Did you know that every day, over 2.4 billion shares of stock get traded – and that’s just on the New York Stock Exchange (NYSE)!
Maybe you’re interested in investing in tech companies, green energy, or consumer goods. No matter what you’re interested in, stock exchanges like the NYSE, NASDAQ, London Stock Exchange, and dozens of smaller exchanges offer the opportunity to trade.
And with online brokerages, you can trade from the convenience of your home. If you have some extra money and want to learn how there are a few different types of stock trading you must learn. Each has its own pros and cons, so by learning about the different types of trading you can choose the one right for you.
Keep reading to learn more.
The shortest form of stock market trading is scalping. Traders who scalp make lots of smaller, quick trades, often holding each trade for mere minutes.
Each trade has a small profit, however over time enough profitable trades can add up. Ideally, at the end of the trading day, the cumulation of all trades will produce a modest profit.
However, scalping can be very time-consuming, since a high amount of orders are required to make a profit. This high amount of orders also makes this a very time-consuming strategy. A high amount of upfront capital is required to generate decent returns since each trade will only generate a small profit.
As the name implies, day traders enter and exit on the same day, removing any risk associated with holding trades overnight. At most, trades are held for a few hours. Day trading is the most widely known trading style.
Day trading can allow you to seize immediate opportunities each day, without having capital at risk by holding it overnight. However, profits can be smaller due to exiting trades by the end of the day.
Swing trading is all about chasing trends. Swing traders buy or sell trades as price volatility sets in. They may hold for several days or even weeks.
Swing trading requires less time than scalping or day trading. There is a high potential for profitability per trade, but swing traders may miss out on greater profits while chasing trends.
Swing trading can be complicated, so traders use several swing trading techniques to identify trends.
Finally, there is position trading. Position traders focus on long-term price movement to maximum profits. This means a long-term analysis of the market and prices to identify potential entries and exits for each trade.
Position trading can take days, weeks, or months for each trade, so patience is required. It’s certainly not as exciting or flashy as day trading, but there is a potential for higher returns.
Choose the Right Types of Stock Trading
So which types of stock trading are for you? If you have the free time, scalping and day trading can be exciting, with the potential for more immediate profits. However, if you prefer to hold your trades for the potential reward of a bigger profit, swing or position trading may be for you.
For more tips and advice on how to make the most of your money, check out our Finance section.