of trader you are:
Trend trading is about identifying a trend and then trading in the same manner as the trend is heading towards. Long-term fund managers were traditionally identified as trend traders, but, you can become a trend trader by trading at any timeframe you want.
Technical trading is difficult, since you will need to analyze, enter, manage, and exit your trading based on technical analysis. This form of trading can be done in any timeframe, but technical traders tend to favor intraday timeframes. Long-term forecasting also uses technical analysis.
Swing traders look to trade on the swing of a chart hoping to catch a major move in the market. The most popular timeframe for swing trading is to enter on the daily chart and then hold the position for multiple days, and weeks. The 1-hour charts are popular, as you can hold a position for several hours, overnight, or even for a few days.
There are different forms of intraday trading, and scalping is one of the common ones, where you are essentially glued to the screen. It is a popular style, because it offers greater potential for profits, but it is one of the most difficult trading styles to master. Scalping requires a lot of patience from the trader, but a lot of newbie traders still prefer choosing this style.
Position traders will hold their position for long-term rewards. They can hold their position for weeks, months, and even years, because they are trading for long-term benefits. The traders will not move from their position, even if there are short-term fluctuations, because they have a long-term forecast in mind, which will smooth out any fluctuations.
Swing and position traders tend to use pending orders to enter the market, and they don’t need to be staring at their screens when they enter or exit their trades.
New traders are specialists in ‘Red News’ events and will only trade when there is an important news release. If there is a surprise figure released, there can be extreme volatility in the markets, but that rarely happens. However, there is a lot of opportunities to make profits over a short time, due to the volatility. There can also be long-term consequences due to an important news that may interest in macro traders, who are trading on long-term trends.
Intraday traders tend to open and close trades on the same day and place greater emphasis on the technicalities of trading, instead of the fundamentals. There are various forms of intraday trading, which every fully funded trader must master to achieve trader growth.
Fundamental (Macro trading)
Macro traders use fundamental information or financial models to gauge the strengths and weaknesses of a stock, market, country, or currency to anticipate the price value in the future. Information sources tend to vary between Forex and stocks since they are affected by internal news of organizations.
EOD (End of Day)
This is one of the most popular trading styles around and involves traders analyzing the markets on a daily and weekly basis. They must set pending orders to catch evolving price moves, and don’t need to watch their screens when triggering orders. If you have a busy life, then you can choose this method, since it doesn’t require time in front of the screen to manage or analyze trades.
Which Trading Style Are You?
There are a lot of different factors you must account for as a trader, which will determine which trading style best suits you. These factors include the following:
- Risk tolerance
- Level of trading experience
- Amount of time that can be dedicated to trading
- Account size
As a trader, you find there is a complex relationship between the amount of time you must devote to the market and the trading time frame. For instance, position traders must spend a couple of hours every week to manage and evaluate trades. In scalp trading, traders have a full-time job and must spend every minute behind a screen to manage traders actively.
A lot of fully funded traders or other traders or investors don’t fit into one trading category or style. For instance, a lot of long-term investors are also traders, but there are also those that only day trade with a couple of swing trades sometimes. It will take you experience and time to figure out the trading style that best works for you, and as you achieve trader growth, you will find the answer.
Photo by Kevin Grieve