We are not the same, especially in this business. Someone loves to sit all day in front of the charts. Someone thinks that a couple of hours weekly are just enough. Someone likes spending a couple of hours daily trading the financial markets.
And everybody is right. There is no unique approach to this. You need to find yours.
In this blog post, I will try to help you select which style suits you. So, let’s get started.
Scalping the Markets
One of the style majority of professional’s use. Quick approach with a large portion of trades done throughout the day is the main characteristic of this type of trading.
Scalpers are aiming for smaller moves in the markets, usually targeting between 7 and 10 points as their profit levels. Their stops are usually 2 to 3 points. Quick entries and exits. Lots of trades made and trading only the handful of currency pairs so they can closely monitor every single tick.
Their attention is between their charts and economic calendars. Squawk news platform is usually running behind them since their trades can be influenced hard by any news event.
Their preferred chart times vary from 1-minute chart to 15 minutes charts. Based on their trading strategy, they look for long-term trends hourly, rarely on any higher time frame.
Unfortunately, a lot of beginners start with this kind of trading, which is in my opinion, not suitable for them. You need to know every single part of the pair you are trading to be able to use its movement in your direction. You need to accept a fact that you will be spending a lot of time in front of your computer watching charts, which can be hard. Also, you need to have a strategy that will give you the advantage over the long term, a strategy with a very high win rate.
I personally, rarely use this type of trading style. Honestly, it doesn’t suit my personality quite well.
Day Trading the Markets
The style which I started with. Maybe the more suitable style if you wish to test out your strategy by having enough trades to compare.
Traders using this strategy have totally different approach than the traders scalping the financial markets. They analyze a bit thoroughly than the scalpers. Usually, they start with higher time frames, where they try to set the direction of the instrument they are planning to trade – they are looking for the overall trend. Once that is done, they are going to lower time frames to catch the best moment for the trade entry.
Their trades can last between an hour and a couple of hours, but they need to be closed before the end of the day since their stop loss levels can be influenced by swaps and day changes volatility. Usually, day traders aim to catch from 20 to 50 points out of a single trade and can have from one to a couple of trades daily, depending on how many pairs they are going after.
Both scalping and day trading styles can be influenced by economic data. So, traders need to be familiarized with economic events for the entire week so they could save their profits or avoid losses that can be caused by large moves on important economic events (like GDP, Interest Rates, NFP’s, etc.).
Good point, in my opinion, if you are day trading is that with a couple of hours daily spent, you can make a living out of trading. Of course, for this you need to know the markets, have faith in your system, and you need to have developed your edge in trading (psychological, money management, and risk ratio).
I tend to trade with this kind of approach from time to time, and from instrument to instrument. Usually, I like focusing on Gold and Indices with this type of trading. From time to time, I would also chase some smaller moves in Forex markets as well.
Swing Trading the Markets
The style which I find most useful. Personally, I love this style because it doesn’t take you that much time to follow and execute.
I always start with glancing at Monthly and Weekly charts, trying to see whether there are some patterns, potential opportunities for trend changes. Then I switch to Daily and 4 hourly charts to find my entry zone. Economic data and calendars don’t have that much influence on the Stop Loss or Take Profit levels, but is always good to know what is going to happen next in the pairs you are monitoring for a potential trade.
Economic Calendar influence is lowered simply because your Stop Loss level is larger (mine range from about 90 to 170 pips depending on the opportunities I am chasing and trying to catch).
The best reason for trading by using this style is that it doesn’t take you that much time to follow and execute. Me personally, spend around 5-6 hours weekly analyzing charts and looking for potential entries using this type of trading.
Why is that, you might ask? It’s quite simple honestly if you are trading on a Daily time frame, one candle is one day. And for some significant change to happen, it may take somewhere between 3 to 12 days.
Trades are taken with swing trading style usually last from a couple of days to a couple of weeks.
Now, once you get familiar with the basic trading styles, you can decide which style is the best for you and go practice.
You can use a combination of styles or just one of them. But the important part is that you need to know your strategy, backtest it, and know when and where it is best to use it. Not all strategies are made for all trading styles. It is your job to find out when and where your strategy works.