Trading styles can be categorized in to one of three categories; Day Trading, Swing Trading, and Position or Trend Trading. The styles differ essentially by the amount of time the position is open or in play. Traders that day trade, like the name implies, open a position and close it within the same day or trading session. Swing traders have longer horizons, where their trades can be open for several days or even weeks. And Position traders can have positions in play for many months.
Each of the styles have their advantages and disadvantages. And traders are generally predisposed to one or the other style based on a wide variety of factors. Some traders, use all three styles in varying weights depending upon things like market conditions and business objectives. The styles also differ in the amount of time a trader must allot in any given day to the setup and management of a position.
In terms of the number of active traders, Day Trading is by far the most popular style, followed by Swing Trading, and the least popular is Trend Trading. Following is a brief compilation of of the advantages and disadvantages of each style.
Advantages: No overnight exposure, more opportunities, cut losses quickly.
Disadvantages: Greater transaction costs, greater need for advanced resources (computers, advanced software, feeds, etc), constant attention required throughout trading day.
Swing Trading
Advantages: Potential for larger gains per trade, more time to analyze and setup trades, not nearly as intensive as Day Trading.
Disadvantages: Increased risk per trade, overnight exposure, requires more work to setup trades, Swing Traders tend to follow markets closely throughout the day, even if they don’t take positions.
Trend Trading
Advantages: Requires the least amount of time preparing for trades, potential for huge gains, less likely than Swing Trading to get stopped out due to fluctuations in the market.
Disadvantages: Losses can be much larger due to much more liberal stops, tendency to miss out on short term opportunities, requires great patience to allow trade to develop, capital tied up for long periods of time.
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