Share:

Lesson 2. Types of trading: the most popular and widely used methods of trading

👋Welcome to Trading Academy, let’s improve trading skills together!

The second lesson in this section is devoted to different approaches to working with assets, today we will talk about different types of trading.

My friend, from the previous article you learnt that the term “trader” means a profession that requires time and sufficient investments. In this tutorial, I will talk about how the types of trading differ and what is the difference between various approaches to trading

Types of trading (depending on the time spent):

  1. Scalp Trading (Scalping) – no “long positions”, the average time for closing transaction is up to 5 minutes. It also includes trading with the help of bots;
  2. Day Trading – working principle is closing positions during the day;
  3. Swing Trading (“Trading on the waves”) – when using this method, positions are held for about a week, depending on the local cycle;
  4. Position Trading (Invest. Trading) – normally positions are held in the period from one month to one year;

Below we shall discuss each type in details.

For Scalp trading, transactions are opened and closed quickly enough. The percentage of income from such transactions is minimal; this is because at each unit of time we see certain volatility of the market, and the shorter the period, the smaller the amplitude of the fluctuations (which affects the spread between buying and selling).

Let’s take a look at what the amplitude of asset fluctuation is and why the percentage of income with such a transaction is minimal.

Это изображение имеет пустой атрибут alt; его имя файла - image1.jpg

The amplitude of fluctuations (lat. Amplitude – value) is the deviation of the price from the current indicators in a certain period (hereinafter the timeframe).

Important note: the more transactions the user closes the more profit he gets. For example, in the case of invest trading, a deal is opened for a month to receive 10-15% of income. At the same time, while working with scalping, there can be both 10 and 1000 such transactions, and if each transaction in terms of profitability is at least 0.3%, then you can get about 30% of profit from 100 such transactions (for the same time period).

Despite the profitability of this method, it is important to understand that scalping is not suitable for everyone. The method is most often used for automated trading using algorithms and bots.

It’s time to start analyzing the most common type of trading – day trading. The price movement chart looks like this:

Это изображение имеет пустой атрибут alt; его имя файла - RhFqqRsN_aXuN7dQIPgCpsXdj1Wqgcbgms5FIbOWBMqX8LzH5DS-bXmD2ySrDTqZ4znWXMeJ2CoTfRNztZ3JTCjP2GLrH8bz1uEK70khgwz1ujksMSD-9XIcrBshRyuR5q5uFkjV
Why do I consider day trading to be the most common type of trading? Spending 5-8 hours of trading every day, you can catch the fluctuations of the asset, thereby generating about 3-5% of the profit during the day or week, which is undoubtedly a good result. As shown in the chart, the spread of the intraday fluctuation of the asset is exactly 3-4%.

Next in the list for analysis is investment trading. This type of trading is quite widely used because it is easier and requires less time and less specialized knowledge from the trader. Investment trading deals are opened once a month (sometimes even less often), which makes it the least time-consuming type of trading.

An example graph for this method looks like this:

Это изображение имеет пустой атрибут alt; его имя файла - image3.jpg

Another way to monetize and make a profit is simple investing. Of course, you can’t buy assets “at random” with blind faith and hope for growth, always perform a market analysis, and study the “reputation” of the asset before investing in anything.

Digital assets can be purchased on an exchange, from a “broker”, or through crypto exchanges. I will return to these topics in more detail in our next articles: “Exchangers and Stock exchanges: what’s the difference and how to choose” and “Where the trading is carried out?

It is important to remember that each type of trading can have its own strategies of work, based on the amount of work being done, whether borrowed funds are needed, etc., but I will also talk about this at the end of our course. Please be patient and let us continue learning gradually.

Buddy, congratulations, now you know the basic terminology and you can be a “brother-in-law”, you can start showing off your “technical knowledge”. In the next lesson, we will look at where to apply the knowledge gained and how to execute transactions.

Buddy, congratulations, now you know the basic terminology and you can be a “brother-in-law”, you can start showing off your “technical knowledge”. In the next lesson, we will look at where to apply the knowledge gained and how to execute transactions.

Thanks for your attention❤️

Did you like the lesson? Move on to the next one.

Didn’t like it? Write to us your comments and suggestions.

P.S. Soon it is planned to add a review of market situations with the help of our professional online traders.