What is the best investment style for you? Discover the most common types of trading

When you decide to venture into the financial markets, one of the most important decisions is choosing the right approach. Not all traders have the same profile, nor do all markets respond equally to the same tactics. Before opening your first position, you need to understand that there are different types of trading and which one truly fits your personal situation.

▶ The four main styles of operation in the markets

In the world of active investing, traders fundamentally use four different approaches. Each has unique characteristics that make it more suitable for certain investor profiles. Let’s analyze each in detail.

① Ultra-fast operations: Scalping

This is the fastest style of trading. Positions are held for just a few seconds or minutes, sometimes less than it takes to blink.

How does it work? The trader exploits small differences between entry and exit prices, capturing microscopic market movements. In cryptocurrencies like ETH, for example, the price can vary up to 0.66% in just three minutes. These small changes are the main target.

Because each individual profit is small, scalpers need to repeat the operation dozens of times in a single session to accumulate significant gains. If leverage is used, returns increase, but so do the risks of loss, which multiply considerably.

Who should try it? Only professional traders with high concentration, quick reflexes, and proven experience. If you work full-time or are just starting out, this is not your option. It requires being glued to the screen all the time, analyzing every price candle, every market tick.

② Same-day trading: Day Trading

Unlike the previous, here trades can last hours but never extend beyond market close. Investors close all their positions before the day ends, without holding anything overnight.

Main features are:

• Greater time flexibility than scalping (you can make more considered decisions)
• Focuses on instruments with high volatility and liquidity
• Requires technical analysis and constant price monitoring
• Works well in forex, cryptocurrencies, and CFDs

Ideal trader profile: Someone who can dedicate several hours daily without distractions, understands how short-term markets work, and is willing to assume moderate risks. We recommend using automatic stop-loss orders to limit potential losses.

If you have a traditional 8-hour job, this method is also not realistic for you. You need real available time.

③ Fluctuation trading: Swing Trading

Here, the timeframe expands significantly. Positions can last from a few days to several weeks. The trader benefits from broad price movements but without committing to hold them for years.

The essence of swing trading: Identify natural cycles where the price rises for several days, then falls, and the pattern repeats. The swing trader tries to capture these undulating movements without obsessing over the long-term value of the instrument.

For example, if you observe a currency pair like NZD/USD, you’ll see it has constant and significant fluctuations. This type of instrument is perfect for applying swing trading. The trader enters the bullish wave, benefits from the movement, and exits without waiting for the next bearish cycle.

Why is it ideal for beginners? Because it doesn’t require constantly monitoring markets. Operating costs are lower than scalping or day trading. It gives you space to think, review charts calmly, and plan better.

There is risk, but it is more manageable. Predictions are not always correct, so you need to accept some errors as a natural part of the process.

④ Long-term investing: Position Trading

This is the opposite of scalping. Positions can be held from several days to several years, depending on how the market evolves.

The thinking behind this approach: The trader conducts in-depth long-term market analysis, identifies persistent trends, and patiently waits for them to fully develop.

Take the example of Amazon stocks. An investor who fundamentally analyzed the company could have bought shares on January 1, 2014, at $18.21. If they had held until January 1, 2021, they would be valued at $159.03. That represents a gain of +140.82%.

However, this does not happen automatically. It requires the trader to resist the temptation to sell during temporary panic, to keep faith in their analysis even when short-term fluctuations seem disastrous.

Who is prepared for this: Patient investors who do not need to see weekly gains, who understand fundamental and technical analysis, and who can sleep peacefully knowing they have money exposed to the market for years.

▶ Comparison: Understanding the key differences

Each style has a completely different profile. Here are the most relevant aspects:

▶ How to choose your strategy: A practical guide

Before deciding, you should honestly evaluate several factors:

1. Your real available time

If you are a professional trader, you can experiment with any method. But if you work 8 hours daily in another job, forget scalping and day trading. Both require active presence during specific market hours. Swing trading or position trading are much more realistic for someone with work or family responsibilities.

2. The type of market you want to operate

Not all financial instruments work the same. A stock with a clear upward trend, like Amazon between 2014 and 2021, is perfect for position trading. But a volatile currency pair like NZD/USD, which fluctuates constantly due to economic factors in New Zealand (a major dairy exporter), is better suited for swing trading.

Your choice of instrument and your strategy should align. If you try scalping in a market without volatility, you’ll lose money on commissions without real gains.

3. Your level of technical and fundamental knowledge

Do you understand how to read charts? Do you know how to analyze financial statements? Do you understand how leverage works? The less experience you have, the more you should move to the right in the table (towards position trading). The more you master technical analysis, the more freedom you have to try more active methods.

4. Your risk tolerance and emotional management

Scalping and day trading can cause large losses quickly, especially with leverage. If seeing your account drop 10% in minutes paralyzes you emotionally, these methods are not for you. Position trading allows better processing of fluctuations because you have time to breathe between decisions.

▶ Critical warnings for new traders

⚠️ Short-term trading types (scalping and day trading) are dangerous for beginners for several reasons:

• Require advanced market knowledge
• Commissions and spreads quickly erode small gains
• Errors multiply when trading frequently
• Leverage amplifies both gains and losses

Our recommendation: If you’re just starting, practice with swing trading or position trading. Learn to manage risk using stop-loss orders. Don’t try to capture every market move. The best traders are patient, not the most active.

Remember that although trading types offer different approaches, none guarantees profits. Unexpected market changes require you to constantly adjust your strategy. Success comes from a combination of preparation, discipline, and adaptability, not just choosing the right method.