Being a “trader” is about as broad of a classification for a profession as saying you work in an office. In order to figure out whether the business of trading is something you are interested in, it is important to know the different types of opportunities available.
In the most literal sense, there are dozens to hundreds of different ways to trade across multiple markets. However, we have found that you do not need to find niche ways to trade in order to have considerable success – in fact, it is not advised for beginning traders. We go over four popular trading styles, and some tips to help you educate yourself about them and maximize your profits.
Best Trading Styles for Beginners
When people refer to trading styles, there are many variables to take into account. They include types of securities, whether you are bullish (positive) or bearish (negative) on the direction of them, and the time frame you are trading. We’ll get more into the specifics of all those soon, but for the time being, we’re going to highlight our trading styles to get you started as a new trader:
- Swing Trading:
One of the best ways to gain exposure to the market without doing multiple intraday trades is swing trading. This is where you buy a security at what you believe to be a strong point of support and look for it to run-up in the following days. You should always have a thesis for why a swing trade is going to occur, whether it’s the chart setup, news, or earnings. Swing trading doesn’t have to be as actively monitored, so it is a good way to break in for part-time traders looking to take their business to the next level.
- Momentum Day Trading:
This strategy has been much more prevalent in the volatile market we are experiencing presently, and we always encourage our community to be careful when using this strategy. However, if you can recognize various strong setups (such as bottomed charts, or increased volume in a hot sector), there will be stocks that run dozens or even hundreds over percentage in a one-day period. It is important to exercise profit taking here – trades like these are not long-term investments.
- Range Trading:
Otherwise known as range-bound trading, this is a style we love but does require a little bit more skill.. It works well across all security types and allows you to take trades without having to follow trends. In order to best learn range trading, you will need to master buying at support and selling at resistance. Doing this, has made prudent traders reliable money historically, so we recommend having this style available in your toolkit.
- Trend Trading:
Trading with the trend is like surfing with a wave or sailing with the wind or swimming with the current. In trading, a trend is simply the major direction price is moving, either up, down or sideways. A Trend Trade would look for shorting opportunities in a downtrend, buying opportunities in an uptrend and either no trade in the sideways market or “Buy Low, Short High” during a Sideways Trend.
Best Trading Tips for Beginners
In addition to learning trading styles, you must be mindful of the human element, you! The following tips can be applied from your first trade throughout the rest of your hopefully-prolific career:
- Manage your risk
- Don’t trade emotionally
- Treat trading like a business
- Keep a healthy lifestyle
- Start small
Manage Your Risk
Risk management in these terms means you should not be trading with money you can’t afford to lose, and allocating it properly when it is in action. Do not invest enormous portions of your working capital on trades, especially in the beginning when you are trying to develop strategies. We recommend 1% as a proper amount for each trade you take.
Do Not Trade Emotionally
It is tempting to try and ‘make up’ for a trade that didn’t work out the way you wanted; whether you lost money, or sold for small profit and the stock shot up right after, there is never any good in chasing. If you are confident in your approach, remain consistent, and don’t chase, you will profit over the long run.
Treat Trading Like a Business
There are plenty of gamblers in the market. Most of them do not make money, and the ones who do got lucky. Don’t be one of these traders; we emphasize education, planning, and a long-term approach to achieving financial freedom.
Keep a Healthy Lifestyle
Similarly to trading becoming a profession or source of income, you also want it to enable you to decrease stress and live a comfortable life. Thus, don’t let trading rob you of sleep, eating, or exercising. Always keep your physical and mental health in clear view, as your trading will also get worse if either of these is compromised.
There will always be another trade. We know that starting out it can be exciting to purchase securities that you think have great futures or could run – and they might. However, getting into a bad trade due to inexperience is one of the easiest ways to cripple your starting capital as a new trader. Thus, we recommend buying a few shares at a time and testing out potential trading strategies before committing an amount that is material.
There are plenty of other ways to work on your trading skill via consistent education. Mostly, we like to impart that the stock market is always changing, and learning from professionals with significant experience is one of the best ways to learn quickly with minimized risk.
Get to know Stock Trading at StockAbility™
At StockAbility™, we’ve helped new traders develop strategies for long-term success and financial freedom. We do this through advanced educational courses that are far more applicable than prevalent free content you’ll find. The reality is that trading is zero-sum and competitive, so learning from the pros is the best way to become one. If you’re looking to start trading and take the leap to afford yourself an avenue to a rewarding lifestyle, sign up for one of our free webinars today – the results could be literally life-changing.