Finding the Trading Styles Best Suited for Your Personality
Dany Mawas, Regional Director at INFINOX Capital (www.INFINOX.com), a global CFD and FX broker that boasts an award-winning and market-leading online trading platform, believes that online trading has something to offer everyone. Here he unpacks one of the most important aspects of online trading, how new traders can settle on the right trading style.
Online trading continues to enjoy growth as young and digitally savvy people consider alternative forms of generating income. Each day more people are learning about its features, benefits, and potential profitability. With accessibility to online trading platforms steadily improving, this industry will no longer be for the few, but rather for the many.
Often new traders will experiment with a variety of trading styles and strategies as they first familiarise themselves with online trading, attempting to settle on one which best suits their lifestyle and funds. Finding the right trading style can be a dizzying experience, which is why demystifying this early stage for new traders is crucial for the continued success and wider adoption of online trading.
Trading without having decided on a set approach that you understand and believe in is a sure recipe for failure. An effective strategy should inform your decision-making, guiding you even in times of uncertainty. Whatever the strategy you choose, have the courage of your convictions, and expect that there will be highs and lows.
Each of these trading strategies is viable and can bring success. However, it’s important to note that markets are ever-changing, reacting to the world around us. Keeping abreast of the dominant trends in the online trading space will allow traders to pivot and adjust their strategy accordingly.
Generally, trading styles can be broadly categorised into two, active and passive trading. Fundamentally, active traders believe that ‘beating the market’ is how real profits are to be made. Passive traders, on the other hand, believe that holding onto a position despite short term fluctuations ensures greater long-term returns. Some of the most common active trading strategies include:
Position traders can be categorised as cautious individuals who have the time to conduct thorough research. Traders aim to hold onto a position for the long term, weeks or even months.
These traders attempt to gauge the general market direction, spotting new trends by considering longer-term charts and other resources and information. Once traders believe they’ve identified a trend, they’ll attempt to ‘ride the wave’ over some weeks or even months, exiting the position only once the trend breaks.
Position traders will hold trades through short-term volatility with the long-term goal as a target. As such, and their generally cautious nature, they tend to avoid highly volatile markets. This is especially true when their trading strategy uses leverage.
The ideal swing trader is a highly organised individual with limited time to dedicate to trading activities. Swing trades are medium-term positions that are conventionally held onto for a few hours to a couple of days.
Often swing traders enter the fray during moments of market volatility, following the breaking of a trend. This volatility poses risks, which is why traders tend to hold a position for no more than a few days. For this reason, swing traders favour markets that generally move in one direction and are not prone to sudden swings.
Decisive individuals who want to see immediate results utilise scalp trading. For scalp traders, the lifespan of a trade can last only a few minutes.
Scalpers exploit temporary imbalances in markets, capitalising on regular occurring but small moves. To manage their risk and reward, sizing their trades correctly is important. To take advantage of small price movements, larger positions are required. Scalp trading is one of the most popular active trading styles, with traders often waiting on news events to catch these short-term moves.
Similar to scalp trading, day traders buy and sell all within the same day. The advantage of this approach is that it removes the risk of large overnight moves. This means that at the end of each day, when traders close their position, they will know whether they have made a profit or loss.
Day trading was once reserved for specialists and market makers, however, the wide adoption of electronic trading technology has popularised this approach among new or novice traders.
The world of online trading is now an open secret and everyone can participate in the market, irrespective of expertise, lifestyle or personality. Online trading has something for everyone. The strategies we’ve outlined are just the most common, the trading rabbit hole goes far deeper. What is imperative for all new traders to understand is that each of these strategies come with associated benefits and risks that should be well considered. Knowledge is power and having a well-rounded understanding of the online trading landscape is ultimately one’s best ticket to success.
Distributed by APO Group on behalf of INFINOX Capital.
INFINOX is an award-winning and market-leading online trading platform.
Founded in 2009, with the vision of delivering a customer-focused trading experience, INFINOX has been offering its clients premium service in a range of asset classes. We empower investors and help them gain access to markets so they can trade forex, stocks, indices, commodities, and futures; using our fast, efficient and reliable trading technology.
We are committed to providing our clients with outstanding service, and offer a dedicated multi-lingual support team that’s available 24 hours a day 5 days a week. Whether you’re a beginner or experienced trader, INFINOX provides the relevant tools to help you get started and improve your trading strategies. We offer instant funding options and the ability to withdraw your money swiftly.
INFINOX Capital Ltd SA is an authorized Financial Services Provider and is regulated by the Financial Services Conduct Authority under FSP No 50506 (INFINOX Capital Ltd SA acts as an intermediary for INFINOX Capital, which is Authorised and Regulated by the Securities Commission of the Bahamas).
INFINOX Capital is a registered trading name of IX Capital Group Limited, authorised and regulated by the Securities Commission of The Bahamas (‘the SCB’) under Registration Number SIA F-188.
INFINOX Limited is authorised and regulated as an Investment Dealer by the Financial Services Commission (FSC) of Mauritius under License Number GB20025832.
INFINOX is a trademark belonging to INFINOX Capital Ltd, a registered company in the United Kingdom under company number 06854853. INFINOX Capital Ltd is authorised and regulated by the Financial Conduct Authority under Registration Number 501057.