Every trader has his own trading style and differs from one to another. Deciding what styles that best suit for a new trader can be a difficult task because it is one of the factors that determine whether he will be a success trader or not. According to Investopedia, active trading is the act of buying and selling securities based on short-term movements to profit from the price movements on a short-term stock chart.
There are four active trading styles that commonly used by the people namely position trading, swing trading, day trading, and scalp trading. Basically, the styles are based on the length of the trading itself.
Position trading is a long-term trading which is most suitable for those who are patient and consistent. The trade is usually going for a long period of time or years. It is more like “buy and hold” trading rather than active trading. It involves fundamental analysis and often ignores the short-term fluctuations. It uses a long-term chart for daily, weekly, to monthly and some other methods to determine the higher and lower high of the trend of a security.
It is usually held for more than a day but not longer than the trend trades. It often holds overnight. Swing traders usually have their own algorithm to decide when to buy or sell their securities. They usually buy or sell their securities at the end of a trend when there is price volatility. This style is not suitable for people who cannot be at ease while they are away with their computer.
It is well known for active trading style. As its name, the buying and selling securities happen in a day that is why it is also known as intraday. There is no position which is held overnight. They are usually closed if the profit target has been reached. Day trading counts on small gains to build profit. This style is suitable for people with type of personality which want to start it at that day and finish it at the same day too.
This style is compatible with people who are impatient since it requires rapid activity in the trading. It last only few minutes to hours. Since it lasts for a short period of time, the scalp traders usually are people who can make a quick decision and have good focus as well as concentration. The commitment goes along with the time devoted to the trading; the shorter time frame, the more dedication needed.