Choose A Stock Trading Strategy That Suits Your Personality

1. Positional Trading:

Positional Trading is a preferred trading style by most of the traders because it features a longer time implication when compared with Intraday. Positional trading aims to make the most out of market opportunities and thus the span varies largely from few days to few weeks to even a couple of months. Traders who trade with position trading make use of a combination of fundamental triggers, technical charts and news flows in order to take trading decisions. Positional trades usually use news flows as a trigger and fundamentals are used to ratify the story. The entry and exits in the position are timed using the fundamental charts.

Unlike intraday, positional traders ignore short term price fluctuations and aim at extracting profits from medium term and long term market trends. You might be thinking that positional trading is similar to investing, but that’s not the case. The key difference between position trading and investing is that investors look at only long trades where they can earn profit by the rising market whereas positional traders choose both short side as well as long side strategies based on the trigger strength.

2. Intraday Trading:

Intraday trading or day trading is probably the most preferred trading style in the Indian financial markets. It involves buying and selling of securities on the same trading day. Intraday traders avoid deliver based trades because an overnight position is not preferred by them. Intraday positions are held from few minutes to few hours by the traders. A trader can buy first and sell later on the same day, or even sell first and buy later on the same day. The process of selling first and buying later is known as short selling.

Intraday trading requires great knowledge and experience. It aims to extract profits from small market movements. Intraday traders are great chartists and thus enter in very acute level based positions. However, intraday trading requires time and this is the reason that intraday traders and full time traders. Market Pro can help you if you are new to the market and don’t have proper knowledge and experience.

3. Swing Trading:

Swing trading is a trading style which mostly relies on technical analysis. This includes breakouts, news flows. The exit and entry levels are determined using [price action. Swing trading hardly requires any fundamental analysis and that is probably the biggest benefit. Swing traders aim at capturing short term market movements and hold their position for a span of few days to weeks.

Swing traders close the trade with discipline i.e. a trade is closed after reaching a previously established target price or if the trade is stopped. Swing trading strategy is widely used in the derivatives. Delta Derivative Plus is a swing trading strategy which helps you make the most out of the derivatives market.

4. Arbitrage Trading:

Arbitrage is more of a trading strategy than style, and can be performed in a number of ways. This includes cash and futures arbitraging which provide good returns as compared to the bond returns. There is exchanging arbitraging as well which is very rarely used by traders. Arbitraging is also done with option mispricing by the traders but it requires the help of algos.

The scope of profit is very little in case of arbitrage trading but the incurred risk is also very less because these are long short positions. Arbitraging is a preferred trading style of mutual funds, proprietary desks and institutional investors because it requires locking up of your capital.

5. Scalp Trading:

Scalp trading is important trading styles for the market because it helps to create liquidity and also aids in compressing the bid ask spreads of the market. Frequent buying and selling is required throughout the session, therefore scalp trading can be considered as a highly active trading style. Scalp traders try to capture tiny price movements but trade in large volumes. They rely on the strategy of small gains by churning there capital multiple times.

Scalp traders or scalpers need to be extremely cost sensitive and usually trade on low commissions. The reason for this being the large volume they trade in. It can be considered as a high risk trading style because it relies on having a high percent of winning trades. A few bad trades and your portfolio start bleeding. It is very important to get your risk profile analysis to know about your risk bearing capacity before being a scalper.

5. High Frequency Trading::

High Frequency Trading or HFT is a newly introduced trading style in the Indian financial markets which operates by using algorithms and technology driven executions. High Frequency Trading requires you to trade across multiple asset and class and even across multiple markets in order to balance your risk. In order for HFT to be meaningful, it should be practiced with low latency. The complex nature of HFT makes it impossible to execute the trades manually.

High Frequency Trading has been in the headlines in the last few years because it was held responsible various flash crashes in the financial markets.

Choosing the right trading style is a very important factor for a trader. It should be done based on the risk profile analysis, time commitment and invested capital. If you are still confused with choosing the perfect trading style for you, it is better to consult a SEBI registered investment advisor who will not only help you with selecting the perfect trading style but will also guide you through the trading journey.