Swing Traders vs. Day Trader vs. Position Traders

By mosesbet · Filed Under Spread Betting Comments Off on Swing Traders vs. Day Trader vs. Position Traders 

There are a number of different trading strategies in spread betting, for example we could cross examine technical analysis vs. fundamental analysis or even identify spread bettors by their starting salary, cash reserve and willingness to take risks.

One of the biggest things that differentiate spread bettors is your trading style.  This means whether a trader is an intraday trader, swing trader, position trader, scalp trader and so on.  Each of these different types of trading styles suits different people and has its advantages and disadvantages.  In this article I’m going to provide an introduction to each of these trading styles.

Day Traders/Intraday Traders

Day trading (also known as intraday trading) is the most common trading style among new spread bettors (and also the riskiest in my opinion).  Day trading is when you enter and exit your trades in the same day.  You might only make a profit of a few points per trade but when you’re making 2-20 trades per day it will all add up.  An example of a popular day trader I know is Nick (who day trades on the FTSE 100 and keeps a blog at FTSEDayTrader.com).

The advantage of day trading is that because you’re making small trades on a regular basis the risks are much lower.  You’re not holding trades open overnight which avoids large interest rates and market volatility, plus you’re high volume of trades and compounding means that you can afford to take losses and a little bit of slippage.  I still wouldn’t recommend day trading for beginners because in all honesty you never know what will happen and you could lose a huge amount of money trading on volatile markets such as the FTSE which can range above 100 points on a daily basis.

The disadvantage of day trading is that it’s very time intensive (most spread bettors have day jobs remember), large spreads can eat away at your profits and your attention to the markets has to be very consistent.  Mobile trading is a 100% requirement for day traders nowadays.  Another disadvantage of day trading is that you can end up missing out on long term price trends by exiting trades too early.

Scalp Traders

Scalp trading is similar to day trading except you’re only keeping trades open for 1-3 minutes at most and make maybe 1-5 pips profit in the forex markets.  A lot of forex and spread betting sites don’t like accepting scalp traders because they can jam the markets, usually don’t cover the spread size and they are difficult for the sites to process and cover.

Swing Traders

Swing traders take advantage of short to intermediate term trends which could last anywhere from 1 – 30 days. Swing traders tend to be the more experienced of spread bettors and will use technical indicators such as Fibonacci Retracements and Stochastic Oscillators to find price reversal and trends emerging.

The advantages to the swing trading style is that it’s less time consuming and stressful than intraday trading, it allows you to take advantage of price reversals/retracements in the markets, and fewer trades per month reduces the commissions of the broker.

The downside to swing trading is that it can be very difficult to learn and become profitable, leaving your trades open longer massively increases the risks (including leaving trades open overnight), and you need to be very disciplined to check daily trends/cycles in the market.

Position Traders

Long term swing traders or “position traders” is also known as then “buy and hold” approach.  This long term style of trading involves holding positions open for extended periods of time such as weeks, months or even quarters.   Most swing traders will be seeking profits of 20%, 30% or even 50% return on investment over a couple of months.

The obvious benefits of position trading are that you eliminate the noise of the markets (volatile, daily, choppy markets) in exchange for long term rewards from trend patterns.  Position Trading is one of the most forgiving types of trading because the huge profits absorb any of the costs and it’s much less time consuming than day trading.  As long as you know what you’re doing swing trading is very easy to generate risk-free profits (around 25% of position traders learn how to make profit).

The disadvantages do position trading is that you need a combination of technical and fundamental analysis skills, compounding has a much smaller effect on your profits and you have a lot cash reserve tied for up an extended period of time.

Conclusion on Trading Styles

In conclusion, different trading styles suit different people’s needs and their risk ratios.  Swing traders will be investing the most amount of time in their pre-trading routine (using technical analysis to look for upward trends and entrance/exit positions) while position traders can use their experience to go long in markets and make huge profits.  On the other hand, day trading carries huge risks in volatile markets and isn’t recommended for those looking for big profits and gains.

Whichever trading style you choose, just remember that neither is perfect.  At the end of the day spread betting is still another form of gambling and no specific trading style will ever guarantee profits.

For more information on swing trading vs. day trading vs. position trading you can sign up to ETX Capital and watch live seminars with advanced explanations and differences for these trading styles.

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