A Trading Style is a pre-defined set of rules and parameters for how you will trade any market or instrument. Whether you trade stocks, options, FOREX, or derivatives, you need to choose the appropriate trading style for your goals, experience, and capital base.
A Trading Style is NOT a strategy. Your trading style will define what strategies you should be using based on current Market Conditions.
Most traders simply hear or read about a certain trading style, such as “daytrading” and immediately assume that's the trading style they should learn and use. A Trading Style should be carefully researched and your decision should be based on many factors:
The single most common mistake traders make is to rush to trade after a weekend seminar,especially if they have never traded in the financial markets. Novice traders often jump into trading a complex, high risk market such as FOREX, Futures, or Commodities,when they have only spent a few hours listening to someone speak about the trading platform, or have read a few articles on the internet. What happens is the trader may have a couple of lucky trades then begins to lose money. Then the trader blames the markets, market makers, and anyone nearby.
Yes, most people can make extra money from one of more of the financial markets, but you must start by understanding the basics of ALL trading platforms, and that is: how are you going to trade, or what is your trading style.
Another example is Options Trading. Most options traders are swing trading their positions, when the basic premise of options is a position style hold. But even beyond that mistake, most options traders do not realize that they can exercise the option contract to make even higher profits in some instances. By not understanding what trading styles they should be using, the option trader severely limites their profit potential, ROI, and increases their risk of losses.
Still other traders learn a weekend seminar strategy and Monday morning start trying to trade with that strategy only to lose money and confidence. All strategies work, but each strategy, whether it is for stock trading, options, Forex, bonds, etc, was written and developed for specific Market Conditions. If you use a strategy in the wrong Market Conditions it will fail to perform as you expect it to and you will be disappointed in the results.
Trading Styles help traders stay on track, give them a set of rules and parameters to clarify what trades they should enter and what trades they should avoid. Trading Styles help develop that elusive “discipline” that every trader reads and hears about but never seems to achieve. Trading Styles simplify trading, streamline, the selection process, build confidence, and increase profits, while providing a method for consistent success no matter what trading instrument you choose to trade.
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