Understanding The Different Types Of Trading

Understanding The Different Types Of Trading

Trading can be broadly classified into three types and they are short-term trading, medium-term trading, and long-term trading. Each category of trading has its own set of advantages and disadvantages. Every trader has a comfort zone that lets him or her trade efficiently. While one trader may be happy with day trading, another will want to explore the possibilities of online trading then check this out. This article will help you to understand the different types of trading. Check this out to know which type you are comfortable with and which one you should opt for right away.

Broad categorization

As mentioned above, trading can be broadly categorized into three types:

  • Short term trading that generally has a time frame of a few weeks.
  • Medium-term trading that could go from a few weeks to a couple of months.
  • Long-term trading that holds assets and securities for several years.

However, apart from these basic types of trading, there are other types that have now come up. These are as follows:

Day Trading

Day trading is considered to be the most popular form of trading. It falls under the category of short-term trading. This strategy involves selling securities the same day they are bought. Earlier, this form of trading was reserved for the proficient traders alone but considering the technological advancements of today, even beginners can carry out day trading. Day trading is further categorized into

  • Scalping
  • Price Action Trading
  • Market Making
  • Pattern Trading
  • Rebate Trading
  • Market Trading

The benefits of day trading

There are a number of benefits that come along with day trading. By trading with this, you can make a lot of money in a short period of time. This is a great trading tool for beginners since a simple investment for a very short time can earn them a whole lot of profits.

Position Trading

Position trading falls under the category of long-term trading. In this form, the traders keep their securities under a hold for years. The buying and selling decisions are made by predicting present and future market conditions. The security is always bought at the initiation of a trend and is sold when the trend peaks.

The benefits of position trading

A huge amount of research is required to earn money with the position trading system. If you can get access to reliable information and are good at identifying market trends, then this could be a great way to trade. Having access to proper data is all-important here.