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What Are Trading and Investing Styles for the Stock Market?

What Are Trading and Investing Styles for the Stock Market?
September 24, 2020 Martha Stokes CMT

What Are Trading and Investing Styles for the Stock Market?

Trading and Investing Styles List with Descriptions

Your Trading Style will dictate which financial trading instrument you should use. Most traders do not have a well-defined Trading Style OR they are attempting to use a Trading Style that is unsuitable to their personalities, goals, capital base, education, and experience.

The Primary Trading Styles are listed below:

Intraday Trading:

This is the fastest-paced Trading Style and requires the highest skill level in terms of Chart Analysis, Technical Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline. Professional level education, extensive experience over many years, and thousands of trades are necessary for consistent success with Intraday Trading. It is not for Beginners or Intermediate Level Traders because this Trading Style is the most demanding in time and commitment.

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It also requires professional grade computer equipment, execution software, and a large capital base. Intraday is the highest risk Trading Style. Typical lot sizes are 5,000–50,000. This Trading Style group also includes High Frequency Traders HFT.

Day Trading:

This very fast-paced Trading Style requires high skill levels in Chart Analysis, Technical Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline. This Trading Style requires advanced level education and many years of experience with hundreds to thousands of trades.

It is not recommended for Beginners or traders with limited experience.

Day Trading requires near professional grade computer equipment and execution software, a moderate to large capital base, and is a high risk Trading Style. Typical lot sizes are 1,000–10,000.

Velocity aka Momentum Trading:

This fast-paced Trading Style requires moderate to high skill levels in Chart Analysis, Technical Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline. With sufficient simulator trading experience, Intermediate to Novice Level Traders can succeed with this Trading Style. A minimum of a 2–3 monitor computer system linked to a fast reliable execution system is sufficient, and a moderate capital base is also sufficient. It is a moderately high risk Trading Style. Typical lot sizes are 1,000–10,000.

Swing Trading:

This is a moderately fast Trading Style which requires moderately high skill levels in Chart Analysis, Technical Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline. With sufficient simulator trading experience, Intermediate to Novice Level Traders can succeed with this Trading Style. A minimum of a 2 monitor computer system linked to a reliable execution system is sufficient. Swing Trading requires sufficient capital to trade 500–5,000 shares at a time.

Position Trading:

This is the lowest risk and easiest short-term Trading Style to learn. It is suited for Beginners to Advanced Traders, and to traders with limited time or time constraints.

A moderate skill level of Chart Analysis, Technical Analysis, Financial Analysis, Institutional Holdings Analysis, Growth Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline is adequate for this Trading Style.

It requires a low to moderate capital base with average lots ranging from 100–5,000 shares. This is a low risk Trading Style.

Intermediate-Term Trading:

This Trading Style is a longer version of Position Style Trading which extends to less than a 1-year hold time. It is suited for long-term investors who are just learning how to short-term trade.

A low skill level of Chart Analysis, Financial Analysis, Institutional Holdings Analysis, Growth Analysis, Technical Analysis, Risk Assessment, Order Calculation and Execution, Money Management, and Self-Discipline is adequate for this Trading Style.

A low capital base will suffice. Average lot sizes range from 100–1,000 shares. Beginners will find this Trading Style lower risk with a good Return on Investment.

Long-Term or Retirement Investing:

This is the lowest risk of all Trading Styles so long as Technical Analysis is used in conjunction with Fundamental Analysis, and Cyclical Trend patterns are applied. Financial, product cycle, business cycle, and Technical Analysis are important for long-term hold investments. A low capital base will suffice. Average lot sizes range from 100–1,000 shares. Beginners will find this Trading Style lower risk with a good Return on Investment.

Summary

Although most traders are concerned only with making monthly income from financial markets, everyone needs a retirement account. Therefore, knowing how to properly invest for the long term is necessary in addition to your short-term Trading Style.

Before you select your financial trading instrument, you must first choose your Trading Style.

Selecting your Trading Style must be based not on dreams of great wealth or on what you perceive to be the most popular instrument, nor should it be based upon what you believe your friends and family will admire.

A Trading Style is based upon your risk tolerance, your time available to trade, the amount of capital you have, your level of financial education, your experience in trading, and your individual personality. Just because you want to day trade doesn’t mean Day Trading is right for you.

Go to the TechniTrader Learning Center and watch a training webinar.

Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.