Which trading style could be most successful?

Trading is a process that involves risking one’s own funds and testing skills in order to beat the market. As such, it’s only natural for traders to want to increase their profits in any way they can.

The first idea that pops to mind is simply to find the most successful type. On the surface, this sentiment does make sense, since it’s only natural to want to optimise the trading process. However, things don’t work out like that in actual market conditions.

Markets are constantly changing, traders have different personalities, goals and abilities to execute tactics. For instance, let’s say scalping is the best tactic. The problem is that it puts a tremendous strain on traders, both mentally in its intensive multitasking and physically with the need for quick reflexes and precise execution. For traders who can’t meet those requirements, the strategy would not perform well.

Scalping may be an extreme example due to its unique nature, but the same goes for less intense styles. For instance, maybe a trader wants to achieve earnings of $100 every month.

Position trading, a style that doesn’t require any execution and hinges on research, would be unsuitable because it’s a safer, more long-term-oriented strategy.

The same can be applied to any style, meaning neither is inherently the most successful. How traders mostly find success instead is by figuring out what suits them and maintaining consistency. This article will be devoted to helping traders go through that process. 

The three major trading styles

While delving deep into trading tactics isn’t the point of this article, introducing the three broadest trading types may give traders some guidance on how to start figuring out their personal regimen.

Three trading styles pertain to how quickly traders open and close their positions. Generally, these three categories are accepted:

• Day trading – Within a day
• Swing trading – Within a few days/a week
• Position trading – For longer periods of time

Each of these strategies has a long list of sub-strategies, but for completely new traders, figuring out where they stand time-wise is a great start.

Traders can also somewhat intuitively match their personalities and goals to these styles. Traders who want more immediate results and a more active trading regimen will default to day trading styles.

Calmer traders, who want to be less involved in trading and want to just gradually increase their capital, are more likely to lean towards position trading. Swing trading, naturally, is somewhere in the middle.

This can be used as a starting point for finding a more specific trading tactic within these three categories. As traders get more experienced, however, they may find that none of the tactics suits them perfectly, or that they like more than one. Of course, once they’ve honed their market steel, it’s entirely fine to modify and blend these tactics into a personal trading plan.

Experimentation

While trading tactics may be a good way to find a starting point, things sometimes change when traders enter markets. Let’s take, for example, an aspiring trader who happens to like high-intensity video games like first-person shooters.

Intuitively, they may feel drawn to day trading, particularly its faster sub-types like scalping. But the pressure of trading may be too much for them, and it may not be as engaging as their hobby.

The point is that sometimes the right trading style for each individual may not match what their out of trading interests imply. That’s why experimentation is an important step in crafting a consistent, operational trading routine.

This may sound like a concerning process, since it involves trial and error, and the error may mean losing money. Luckily, there’s a simple workaround in demo accounts for online brokers. Traders can use these to try a tactic with virtual funds and see how it feels without putting down actual capital.

It’s smart to try out different tactics, even ones that may not seem like a personality match initially. At worst, traders can write them off and take one step towards finding one they do like. At best, they surprise themselves with an option they wouldn’t otherwise consider.

However, the work doesn’t end with finding a suitable trading tactic. To achieve consistency, traders need to put in a bit of extra work.

Trading schedule

Consistency is the best way to improve at almost any skill. For trading specifically, the first step towards being consistent is having a trading schedule.

Traders, especially those who don’t trade full-time, often have busy lives outside of the markets. Jobs, kids, personal lives, and other obligations commonly cause irregular trading patterns.

So a trader may have a busy Monday to Thursday, and then have a bunch of free time on Friday, and decide to spend five hours trading to make up for what they’ve missed.

This may work out, but in general, it is not a good way to improve at trading. Creating a schedule that works with other daily obligations is much more efficient and will lead to deeper market understanding in most cases.

There are two things that are important here. The first is being realistic. If a trader has a busy life, they likely won’t be able to devote two or three hours each day to trading without either compromising other things or burning out. Everyone wants to get better quickly, but the way to do that isn’t by overexerting oneself.

Consistent sessions, even if they only last 15 minutes or half an hour, are the way to go. Of course, on some days, there will be more or less time, and it’s entirely fine to go longer or skip a day occasionally. The important thing is to leave some predetermined time for trading, preferably when traders are well-rested and focused.

The other important thing to consider is market times. Specific assets can become less active or completely inactive during certain periods. As such, it’s important for traders to take trading hours into consideration and find assets that match the times that they can trade.

Results journal

Lastly, to remain consistent, traders need to be true about their results. Sometimes, things may feel like they are working out when they actually aren’t. Keeping a trading journal may help traders iron out errors in their routine and help them grow over time.

This can be done manually, by writing in a notebook. Alternatively, many brokerages offer account history tools that can be used to measure performance. Traders should be sure to check these, as consistency needs quality as well. If they are doing something wrong consistently, that’s only stunting their potential.

A results journal may also help indicate when it’s time for a change in direction. For instance, a tactic may feel good to traders, but yield poor results. And while this may be fine to some, for traders who want to increase profits, it may mean they should slowly transition to something else.

Conclusion

To answer the titular question, the most successful trading style is when traders find a way to fit trading into their lifestyle consistently and gradually improve their routine. The process of achieving that can be long, tedious, and rough around the edges at times, but can also be well worth it if done right.

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.