There are 3 main styles of trading, and by styles, I mean the way you approach trading, and this in turn will determine your holding period, timeframe, time commitment, and the products you trade.

Here are the 3 main styles:

• Short-term
• Medium-term
• Long-term
  

 

Short-term Trading

Short-term trading is mainly for people who are doing it full time, and includes day trading (closing all positions by the end of the day) and scalping (taking extremely short-term positions which can last seconds).

Traders will mainly be using 5-minute or 15-minute charts, or even shorter timeframes, so this means that they will need to check their computer screens every few minutes, or stare at it constantly. This can be quite stressful for beginners, hence it is strongly not recommended.

The products traded will tend to be very liquid, have low commissions, and have significant price movements during the course of a day. These include forex, futures, and larger stock markets.

Medium-term Trading

Medium-term trading is the most ideal for part-time traders, as it does not require much monitoring of the markets. It is also known as swing trading, as it captures the “swings” in the markets.

Traders will mainly be using the 4-hour or daily chart, so they will only need to check their charts every few hours or even once a day, making it ideal for people who have full-time jobs and do not want to spend too much time looking at charts.

The products traded will tend to be those more customised to retail traders, such as forex, CFDs, and stock markets that do not have too high transaction costs.

Long-term Trading

Long-term trading is suited for people who do not have any time at all, and this includes position traders and investors who take long-term positions that can last weeks or months.

Traders will mainly be using the daily chart or weekly chart, meaning they will probably only be checking up on their positions weekly, monthly, or even quarterly. This is the most hands-off option, but it also requires a lot of patience, and is not suitable for people with little capital since your capital is going to get locked up for long periods of time.

The products traded will tend to be more asset-based, such as stocks, ETFs, REITs, or other assets which can appreciate over time and pay dividends.

 

There are 3 main categories of technical analysis methods that are used by all traders:

• Classical charting
• Technical indicators
• Price action

Since I will be doing separate guides for each of these methods, for now I will be briefly going through each one.

 

 

1. Classical Charting

These were the very first tools developed by traders, back when there were no computers and charts had to be plotted and analysed manually.

They include things like swing counts, support and resistance levels, trendlines, channels, price patterns, etc.

Even today, most traders still use these methods, usually in conjunction with other methods.

2. Technical Indicators

With the advent of computers, traders started using them to crunch numbers, and by applying mathematical formulas (using the open, high, low, close, volume data) were able to add another dimension of analysis which was not always obvious by visual observation.

There are thousands of indicators, but the common ones used are moving averages, MACD (moving average convergence divergence), RSI (relative strength index), Stochastics, Bollinger Bands, etc.

3. Price Action

Price action is a pretty broad category, but the main idea is to study the movement of price, while understanding the underlying reasons for such moves.

In the past, one such method was tape-reading, which has now evolved to reading the price ladder and order flow. but these are more for intraday traders on very short timeframes. I used to do that when I was trading for funds.

For retail traders, the more common approach is to study candlestick patterns, which is to identify unique clusters of bars, but for more advanced price action, it involves studying every single individual bar.

Most traders will use a combination of all 3 methods, since they are not mutually exclusive. The idea is to find a combination of tools that can enable you to find good trading opportunities with the least amount of effort.