Stock Day Trading Styles

Sorry to be the bearer of bad news but there is no foolproof way to profit in day trading. The majority of traders who start day trading begin with only fundamental knowledge which provides general guidelines for their initial decisions. As they learn the techniques of day trading, they begin to develop their own systems that work based on different day trading styles.

There are several kinds of styles involved in day trading. Some of them are as follows:

Swing Trading - Developed during the 1900’s, swing trading is a style that adheres to forecasting the succeeding behaviors of the market based on the swing it followed during previous trades. While day trading is described as a trade that is normally held with a maximum of one day, a swing trade could make up anywhere from a day to several weeks. Swing trading works on the principle that changes the behavior in the market will only yield significant profits if held over a certain period of time.

One of the advantages that swing trading has is that it can give good chances for traders to take advantage of the predictable movements of the market and the expected range of highs and lows based upon recent prive action.

Momentum Trading - After its unpopularity before the 90’s, momentum trading came back to the scene due to the lively market during this period. The main appeal of this style is that it lets traders hold their positions overnight with minimal risks. Momentum traders basically jump over to the stocks that are moving upwards and try to ride the momentum until they reach their desired profit. They jump out of the trade at the first sign of a price reversal. When day trading using momentum guidelines the daily price action may not fully reflect the stock’s momentum as trades will be initiated and closed out daily.

Technical Trading - One style of trading that is based purely on charts, index graphs, and the likes is technical trading. This style is broader in perspective and approach. Technicians base their decisions on the history of trades, the indicators that worked before and the unique patterns which led to good trades in the past. They use these tools for finding a likely repeat of patterns for their trades. There is one significant flaw in this style though; there are many technical indicators to choose from. Using too many of them may obscure the judgment of the technician as they may not always confirm each other.

Scalp Trading - Probably the most popular of all trading styles. Scalp traders are those who make several trades in a day trying to make small profits from each of these trades by exploiting the more predictable movements of small daily moves. This style is popular since the investment is spread out over several stocks and when following the major trend it is more likely to produce more winners than losers for the day. However, scalp trading can lead to overtrading with additional expenses offsetting profitable trades.

In day trading each trader will need to experiment a bit to see which style of trading fits his temperment and financial capibities the best.

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