Three styles of Stock Trading

Stock traders use different styles when trading in the stock market. Which style of stock trading depends on several things; your personality, how much time you have available to trade during trading hours and how much time you have available to devote to studying. you may find once you begin trading, that you prefer a combination of styles or one over the other which you had not considered before. It is okay to change gears when you see that you may be more suited for a different style of trading. The main thing is to find the style of trading that best suits your needs and become proficient at that trading style to maximize profits. Following are three specific styles used to trade stocks:

  • Intraday scalping (Day Trading)
  • Swing trades
  • Intermediate trades
Intraday scalping is when you enter and exit a trade usually in a matter of minutes, usually less than an hour, without holding them overnight, meaning you have closed out all of your open positions before the stock market closes at the end of the day. Intraday scalps are usually faster moves of 2% or higher. The idea is to enter and exit a trade in a shorter time frame. A stock trader will primarily use a one-minute, three-minute and daily stock chart combined with technical indicators to determine the best entry and exit prices. You will be looking for increasing volume and areas of support and resistance to help you decide when to enter and exit. When a day trade is setting up for a long trade, it will be making a bottom or hitting support and for a short trade the stock will be making a top and hitting resistance. Intraday scalping produces many profitable trades when there is more volatility in the stock market and the best hours are generally the first two to three hours of the morning.

Swing trades normal hold time is two to seven days. For swing trades you will be mainly using a daily stock chart for monitoring and the initial entry and exit signals and a fifteen-minute stock chart to get a closer look for entry and exit prices. The first sign for entry is when the technical indicators line up and begin pointing up, in the bottom of the channel, which is a buy long or cover short signal, while the opposite signals suggest a sell long or sell short signal. Look for decreasing price and increasing volume over multiple days and for the technical indicators to reach the bottom, or the oversold area, for additional confirmation. Also look at other stocks in the same sector to see how they are acting; whether they are following the trend of the market are not. This will help you make a better-informed decision.

Another thing to remember is never turn a day trade into a swing trade. For instance, if a day trade is not going according to the way you anticipated it, it is not a good idea to hold it overnight hoping it will eventually go in the anticipated direction because usually, it does not.

Another factor that many stock traders like about swing trades is they take less focus and devoted attention. You do not have to monitor swing trades or intermediate trades nearly as much throughout the stock-trading day as you do with a day trade, which makes it convenient for people who work full time. 

Intermediate trades normal hold time is eight days to several months. Again, the stock trader will be looking for the right entry price on a daily stock chart. It is important to pay attention to any news regarding the stock and news in general that may have an effect on its movement. If the stock continues making higher highs or lower lows (depending on if you are long or short) it is a good sign that the stock should continue in the given direction. As you see the stock begin reversing and the technical indicators turning over if long, or up if short, you may consider reducing your position or exiting completing to protect profits.

Whether you prefer fast-paced stock trading such as day trading or the slower paced trades such as swing trading or intermediate trading determine which style works best to suit your needs. After learning how to trade stocks, work until you become proficient. Stock trading is an excellent way to increase your income. Learning how to successfully trade stocks may time, but it is worth the investment when you consider the potential to continually increase your profits.

TradeStocksAmerica Staff

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