How to Find Your Own Profitable Trading Style

When you enter the world of trading, it’s important to find a style that suits your personality. By doing this, you’ll improve your chances of long-term profitability. You’ll draw on your strengths and perform at your optimum. 

Before you get started investing in gold, stocks, crypto or any other asset, take some time to analyze who you are and how you prefer to operate in relation to the different styles of trading. 

Remember, there’s no right or wrong answer—but there’s one that’s the best fit for you.

The 4 Classic Styles And The Personality Traits That Complement Them

There are four main styles of trading and each one has its own pros and cons. 

The most important aspect to look at is if a style suits the way you like to do business and complements your overall personality. 

1. Scalping = Quick Decision Making

If you love making snap decisions and are good at confidently taking action fast, this is a great trading style for you. Scalping is when you hold your trades for short periods—sometimes a few minutes or only a few seconds. 

It’s a very active method of trading and requires you to be fairly ruthless in your decision making. Most swing traders will immediately leave a trade if it doesn’t show profitability in the first few moments. 

Scalping is all about instant gratification and instant switching.

Other personality traits required for this style include being able to focus on one thing at a time and not getting distracted easily. If you tend to daydream or know that your work time is often interrupted, scalping is not a viable option.

2. Day Trading = Completing The Task Today

This is a slightly slower style of trading compared to scalping, but it can require some snap, split-second decisions too. If you’re goal orientated and like to tick things off your to-do list, this is a great style of trading for you.

In day trading, you can hold your trade for as little as a few seconds or as long as the entire day. While you don’t have to make split-second decisions, you have to keep a close eye on trades to ensure you make your move at the most profitable point for that day.

With day trading, you start on a clean board at the beginning of the day and complete all of your trades before day end. 

The next morning, you start fresh again. 

You leave nothing open or active overnight. So, if you’re prone to monitoring movement and lose sleep worrying about what might happen, day trading is best.

3. Swing Trading = Holding Your Nerve

If you have a good level of patience and are happy to wait things out, then swing trading is tops.

There are very few snap decisions required, and you have time to breathe through your trades and watch the market change. However, you do have to be able to hold your nerve, be optimistic, and wait for the right moment to trade to come along.

In swing trading, traders usually wait at least one day before making a trade. And they can wait up to a week to find the sweet spot on a single trade. 

A swing trader will rarely make a move in less than 24 hours. 

This means you have to accept that downturns and upswings will occur that you cannot monitor. If this doesn’t bother you and you prefer a slower approach, this is the way to go. 

4. Position Trading = Foresight and Patience

If you like to think along the lines of the big picture and you have great patience, then position trading is the ideal fit. 

This really is the long game and you can hold trades for a few years before making a switch. The aim is to work in thousands of ticks and not tens or hundreds like you would in the faster styles of trading.

Position trading requires dedicated and extensive research so you can make solid bets on your stock purchases. The more research you do, the more confidence you can have that you’ll see a profit in the long run. 

To excel at this trading style, you need to have a personality that isn’t swayed by popular opinion and would rather research the facts and monitor changes yourself. This is a skill many entrepreneurs share, and it will stand you in good stead.

You will probably watch your trade rise and fall in value several times over the period you hold it. You need to set a mark for where you want it to end up and be prepared to wait for the stock to reach that price before you make any moves to sell. 

This approach takes patience and the ability to hold your nerve, no matter what other people say. It also requires good financial planning, sound knowledge of how to calculate profit margin, and excellent cash flow management skills, as you may wait a while before seeing a return. 

Testing Your Strategy

Once you’ve found a style that clicks with your personality, it’s time to build up a trading strategy. This will include:

• The type of stock you want to work with
• How much you want to spend on each session 
• What your stop loss order should be

Keep in mind that your stop loss will need to be larger for the longer trade periods. You’ll be allowing room for more fluctuations in price before you make your trade.

The next step is to test your strategy against historical data on the stock markets. This is an ongoing process and you should never test your strategy just once and then jump into making trades. Look at strategizing as an integral part of trading and incorporate it into whatever style you prefer.

Keep An Open Mind

It’s important to remember that your style of trading shouldn’t change with the fluctuating markets. Your strategy, on the other hand, can move, adapt and even change entirely over the years. This will all depend on the economy—both locally and internationally. 

Remember to keep reading about the market and keep checking that your strategy is suitable for the times. The better informed you are, the more profitable your trades should be.