How to pick a trading style based on your personality

It’s been said that trading is 80% psychology and 20% knowledge.

Why does psychology play such a significant role in trading? Because fear, expectations, and mindset drive the market.

If we want to be successful investors, we need to know how to harness our natural abilities that can put us ahead of the pack.

Choosing a trading style that fits our personality will help us maintain our mental and physical health, a crucial part of the success of any kind, and will help us achieve our investing goals.

Finding the trading strategy that fits your personality is the first step to successful trading.

Table of Contents

  1. For the fast-paced, decisive trader: Scalping
    1. What is scalp trading?
    2. Is scalp trading right for me?
  2. For the disciplined, adaptable trader: Day Trading
    1. What is day trading?
    2. Is day trading right for me?
  3. For the busy, level-headed trader: Swing Trading
    1. What is swing trading?
    2. Is swing trading right for me?
  4. For the more risk-averse, ‘in it for the long-run’ trader: Position Trading
    1. What is position trading?
    2. Is position trading right for me?

For the fast-paced, decisive trader: Scalping

Must-have personality traits

  • Detail-oriented
  • Stress management skills
  • Enjoys fast-paced environment
  • Decisive and resolute

If you prefer things to happen on the quick end and know how to make decisions on the fly, scalp trading could be the best strategy for you.

What is scalp trading?

Scalping is a trading style that consists of buying and selling stocks multiple times throughout the day. Traders open, hold briefly and sell quickly. They must have a clear exit strategy and know the right moments to act.

The end goal for these traders is to make a high volume of small profits rather than a few big wins. So this strategy is best for those who have a lot of time to dedicate to the market and are quick to notice details.

A common way to scalp trade is to buy a large number of shares, wait for an uptick, and sell as soon as there is a margin for profit. Due to the nature of this trading style, you’ll need to follow the markets closely and look for those small but opportune movements that pay-out.

Is scalping trading right for me?

Scalping trading strategy can be volatile. For many traders, the constant chaos and market movements can make it hard to make the best decisions. If you need time to think about your options and process your decision-making, scalping may not be for you.

But if you’ve got the mental agility to stay focused, scalping makes for a profitable strategy.

For the disciplined, adaptable trader: Day Trading

Must-have personality traits

  • Patient
  • Flexible
  • Independent
  • Analytical
  • Good decision-making skills

If scalping sparked an interest for you, but you’d prefer a slightly slower-paced style, you may enjoy day trading.

What is day trading?

All scalpers are day traders. Not all day traders are scalpers.

Day trading is a short-term trading style in which we open and sell trades within the same day.

This trading method is similar to scalping in that there’s a lot of movement within a day’s time. But day traders hold their trades for, as the name suggests, no more than one full trading day.

The end goal is to trade less frequently and get a higher pay-out. So with day trading, there is more risk and more reward – best for those inclined to take a bigger swing.

This method is not as fast-paced as scalping, but it requires a high level of stress management skills to know how to follow trends. You’ll need to be diligent, pay close attention, and know-how to spot the best opportunities.

Is day trading right for me?

As with scalping, day trading requires long periods of focused attention to be successful. Unfortunately, many still see day trading as a get-rich-quick scheme.

Day trading can be very profitable for those who play their cards well. The best day traders are typically those who have a fundamental understanding of how the markets work, experience with various strategies, and capital to leverage.

For the busy, level-headed trader: Swing Trading

Must-have personality traits

  • Analytical
  • Organized
  • Even-tempered
  • Multi-faceted

If you’re interested in trading but don’t have several hours a day to spare, swing trading offers a less intense yet still profitable trading strategy.

What is swing trading?

Swing trading is the trading style in which we keep our positions open for a couple of days up to several months. The goal is to make short-term profits by capitalizing on market swings.

Traders will identify when a stock’s price is likely to change and craft their entering and exiting strategy around that movement. They can seek out more volatile stocks or ones that tend to have less activity.

This type of trading is not as involved in the day-to-day as scalping or day trading, so it’s ideal for those who may not have as much time and want to simplify the trading process.

Is swing trading right for me?

The name of this trading style comes from the swings between cycles of optimism and pessimism. So the best swing traders will be the ones who can see through the forest and consider weekly and monthly trends.

To be a successful swing trader, you’ll need to look at multi-day chart patterns to help form your strategies. So investors with a knack for quick, analytical analysis are typically best suited.

For the more risk-averse, ‘in it for the long-run’ trader: Position Trading

Must-have personality traits

  • Big-picture thinker
  • Self-driven
  • Patient
  • Knowledgeable

While no form of trading is ever free of risk, position trading is the method for those looking to minimize risk as much as possible.

What is position trading?

Position trading is a long-term trading style.

Position traders hold their trades for months or even years before closing. The objective is to cash out on appreciation. So position traders will prioritize more significant profits from the long-term market trends.

With position trading, investors are less concerned with short-term fluctuations. They are on the opposite end of the spectrum from scalping and day-traders and will make very few trades over the year. 

At the core of position trading philosophy is the belief in the market’s upward trend. So the short-term ups and downs need to be a mere blip on your radar rather than strategy influencers.

Is position trading right for me?

Position traders are long-term investors and will need to be patient and able to focus on the bigger picture.

Out of all of the investing strategies listed, position trading is the one that requires the least amount of time in the day-to-day. It is also the strategy with the least amount of risk.

If you’re considering position trading, consider what you’re looking to achieve. If your answer is to capitalize on the long-term market growth while dedicating less time and assuming less risk, then position trading could be for you.

These traders will need to block out the noise of market rumors and panic over short-term trends. They should be confident in their knowledge of the market and the long-term goals of their investing strategies.

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