Which Trading Style Suits you ?

By | February 16, 2013

To be a successful trader you need to find a “Trading Style” which suits you “THE BEST” , in terms of risk appetite, stress,money management. A trader who is not comfortable with his trading style or has not found trading style are the one who commits the trading sins and blow of their trading account.

Trading can be broadly classifies into:

  • Day trading
  • Swing trading or Positional Trading.

 

Let’s define these two terms:

  • Day Trading is also known as ‘Intraday’. It  means opening and closing a position within the same trading day. Traders who are intrested in scalping,quicker and smaller  profits and who can make multiple trades per day work on this strategy.
  • Swing Trading means that you are trying to take advantage of larger price swings in the markets. Traders will carry positions for few days to 2-3 weeks. Traders who swing trade typically look for trend reversals & retracements for their entry/exit points.

So which trading approach is better – Swing trading or day trading? Traders can look to either day trade or swing trade, the benefits and drawbacks are different with each. Understanding the differences in risk, rules and goals is important when deciding how to trade on a particular trading style.

 

Day Trading Advantage:

  • Risk is in Control if you follow “ Stoploss
  • Profit is small.
  • Traders can use the Over leverage provided by brokers
  • It is presumed you can make fast money, from my experience opposite holds true 🙂
  • Gives you a “Fell Good” factor
  • Allows you to always be actively participating in the market
  • Positions are closed by end of trading day so overnight unexpected news will not affect your trading account

Day Trading Disadvantage:

  • Overhead cost are more, STT , Turnover tax commissions eat away most of profits.
  • You can lose money faster.
  • Time consuming – very difficult to trade properly if you have a full-time job.
  • Success Ratio is very less, As per stats only 5% traders become successful in long run.
  • Extremely Risky! Traders can lose a substantial amount of money in a very short period of time.
  • Fast pace & necessary concentration can make day trading very stressful.
  •  Money management,Discipline and a profitable system are a lot more important when day trading.
  • Even a small mistake can result in a huge loss.

 

Swing Trading Advantage:

  • Swing trading gives you time to allow the move you’re anticipating to actually occur.
  • It helps in Managing Stop loss and Profit target.
  • Success Rate is quiet high when compared to Day trading.
  • Not necessary to “Baby Sit” your trades, less time involved in active trading.
  • Can be worked around a regular job – a couple of hours per day should suffice.
  • Less stressful than intraday trading.

 

Swing Trading Disadvantage:

 

  •   Trader will find  difficult to learn and become profitable in initial phase of trading career.
  • More time is required in analyzing charts and preparing trading plan.
  • Trader must review his open trading options once in a day.
  • Trader need to fight “Emotional Attachment” to the trade.
  • Most of trader will keep searching for tops and bottoms or reversal for taking the trades and mostly go wrong in initial phase of trading career.
  • It is not uncommon to exit on a retrace or trend change only to have the market immediately change back and head in the original direction.
  • No Control over overnight positions.
  • Traders will not be able to use leverage provided by Brokers ( Professional traders will consider this as an advantage.)

Which style appeals to you? Which are you now actively trading? Please use the comment section below to describe.

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2 thoughts on “Which Trading Style Suits you ?

  1. Raj

    hi Bramesh, A worthy Article. Thanks. Regarding swing trading disadvantage, We are getting leverage on overnight positions also right? I can buy a lot bank nifty for 30k to keep the position while 22 k for intraday with My current broker.
    thanks,
    Raj

  2. Vips

    Hello Bhai,

    Again, this article has helped me a lot in understanding my drawbacks and my strengths.

    As far as my trading style goes, I have a big FEAR to take trades overnight. As per my expirience and as per my TRADE BOOk, I have suffered my major losses in overnight positions. Now I dont have patience at all to take take trade (even for a day for next trading day)

    I have analysed, as per your QUADRANT system for Intraday trading, it has given some huge profits , like 50-75 points on some day (intraday).

    I dont think I can take swing trading. I have DECIDED now. I will only do intraday wd quad system,it gives less stress and I dont have to watch DOW JONES DAX CAC in night.

    Your comments will be highly

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