How to choose the right trading style for you

Beginners often wonder how to select the right trading style. This is an important question, as you should never start trading without determining the kind of trader you are, and what kind of trading strategy you should follow. But choosing a trading style isn’t easy, as there are many factors to take into account. So let’s take a look how you can select the right trading style for you, and maximize your chances of trading success!

#1 – Think about your level of knowledge

The first thing to consider is whether or not you have enough knowledge and experience to start trading right away. Do you have a finance degree, or similar qualifications? Do you have working experience in the financial world? If the answer is no, then you first want to bring your knowledge up to speed, as you’ll quickly find yourself out of your depth without a good grounding in the field.

#2 – Take into account your personality

The second step is to take into account your personality to determine the trading style you naturally lean towards. Scalping, day trading, swing trading, and position trading are among the most popular trading styles. The first two better fit active traders that are able to make quick decisions, have a high tolerance to risk, are available to take advantage of trading opportunities whenever they arise, and are not easily distracted. The latter two strategies require lower commitment, focus, and availability, as you will carry your positions overnight to take advantage of larger market movements.

#3 – Select the right financial product and market to trade

When you know the kind of trader you are and the kinds of risks you’re willing to take to reach your financial goals, you have to select the right financial products and asset classes, as there are many different ones you can take advantage of. If you are not risk-averse for instance, you could focus on penny stocks, as they might provide greater opportunities than classic stocks (but they are also riskier). Have a look at this guide about trading penny stocks for beginners to decide if penny stocks are the right financial asset for you. If you prefer less risky assets, then value stocks, ETF, and bonds might be better.

#4 – Choose between discretionary and automated trading

To select the right trading style and strategy, you also have to decide if you’ll use automated trading or not. Automated trading strategies can help you automate your trading if you do not have time to spend trading the markets, or if you want to remove all human interaction from your trading. Discretionary trading means that you make all trading decisions, which better fits people who like to exercise more control over their trading. Both techniques have strengths and weaknesses – and both can help you reach your goals. You just need to be sure to have the right knowledge and tools to create an automated trading strategy.

#5 – Create your trading plan

Once you’ve gathered all the information above and you’ve chosen your trading style, you can work on your strategy and determine the kind of trading setups that need to appear before you open and close trading positions, as well as the way you will manage risk. Create a writing trading plan that gathers all this information, and never deviate from it!

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