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Choose a Trading Strategy That Suits Your Personality


November 24, 2020
Trading is all about strategy, psychology, and goal setting. But how to start? Here are 5 of the best and widely used trading strategies and – because strategy and psychology go hand-in-hand – we tied these strategies to five typical trader profiles. So, get comfy and enjoy the read.
Choose a Trading Strategy That Suits Your Personality

The Big Short

Yep, we’ve all seen the movie. It’s fun and it’s all about trading. In essence, the Big Short is a story about “reading” the markets and how you can play it smart, with the due inverted commas. Remember when Michael Burry a.k.a. Christian Bale, created that credit default swap to “short” the market? That was his strategy….

 

“Easy for him, he was a fund manager”, you say? Stop right there. There are plenty of strategies that may be used to help you do the same. It’s all a matter of setting your goals. What do you want to achieve? Short or long-term gains? Are you more of an adventurous trader, fun loving trader, value-driven, or all of these together? Dr. Van K. Tharp, professional psychologist and trading coach, says there’s a strategy for all – including you. It’s up to you to find out.

 

Scalping

Scalping requires a lot of time and attention as it involves watching the charts almost every minute to identify the right opportunity to enter or exit the market. The main aim with this strategy is to take advantage of every opportunity, so speed is the name of the game here. You need to open and close positions incredibly fast (but not rushed).

 

Each trade you place could possibly result in a small return which adds up to the previous one. Scalping best suits traders with a small to average budget but with good chart knowledge.

 

The Scalper

Now we talk trading… Scalpers are generally highly accurate and technical traders, but they are also adventurous risk takers. There’s also a flurry of emotions that go with scalping that may not suit a meticulous, hard-core planner. With this strategy, you can only think near-term.

 

Day Trading

With this strategy, trades last longer than a few minutes (as previously, with scalping) but commonly, under one hour. Nevertheless, day trading gives you the luxury of time to study chart patterns and keep an eye on the news at the same time. But this extra breathing space requires that you have a larger budget to invest.

 

The Day Trader

Day traders are typically meticulous researchers, but not so much risk takers. They take the time to check out all the top-tier media sources out there and study the charts at the same time. These guys, they really do their homework.

 

Range Trading

Range trading puts your chart reading skills to the test. Practically, in range trading you need to look for where the support and resistance lines form, and buy when the price reaches the support level and sell at the resistance. In other words, “buy low, sell high”.

 

While this may seem simple, it is not really so. Sometimes it takes days and weeks for an uptrend or downtrend to be confirmed. Therefore, you need to pay close attention to influences, which may not immediately appear on the chart. What do you do in this case? Read the news. Every headline can hugely impact the value of an asset, and range trading goes hand-in-hand with news or trading on fundamentals.

 

The Range Trader

Range traders are pretty much like day traders keen on the news. They’re not news traders per se, but they do appreciate a good scoop. And they’re native researchers and tech geeks. A range trader will always make friends with the trend.

 

Swing Trading

Take your range to the next level with a swing. Swing trading and range trading have a lot in common. They both focus on substantial changes in an asset’s value. However, swing trading unlike range trading is more centred around finding breakouts. With this strategy, you definitely need to be on top of the news and forum discussions as the juice about any up and coming IPOs, for example, will not come to you through the charts. This is your homework.

 

The Swing Trader

Swing traders are born “jugglers”. They know their technicals and spice it up with fundamentals on the fly.  And they love it.

 

Position Trading

Saving the best for last, position trading is the way to go if you’re looking to invest long and very long-term. But brace yourself (and make sure your budget allows it), because position trading takes place over an extended period of time, often months or years. This strategy ignores small trends that are opposite to the open position. In essence, in position trading you only look for long-term trends. Traders choosing position trading over other strategies usually have a very deep budget to cushion themselves against any large losses.

 

The Position Trader

Finally, position traders are the pacesetters of the trading floor. They don’t just follow the trend, they are one with it. There is no such thing as “going short” for them. They only think long-term.

So, which one are you? Once you decide, be ready to test it.


Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

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