Trading Styles Explained: Which One Fits Your Strategy?

Each trading style requires a different set of tools and features to implement. Identifying the right broker and trading platform for your chosen style is crucial to market success. Our broker review methodology analyses these criteria to help our readers trade with the right broker for the right style.

Below, we define the most popular trading styles and cover why and how traders use them. We also outline the broker and platform requirements needed to implement each style.

Casual Trading

A casual trader is typically a market beginner who does not use advanced strategies. Their interest in understanding how the market functions and determining whether they can successfully navigate it often supersedes the need to adhere to a specific trading style.

Casual traders often look at the market infrequently, perhaps before or after their main job. Most rely on trading research or ideas from their broker or other experts, as their knowledge of technical or fundamental analysis tends to be more limited.

Broker and Platform Must-Haves

• Demo account to practice trade execution and ideas
• Low minimum deposit to support small accounts
• Educational materials to build market knowledge
• Reliable customer support to have the broker’s support for any questions or issues
• User-friendly trading platform for efficient and straightforward trade execution
• Web platform and mobile app to access the market regularly, whenever you are situated

An excellent way for casual traders to get started is to use a demo trading account. These allow trading in a virtual environment. The simulated environment can help traders practice trading skills and ideas. Most brokers make it easy to start with a demo account first and then transition to a live account when more confident.

Social and Copy Trading

Social trading is a style in which individuals leverage other traders’ ideas. This process is automated in copy trading, which has seen a significant increase in services over the last few years.

In copy trading, a trader analyzes the performance data of various traders to determine whom to follow. Typically, these copy traders are beginners who lack the time or expertise to research and trade in the markets independently.

Social and Copy Trading Must-Haves

• Demo account to test the performance of strategy managers.
• Low minimum deposit to diversify capital across different types of strategy managers.
• No copy trading commission to ensure fees don’t eat into performance gains.
• Automated copy trading technology to automate the copying of trades instantly.
• Cloud-based copy trading platform that doesn’t have to be open all the time to copy trades.
• Detailed performance metrics to identify the best traders to copy.
• Risk management scoring to identify the safest traders to copy.

Explore our list of Best copy and social trading platforms.

Swing Trading

Swing trading is a trading style that involves holding trades for several days or weeks. The aim is to profit from the sustained up and down swings that develop across different markets. As swing trading involves more time and research, it is mainly suited to intermediate and advanced traders.

Swing traders use various technical indicators, such as the MACD, moving averages, stochastic oscillators, and others, to identify market swings. Some traders may incorporate fundamental analysis, such as economic news releases or company earnings data, to support their trading decisions.

Swing Trading Must-Haves

• Low swap fees to ensure overnight borrowing fees do not eat into performance gains.
• Trading calculator to calculate the cost of holding positions over several days.
• Wide variety of assets gives the best chance to identify and trade directional markets.
• Strong regulatory safeguards to protect against adverse moves in the market over the longer term.
• Range of indicators to perform technical analysis for identifying the best swing trades.
• Multiple order types for flexibility in building and managing multiple positions.
• Risk management tools, such as normal and guaranteed stop-loss orders, protect against overnight/weekend risks.

Check out Best brokers for swing trading.

Day Trading

Day trading involves holding trades for several minutes to several hours, and all trades are closed by the end of the same day they are opened. Day traders do not carry trades over to the next day but instead try to profit from movements within a single day. This focus requires a level of expertise, making it a style more suitable for advanced traders.

Day traders heavily rely on technical analysis indicators to identify the potential of intraday trends, momentum, and breakout moves. Due to the intensive time required to research and execute trades quickly, day traders often focus on a small selection of markets to find opportunities.

Day Trading Must-Haves

• Low spreads and commissions to ensure maximum profits from small movements in the market.
• High leverage to trade multiple positions at the same time.
• ECN/DMA accounts to trade with precise, transparent quotes from the interbank market
• Fast execution speed to ensure execution at exact price levels with little slippage
• Trade directly from charts for speed and efficiency.
• Multiple order types for flexibility in building and managing multiple positions.
• Risk management tools to assist in fast trade and risk management calculations.

Discover our selection of Best day trading brokers.

Scalping

Scalping involves holding trades for periods ranging from seconds to minutes, with the aim of profiting from numerous short-term movements throughout a trading day. This method requires rapid decision-making and execution, making it suitable for advanced and professional traders who possess high levels of discipline and focus.

