What is your ideal trading style? Discover the different approaches to trading.

Are you new to the world of investments and don’t know where to start? Understanding what types of trading exist is essential to choose the strategy that best suits your profile. This article will guide you through the main operational approaches and help you identify which one is most convenient for you.

▶ The four pillars of trading: What types of trading are there?

In the financial market, there are four main operational approaches used by active investors: scalping, day trading, swing trading, and position trading. Each one differs fundamentally in the time horizon, trading intensity, and the type of analysis required. Understanding these differences is essential for making informed decisions.

① Scalping: ultra-fast operations

Duration: Seconds or minutes

What characterizes this approach? Scalping is an accelerated trading method where the trader executes multiple transactions over short periods. Positions are held open only minutes or occasionally seconds, focusing on capturing small differences between buy and sell prices. It does not seek to benefit from significant trend changes, but from micro-movements in the market.

In the case of cryptocurrencies, for example, a three-minute candle in ETH can show fluctuations of up to 0.66%, creating opportunities for this type of operation. Since each transaction yields modest profits, traders need to repeat many times to accumulate profitability. When combined with high leverage, potential returns increase, but so do the risks of loss.

Who is it suitable for? This method requires constant attention to the screen with maximum concentration. It is recommended for professional traders who handle highly liquid and volatile instruments. If you work full-time or are a beginner, this approach is probably not suitable for you.

② Day trading: operations within the trading day

Duration: Less than 24 hours (without overnight positions)

Main features: Also known as intraday trading, it involves buying and selling financial instruments within the same day. Traders close all their positions before the market closes, avoiding the risk of overnight gaps. Unlike scalping, operations can extend several hours.

This strategy thrives in markets with excellent liquidity and volatility. When volatility is high, potential profits increase, but so do losses. Higher liquidity allows quick exit from positions when prices rise. That’s why it is especially used in forex, cryptocurrencies, and CFDs.

Who is it aimed at? It requires constant monitoring of price movements during the day. It is suitable for traders with professional dedication or enough time available daily. If your job consumes many hours, it will not be the best option. It is recommended to set stop-loss orders to limit potential risks.

③ Swing trading: capturing market oscillations

Duration: Days or weeks (multiple open positions over several days)

How does it work? Swing trading operates on an intermediate time horizon, holding positions for several days or weeks. It seeks to identify local trends in price movements without committing to long-term investments. Traders analyze recurring price patterns: when indices rise for days, fall, and repeat cyclically.

This approach leverages technical analysis to predict movements. The trader benefits from fluctuations without needing to hold positions for months or years. Although predictions are not always correct, the methodology significantly reduces exposure compared to other approaches.

Ideal for: Beginners and traders with limited availability. It does not require constant operations or obsessive monitoring. Operating costs are lower than scalping or day trading. It is perfect for those who cannot spend hours in front of the screen.

④ Position trading: long-term investment

Duration: From months to years

How it works: This strategy requires patience and perspective. The trader opens positions based on long-term market potential analysis, without worrying about short-term fluctuations. Positions are held indefinitely until the investment goal is achieved.

An illustrative example: a trader who buys Amazon shares in January 2014 at $18.21 and sells them in January 2021 at $159.03 achieves a gain of +140.82%. This performance is achieved because the trader held the positions for six years, taking advantage of the prolonged upward trend. However, this depends on accurate predictions, and uncontrollable market factors can affect results.

Applicable to: Investors who want to minimize the time spent on daily operations. It requires combining fundamental and technical analysis to select promising instruments. Emotional discipline and rational decisions at critical moments are necessary.

▶ Comparison: key differences between approaches

The following table summarizes the distinctive features of each method:

▶ Selection guide: Which one to choose?

1. Evaluation of available time

Your availability is decisive. If you are a professional trader, all methods are viable depending on your needs. If you work full-time, avoid scalping and day trading. Swing trading and position trading require less daily monitoring.

2. Analysis of the financial instrument

Different assets demand different strategies. Let’s compare two scenarios:

Case 1 - Volatile currencies (NZD/USD): Shows significant and constant short-term fluctuations influenced by cyclical economic factors. For these instruments, swing trading is ideal.

Case 2 - Stocks with stable trend (Amazon 2014-2021): Show sustained upward movements without extreme short-term volatility. Position trading maximizes profitability here.

3. Mastery of analysis

Do you better master technical or fundamental analysis? Novice investors should strengthen both fields. Technical analysis is critical in scalping and day trading, while fundamental analysis becomes more important in long positions.

▶ Crucial warnings for traders

⚠️ Special caution with scalping and day trading: These methods involve multiple transactions in volatile markets, requiring advanced expertise and generating high operational costs. Beginners face a high risk of significant losses.

Recommendations:

• Use stop-loss orders in all your trades
• Adjust your strategy according to market changes
• Start with less intensive methods if you are a novice
• Fully understand any strategy before implementing it

Choosing which types of trading exist and determining which aligns with your profile is the first step toward disciplined and profitable operations.