Types of Stock Trading

In this section we'll go over four types of stock trading that are based on specific trading time frames.

Before choosing between one of the following types, you must consider the amount of time you have available to commit; the specific time frame you have available to trade; and your personality type.

In addition, many people try out different types to see what they like and/or do a combination of types based on different portfolios.

The following types of trading can be categorized as either Long Term Investing or Short Term Investing/Trading.


  • Scalping involves stock trading that seeks to profit from quick moves in stock prices, usually seconds or minutes. Most of these moves occur in the morning hours, so a scalper must be available to trade during this time period without distractions.

    To be a successful scalper you must have a strict trading plan, including tight stop losses that cannot be broken. If your emotions keep you from getting out of a losing trade, scalping is not for you.

    Read more about Scalping on my other page here,
    and on my Scalping the Market Using BAC example page.

Day Trading

  • Day Trading involves stock trading that seeks to profit from stock price movements that occur during a single day. Day Traders do not hold positions overnight.

    Day Trading is commonly used based on microeconomic news that becomes available such as retail sales reports or company earnings news. Strict stop losses must also be used to prevent greater losses than expected to be successful.

    A problem that occurs with Scalping or Day Trading is that once you have a profit on a trade, it is common to leave it alone and expect it to keep going.

    What usually winds up happening is that the trade reverses and you wind up losing money. Partial or full profits must be taken as soon as they come while Scalping or Day Trading.

  • Read more about Day Trading stocks here, on an additional page on this topic.

Swing Trading

  • Swing Trading involves stock trading that seeks to profit from stock price movements that occur over several days or months at a time. This type of trading is a little easier on the blood pressure than Scalping or Day Trading.

    Swing Trading involves using technical analysis and/or fundamental analysis to forecast future price movements. Swing Trading is much better suited for someone who only has time to do research in the evenings or a small part of the day.

    Wider stop losses are used along with smaller amounts of money risked. It is much easier to take advantage of letting your winners ride while Swing Trading as compared to Scalping or Day Trading.

Long Term Buy and Hold Investing

  • Long Term Buy and Hold Investing involves stock trading or investing for someone who is willing to wait months or years for a potential profit.

    Typically this style of investing involves looking for undervalued companies; improperly valued companies; buying stocks based on macroeconomic outlooks; and people who don't want to watch their investments daily- as compared to Scalping, Day Trading and Swing Trading which all require closely monitoring any positions.

    There is the least amount of stress in this type of trading, although there is still stress. When the stock market is in a bear market, whether short term or long term, this type of investing is just as stressful to the Long Term Investor as any other type.

    Being a Long Term Investor also involves the least amount of time involved. There is no staring at computer monitors and watching every news flash from other companies that can affect the short term outlook of your position.

To briefly summarize:

  • Scalping is for nerves of steel and someone who has plenty of time- at least in the morning hours when most of the action is.
  • Day Trading is for someone who still has plenty of time on their hands, has a little more patience but is not willing to risk holding their positions overnight.
  • Swing Trading is for someone who is confident in doing their own technical analysis and fundamental analysis, allowing themselves time in the evening or part of the day to make decisions and is willing to wait days or weeks for results.
  • Long Term Buy and Hold Investing is for someone who is comfortable with broader views of the economy and is willing to wait months or years for a good return on their investment.

To be successful at any particular style, you must be willing to take the time to learn; understand the style that best fits you; and have a good trading plan. Remember that when you are involved in stock trading, no type of trading will matter if you don't stick to your plan.

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