EL JEFE LESSONS - VARIOUS TRADING STYLES
Let's start this conversation off by stating that you can make money with any style of trading. In the day trading game, the primary factor that will determine your success or failure is what's between your ears. That said, there are many different styles that can be used in day trading.
It's important to define your trading style as early as possible in your day-trading career, because it will have a direct bearing on a number of important elements. For instance, your trading style will dictate the type of brokerage account you'll need, the type of trading software you'll use, the sort of training you'll need and the kind of mentor you may seek. Each style is a variation on the day-trading game with its own rules and idiosyncrasies – and you can't learn the rules until you know which game you'll be playing. Nor will you be able to develop a trading plan until you know your trading style, because to write a trading plan you must know what, when, why, where, and how much you're going to trade. And knowing these things actually goes a long way toward defining your trading style.
A trading style is defined partly by how much time is spent in the market – do you close all positions by the end of the day, or do you hold them overnight or perhaps longer? It's also defined by the stocks that you trade, whether you use technical analysis or if you base your trades on news events. Many elements go into defining a style but, again, the most important is the organ inside your head.
Your mental makeup will (or should) drive your decision about style. For example, if you, by nature, methodically think through a situation before making a decision, you may never make it as a 'scalper' because such a style requires the ability to make split-second judgments based on rapidly changing data. Or, if you've spent years making investments based primarily on fundamental analysis, you may have a hard time relying on signals emanating from technical indicators. You may feel more comfortable in trading a group of fundamentally sound stocks. The point here is to learn the essentials that make up the different styles, while at the same time learning about yourself. As you do, you'll naturally gravitate toward a style that best fits your personality.
Although combinations are virtually infinite, let's separately examine a few of the most basic trading styles that you might consider using.
