Know the most common types of trading on the market

October 6, 2017


Before starting in the financial market it is very important to be familiar with the various types of trading. Whether it’s Day, Swing or Position Trade and even medium and long term trading (Buy & Hold). These terms may even seem too complicated at first.


But you will soon see that there is a basic difference between them: how long you will negotiate. Understand:


Every investor has a plan for their investments. And it is precisely this plan that will help you to define your strategy, as well as the time to operate in applications such as the Stock Exchange and the Forex. That way it is essential that you prepare to work as accurately as possible. That is: taking calculated risks and knowing when to expect the results.

Among the most common types of trading (short-term trades) are Forex. And these negotiations are classified into: Day Trade – last less than 24 hours; Swing Trade – take two to five days and Position Trade – relatively short term, because they last a few weeks and even months.

All of these definitions and timelines you may know in today’s article. Do this and take another step forward towards your financial independence!

Good reading!


What is day trade


As we have seen, the day trade is always closed on the same day, but may last only a few minutes or hours. It is the shortest of the types of trading. The purchase can be in the opening of the financial market and the sale in the closing, or even with a difference of seconds: both are called day trade.

As it is a time for quick gains, it requires a lot of knowledge and experience from the trader. Besides speed, it is also common to operate day trades to get small amounts. That’s because the final sum can bring interesting profitability. So, recap and check out some more details:

Features of the day trade: several very short-term (less than 24 hours) operations at the same time, require highly liquid assets, requires dedication, earnings are rapid and profits from each operation may be small but the final result very good . Essential knowledge on technical analysis and much experience on the part of the investor.


Swing Trade


Swing trade is also one of the most common types of variable income trading, but it is a somewhat longer term operation. The swing trader trades, on average, for a period of two to five days. No more than that. The idea is to stay in a position until the time set to reach the goals outlined.

In this context, the swing trader usually performs fewer operations in parallel. Factor that does not eliminate the need to have an equal liquidity of the assets as in the day trade. Other prerequisites are the field of technical analysis, patience, discipline, readiness to follow the charts and their trends.

Swing trade features: fewer short-term operations (two to five days) at the same time, it requires highly liquid assets, requires dedication, patience and discipline, there may be more consistency of results and knowledge in technical analysis is indispensable.


Position Trade


In position trade the negotiations can last a few weeks and even months. As the goal is to achieve greater profitability relative to other types of trading, the investor maintains few open orders at the same time. Liquidity is important, but it is not essential like day and swing trade. Here the term to operate is more extensive.

Position trade features: few transactions can be opened at the same time (weekly), liquidity is not the most important factor, it requires patience, discipline and emotional control, there may be more consistency of results and the trader must know the technical and fundamentalist analysis . See in this publication other alternatives to increase equity by investing.


Medium and long term


Medium term: negotiations with longer maturities, from one to five years. It is advisable to have some experience in the market and notions of technical and fundamentalist analysis.

Long-term: also known as Buy & Hold, includes operations from five years upwards. They are used by investors who seek to supplement their retirement up front. Important to know the fundamentalist analysis.


Costs and risks


Both on the Stock Exchange and in Forex, the day trader manual must have enough time to negotiate. And, as you will do several operations per day, you will incur large costs with brokerages and other fees. There is also the incidence of the Income Tax that for day trade operations is greater. Day trader pays 20% of IR instead of the normal 15%. Beyond this point against, you still have to deal with the daily risk of not being able to buy or sell your assets.

In the swing trade, the operations are smaller and, consequently, the capital, costs and risks involved are also smaller. Other than that, chart movements are easier to analyze, as there is a longer (but not much!) Time for that. Remember the importance of properly managing risk, applying stops by hand, following strategy, and keeping your head cool. The same goes for the position trade.


How to choose my types of trading?


Did you realize how the trading period is the main difference between the types of trading? And also how do each of the modalities require specific trader skills? So, to choose the one that best fits your profile clearly assess your lifestyle.

How much time do you have available to invest? How much risk do you want and can you take to achieve the desired results? Only with these answers can you come up with an assertive definition. Keep in mind that it is up to the trader to establish his or her own strategy and chart a path to be followed in your investments.

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