Trading Psychology

Trading Style

There are mainly three different trading approaches:

1. Trend trading (often long-term oriented)

2. Swing trading (often mid-term oriented)

3. Scalp trading (short term oriented)

Of course it is possible to trade in every of these fashions, but for starters this can be really difficult and it is better, in my opinion, to choose one of them. This is due to the fact, that they have very different characteristics, which I will elaborate on in the following.

Trend trading:

This approach is mostly longer-term oriented, although some of you might say, you can also follow a trend on the basis of a 30-minute chart. Of course, you can! But for me these short-term movements are more a directional bias than a real trend. Think of this: On a 30-minute chart you have identified a trend (higher lows). Switching to a 4-hour chart can then perhaps show you, that this is just a correction from the underlying trend. So for me “real” trend trading is more long-term oriented, starting with approximately 1-day until several weeks. This trading style should fit people which like to hit “big winners” and can afford to have many “smaller losers.” You see this is also some kind of philosophy question you have to ask yourself! Can you personally take many small losses in your account (because this is what it mostly takes) AND can you let your profits run? For me personally –especially in the beginning of my trading career – this was quite difficult! Constantly taking these small losses, even though overall you are profitable, can really get into your head, causing you to make wrong decisions. But if you can say for yourself, that you can handle this stress, trend trading is possibly one of the most rewarding trading techniques. The advantages are that it is quite easy to learn and to execute, and that it needs not that much actual time at a PC.

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