Scalping, Intraday, Day long, Swing or Long term trading? Which style is the best?
I wrote something about this theme in 2016 since when my view has changed a lot. I prefered intraweek trades in that period, but besides it didn’t suit me, I did it in a wrong way. So which is the best style of trading to make profit from it? Well, after 9 years of full time trading I tried all of the options for retail trading and I can tell that none of them will work properly in a long term if you stick to just one of them, but for retail traders, in my point of view the best style is intraday trading. Why and what are the advantages and disadvantages and how to trade properly? Here is my view.
I quess you all know what scalping means, but here you go. Forex scalping is a trading style used by forex traders for mostly an extremely short period in an attempt to make a profit. A forex scalper makes a large number of trades in order to take advantage of the small price movements in price action such as 5 to 10 pips per trade. In my point of view, this is the toughest way which can’t provide a profitable trading at the end. The main problem is the range of the target. I mean, the market can always go up down 25/30 pips without any reason and as you have large numbers of trades, you will simply get lost in all those tries. Also, the probability theory is not on your side if you have let’s say 30 trades per day and not to mention the overtrading problem, after which you will get caught by emotions and anger.
Scalpers also usualy trade without a SL and when the market runs away quicky on a wrong direction you can lose easily your previous 4 or 5 successful trades, if you had them before in a row. But even when scalpers use a SL and risk a small amount per trade, taking many trades could mean a significant drawdown if many of those trades end up being losers, which they will beacuse of the mentioned probability theory. When that happens, scalper trader is caught by the losing streak and it can only become worse because emotions start to disturb you mentaly, which will create a total disturbance in decisions making. Scalping can be and it is mostly very stressful. That’s why my suggestion is to avoid this style of trading.
Intraday and Day long
The most common or popular style of retail trading is definitely intraday and day long trading. It’s my style of trading as you know. Based on the strategy it mostly includes a certain technical view and setup with precisely determinated risk and reward ratio with target range of aprox 50 to 100 pips. But no matter how simplistic it is than scalping, this style also carries large traps for traders. The most important part here is apsolutely patience as you mostly need just one or two trades to complete the daily plan. When I say to complete, this doesn’t mean that you will be able to reach your desirable target each day, but if you stick to your risk management rules, you will always have the opportunity to decide the next step in a calm way. It’s of utmost importance in trading, to remain calm how to properly make a new trading decision, wheather your previous trade was loss or profit. But, you must be careful in this, because the loss as well as the profit can disrupt your mental strength. Loss can make you angry after which you can make mistake easy, but also profit can lead you in a state of euphoria, which can also disrupt your reality because you feel invincible.
That’s why in intraday and daylong trading you need to stick to your rules as there is no tomorow. Be patient and wait for the right opportunity and when it comes, take it. If you make mistake, no worries, stay calm and wait for another one, it will come for sure. In my point of view, it’s good to observe the market moves for couple of hours after fail and then search the new opportunity, not instantly after loss. I usualy place my intraday target always at aprox 100 to 120 pips as I trade mostly gold and oil, but as you sow in my trading presentations, I follow the move constantly and made my decision based on market moves. I also move my SL in a range of profit after a while because the worst thing in trading is when you let your decent winning position turns on break even or even in a loss. I mean, the market can turn up and down for several times during the day without a reason, in a same range and as the intraday or day long targets can be high and you wait too long, you can find yourself in big problems. Something like that can hit you hard mentaly. I experienced it for who knows how many times during my trading career and learned what the pharse “brain freeze” means, literally.
Missed or lost profit is the worst possible scenario in trading. Why? Cause, when you make your entry you are aware of the possible loss as you are taking the certain amount of risk in that setup, but when you have a winning and protected trade, a decent profit, you don’t think about loss any more. It’s a psychological part of trading. But as I wrote, the market can turn back suddenly and if you didn’t closed your position on time, you can easily experience the so-called “brain freeze”. You are looking at the market which is going toward your entry, your profit is smaller and smaller and you don’t react. Most of you will even move the SL from the entry and that’s how your previous winning and protected position put in risk again, thinking of how market will turn toward your desired direction again. But, then it happens mostly, the market catches your SL. Wooow, you know what I am talking about, right!? That’s why, never do that during intraday and day long trading!
In my oppinion, this is ‘the easier’ style of trading for retail traders. Stick to your rules and don’t overtrade, which means that you will be comfortable with 2 or max. 3 trades per day, not more.
With swing trading style we are slowly entering in to the institutional trading world. Swing trading is a style of trading that attempts to capture profit over a period of a few days to several weeks, within a range of 300 to even a 1000 pips. Swing traders may utilize fundamental analysis in addition to analyzing a middle term price trends and patterns, but mostly they use technical analysis as well as a day traders. As swing traders seek a pretty big target, they are quite comfortable during the position placing. Intraday moves are not so important for them, but for sure they follows an intraweek paterns and analyse a technical picture. Swing traders usually use a so called “trailing stop loss” which follows the move in their direction in a certain distance.
Can retail traders use this style? Yes they can and most of you probably thinks how swing trading is the best way because you don’t need to follow the market each day, there is no too much risk, there is no stress, etc. Well, in my point of view it’s not like that. I talked to some traders who tried this option because they had a job which didn’t allow them to constantly monitoring the market and they tought the same like; I will place the order and let it flow. But, after several months they were nowere because the market went up shortly and then returned back for several times and so on. The weeks and months went by and they didn’t manage to take any profit with such a trading and when they did it was too small.
It’s not easy to discover/predict a middle term trend like 500 or 1000 pips move because it’s not happening often and when it happens finally, it’s not easy to follow and to remain calm if your position is large. I mean, the market will not move straight forward to your goal just like that, it will move up/down for who knows how many times during the day, week or month. It will distrub you for sure as a retail trader, but if you find yourself anyway how this could be exactly the style what can suit you the best, try why not. It’s not my recomendation.
Long term trading or position trading style is probably only for institutions like; banks, mutual funds, hedge funds, large institutions, etc. A long term or position trade can last anywhere from a few weeks to even a couple of years. Most long term traders rely exclusively on fundamental analysis, such as inflation reports and monetary policy decions from the central banks as they are mostly concerned with the future outlook of the market they are trading. As the swing traders they are not as concerned with the intraday ups and downs and instead focus on the fundamental factors driving the longer term trend. Because of their longer term outlook, long term traders will normally look at weekly and more likely monthly charts for their analysis. In long term trading targets can be away from 2000 to even 4000 pips or more. Sure, the long term traders usualy hedge their positions during the certain time od period if they notice a possible technical stong levels against their position, or if the fundaments are changing in a middle term period. This kind of trading is apsolutely not for retail traders, but for sure it’s interesting to learn about it.
Well, that’s it from me about this theme. Which trading style you prefer?