What Is Trading?
Trading means exchanging one thing for another that will be different types of goods, commodities, fiat money or cryptocurrencies.
Online trading is basically the buying and selling of financial products via different online platforms known as exchanges. These platforms are mostly centralized and controlled by a few people. The trading exchanges are available to everyone (some exceptions are there) those who want to trade financial products.
The online exchanges provide financial products including company shares, Commodities, Indices, Forex, and Cryptocurrencies. Forex and cryptocurrency markets have gained a lot of interest from the users because of their volatility and unique features.
Different Types of Trading
There are 5 types of trading:
Intraday Trading ( Day trader )
An Intraday trader usually executes all his trade in the beginning of the day (morning) and closes at the end of the day, whether it will be in profit or loss.They just hold trades for the entire day. This type of trader uses 1H to 4H chart time frame for trading.
- Just have to hold the position for a day so no extra charges should be paid.
- It minimizes the loss and less time to analyze the market.
- Earning (Profit & Loss) will be on a daily basis.
- The trader has to maintain stop loss multiple times.
- They should be in touch with the market every time because of some news or indication of wrong trades or reversal points.
A Swing Trader is typically a trend hunting trader. They usually find trade whether it is bullish or bearish and capture its swing high and low. They execute trades after broke or get rejection from swing high or swing low respectively. Time Frame for this type of trader is 30m – 1H. They hold trades for an entire day or a week in worst cases.
- It gives short-term profit.
- It requires very less time as compared to Intraday trading.
- it has a good probability of winning trades with moderate R2R (Risk to Reward).
- Swing traders may not ride the full trend and book partial profits.
- As a trader has to hold for a day to a week, the market may change its trend which leads to a proper loss.
A position Trader has been just like a Hodler, a trader analyzes the security once for the long term and holds the position for a week to several months. This type of trader uses 1W to 1M timeframe.
This also gives relaxation from daily charting and executing trades.
Note: Don’t confuse between Position trader and Investor, they both are different.
- Reduces Screen time from regular analyzing charts.
- Reduces fees on trading because we are only executing 2-3 trades for several months.
- The most important one is that salarymen can also do position trading because you don’t have to stick to your screen the whole day every day.
- Probability is profit and lower risk much higher than any trading style.
- Requires huge patience for a longer time.
- Funds are locked for a longer period of time, the exit may tend to lose or can exit in break even.
- Requires good knowledge and accuracy on trading.
Fundamental Trading (FA):
A fundamental Trader refers to those traders who trade on news events. They execute trades before that news event, predicting the market or trades during the news at his release time.
They usually trade on 1H to the 4H timeframe. This type of trading is quite risky because predicting the market is quite difficult and may hit your stop loss easily.
- Larger movement is smaller time that gives instant profit or loss.
- Don’t have to give much time to analyze.
- The market may move in a particular direction but may hit you both SELL LIMIT and BUY LIMIT because the market is too volatile at that time.
- Sometimes there is no clear information about the event or eventually, maybe it’s a piece of false news also.
- Sometimes markets may spike up before the news is out and you can miss that trade.
Technical Analysis (TA) Trading
A Technical Trader totally depends on the previous information provided by the market. The professional Technical trader uses Support and Resistance on a naked chart to trade some use indicators and some use an algorithmic robot.
Technical Analysis also comes with a variety of trading strategies ex: Chart patterns, Range trading, trend trading, etc. This type of trader uses anytime for 5 m to 1d and hold unless found reversal or stop loss hit.
Recommendation – Learn Price Action for professional trading.
- Have an eye on the market, catch every movement and maximize profit.
- Simpler and easier if you are interested in your mental health.
- Greediness and emotions can override your mind.
- Have to learn many indicators, chart patterns and all on your own or have to go for a paid course which costs a couple of thousands of dollars.
- Precision is required because may or may not your trade is correct, but through the retracement, the market may hit your stop loss.
- Requires longer practice before step into real trading.
All Above written is based on my experience, observation and market learning during real trading. (Benjamin Gimson)