Scalpers primarily rely on technical analysis indicators and market positioning data, such as Level II quotes, to support their decision-making. The extreme level of focus required by this style often leads scalpers to concentrate on just a few markets at a time and to leverage algorithm-based tools.

Scalping Must-Haves

• ECN/DMA trading account to ensure transparent, interbank market pricing with no broker intervention.
• Level II data to identify the market depth and if orders can be filled at specific price levels
• Ultra-fast trade execution to ensure execution at exact price levels.
• Zero requote policy to ensure orders are filled at exact price levels.
• Low spreads and commissions to ensure maximum profits from small movements in the market.
• One-click trading options to execute trades directly from the chart at exact price levels.
• VPS hosting for consistent uptime and the fastest trade execution.

Discover Best brokers dor scalping.

News Trading

News trading involves capitalizing on market price movements following a news release. These news items can include economic data (such as inflation and employment), fundamental analysis (like a country’s GDP), or event-driven themes (such as Brexit).

There are two approaches to news trading:

• Reactive News Trading: This method involves taking a trade after a news announcement. It requires sophisticated software to obtain real-time news and rapid reaction capabilities to execute trades. Reactive news trading requires specialized tools, such as a real-time news feed, the ability to analyze economic data swiftly, and ultra-fast reaction times. This style is mostly suited for algorithmic traders.
• Proactive News Trading: This approach involves building positions ahead of time in anticipation of a news event. For example, expecting a central bank to raise interest rates may lead a trader to buy the currency before the news breaks. Proactive news trading requires a deep understanding of economics and fundamental analysis. It is suitable for intermediate and advanced traders who may also depend on fundamental research and economic news analysis from a broker’s in-house analyst team.

News Trading Must-Haves

• Quality in-house research to provide detailed market insights and strategic analysis.
• Forecasting tools to predict market trends and enhance trading strategies.
• Fundamental tools like economic calendars and heatmaps are used to process information quickly.
• Real-time news to make more informed decisions and to trade from.
• VPS hosting for fast execution when trading off a news release.

Automated Trading

Automated trading involves using algorithms to identify and execute a trade. The algorithm has a list of code with user-inputted parameters that execute trades when certain conditions are met. While most algorithms are used for short-term trading, such as scalping and reactive news trading, they can also be used for other styles, such as day trading and swing trading.

Most automated traders have experience in programming languages such as C# or Python, which makes them suitable for advanced traders. Intermediate traders may leverage platforms that offer code-free automation, while beginners may purchase ready-to-use automated strategies.

Automated Trading Must-Haves

• ECN/DMA trading account to ensure transparent interbank market pricing for precise trade execution.
• API access for customized trading solutions.
• Competitive fees to maximize profits from automated trades.
• Zero requote policy to ensure orders are filled at exact price levels.
• No trading style restrictions to ensure high-frequency trading is possible.
• Robust automated platforms use specialized tools in platforms geared for auto trading like MT4, MT5, cTrader, Multicharts, and CQG.
• Code-free automated platforms for assistance in building automated trading strategies without coding knowledge.
• VPS hosting for consistent uptime and the fastest trade execution.

Explore the list of Best auto trading brokers.

Investing

Investing is a long-term trading style that involves holding assets for months to years, with a focus on steady growth and longer-term returns. Most financial market investors build their portfolios using stocks and ETFs.

Hedge funds, mutual funds, and pension fund managers have popularized the concept of investing. Although they may invest billions into their portfolios, this style is accessible even to beginners. Large companies, such as Apple, use stock splits to make the price of a single share cheaper and more accessible to retail investors.

Investing Must-Haves

• Real stock trading account to purchase and sell physical shares and ownership of companies.
• Access to global exchanges to diversify investments around the world.
• Low investing commissions to maximize profitability.
• Margin accounts allow US traders to trade real shares on margin.
• Fundamental tools like economic calendars and heatmaps help process information quickly.
• Direct pricing from the exchange for transparent pricing and volume data.

Conclusion

Identifying your trading style first is crucial in choosing the right broker. The bottom line is that there is no one-size-fits-all. As the brokerage industry is highly competitive, many brokers specialize in their products and services to cater to specific styles.

With over a decade of experience reviewing forex and CFD brokers, FXEmpire analysts evaluate dozens of factors to determine which brokers are best suited to specific trading styles. To find the right fit for your needs, explore our broker reviews and discover the one that matches your trading approach.