Choosing a trading strategy can be tricky; often, people align their personality to what type of trading method they deem best for them. We will cover the four well-known trading strategies, Day, Swing, Position, and Scalp trading, and discuss the ups and downs of using one of them. Knowing its ups and downs helps forex traders decide which is best and boost to become successful professional traders.
Here are a small explanation of the four trading strategies and their ups and downs:
Day trading is when you buy and resell your stocks on the same day. This approach is ideal for short-term traders since, unlike long-term traders, it does not require them to wait for an extended period. However, for inexperienced traders who do not adhere to a well-thought-out strategy. So what are some of the pros and cons?
– Considerable amount of trading opportunities
– Average risk-to-reward ratio
– Have Instant results
– Discursive periods of trading
– The risk of overtrading
– Smaller stops = Smaller Profits
Position Trading is the most prolonged method of all strategies, and it’s also known as buy and hold trading. Position trading is buying a single deal that will last for several years, but this strategy has its pros and cons considering its time to invest.
– Positive risk-to-reward ratio
– Minimal time to invest
– Mitigate “Noise”
– Less stress
– Few trading opportunities
– Account Liquidity
– Maximum Capital Requirements
Swing trading, in contrast to day trading, usually demands a larger stop loss. Swing trading is almost always completed overnight. Swing trading duration is termed medium-term because positions are often held for a few hours to a few days while Longer-term trends are preferred because forex traders can profit from the trend at various stages. Now that you know the pros and cons, your journey to becoming a successful professional trader lies in your ability to buy and sell your stocks like a boss.
– It does not tie down your capital for long
– You can trade part-time
– Median risk-to-reward ratio
– Requires stressful time trading
– Possibly of missing exceptional stocks
Scalp trading is a rapid style of trading. This means deals can be bought and resold for only seconds. This type requires you to have focus and concentration because a very small change in the price of the stock is profit. As a scalper, you must have a decent exit plan to follow because a huge loss is possibly affecting other profits that have already built up for some time.
Also Read: 10 steps to building a winning trading plan
– No overnight risk
– Can be a hobby
– Requires discipline
– Very stressful environment
– Can be addicting
To sum up, these are a brief explanation of the pros and cons of the mentioned trading strategies for beginner forex traders to know and understand. Now that you know the pros and cons, your journey to becoming a successful professional trader lies in your ability to buy and sell your stocks like a boss. However, for inexperienced traders who do not adhere to a well-thought-out strategy. So what are some of the pros and cons