Are you a scalper, day trader, swing trader, or event-driven trader? By taking our trader style quiz below – and answering the questions honestly – we'll let you know which trading style suits your personality and goals best.
What are the types of trading?
There are many different styles of trading that you can use to trade the markets. The main types of trading – or trading styles – include scalping, day trading, swing trading, position trading, event-driven trading, and algorithmic trading.
The best strategy is not necessarily trying out each style; it depends more on your own personal strengths, what kind of timeframe works best for you regarding how much risk exposure you want at any given moment, as well as emotional factors like patience levels. The key to finding the right strategy for you is understanding your trading personality.
We don’t want to spoil the surprise of your result, but each trading style has a distinct set of attributes that you might already have. Do you enjoy a fast-paced environment, or do you prefer things to be more reasoned and considered? Would technology excite your interest or would it bore the pants off of you with its lack of excitement?
Find out which trading strategies might fit best for YOU by taking our trading style quiz.
Day traders speculate on intraday market movements, placing multiple trades within a single day. They do this to take advantage of short-term price movements, which they believe will yield them profits. One benefit that comes with being a day trader is the elimination of overnight funding costs, as well as slippage on market open following the next business day because all transactions happen during one session only - therefore there's no need for additional action or input at any other time throughout each 24 hour period.
Day trading takes a lot of time and attention, but it's possible to make the most out of short-term opportunities on any given day. To do so you'll need a strict plan for taking profits or cutting losses as soon as they arise since trades can last anywhere from a few minutes to a few hours.
Interested in day trading? Here are a few day trading tips and strategies to help get you started.
Scalpers and day traders are similar in that they both engage in intraday trading. However, their strategies differ in potentially profiting from frequent trades each day. While traditional day traders place fewer trades with larger profit targets within one session, a scalper's strategy entails making numerous small-profit transactions throughout the course of a single trading session. Scalpers look to profit from rapid price movements by using a fast-paced strategy to move in and out of a high number of trades each day to accumulate small profits over time. Trades can range from as short as a few seconds to five minutes.
Because scalping has a short timeframe, it is ideal for traders who are well-equipped to constantly monitor the markets and act fast when they see opportunities. To be successful in this strategy requires time management skills as well as high levels of concentration so that one can move quickly between positions.
If you’re a scalper who loves to get in and out of the market quickly, consider trading five-minute binary options.
Swing traders keep an eye out for market trends that influence short-to-medium-term volatility. Like scalpers and day traders, they have an active approach to trading. The fundamental difference with swing trading is in the length of the trading sessions. Unlike their day trading and scalping counterparts, swing traders can hold positions for a couple of days, a few weeks, or even months!
Swing traders use both technical and fundamental chart analysis to spot possible trends, act on them, and maintain a position until gains from the anticipated trend have materialized. These trades are usually larger in size compared to smaller positions traded by day traders or scalpers as swing traders seek fewer yet larger profits than their counterparts.
Are you more of a day trader or swing trader? Learn about the pros and cons of day trading vs. swing trading.
Event-driven traders seek to get the most from price movements triggered by major corporate, economic, and political events. These can include corporate mergers or restructurings; economic disasters like the 2008 financial crisis; pandemics such as Covid-19; and political elections/scandals.
Regardless of the execution, event-driven strategies are intended for taking advantage of volatility that often occurs shortly before, during, or after these kinds of events happen. Objective decision-making skills along with access to up-to-date data is crucial in order to capture event-driven opportunities.
Interested in event-driven trading? Check out the key economic indicators for traders, such as the unemployment rate and GDP. As a bonus, you can trade these event contracts plus more of our economic event markets!
Trader types summarized
|Type of trader
|Skimming regular small profits
|Capitalizing on intraday volatility
|Utilizing current market trends
|Profiting from long-term market movements
|No specific timeframe
|Capturing economic and political volatility
|No specific timeframe
|Automated trading based on specified rules
Have you ever wondered what kind of trader you are? Nadex has your answer. You can take our trading style quiz to determine whether or not you’re a day trader, scalper, swing trader, or event-driven trader.
If you’re just starting out in your career of trading, the resources available at Nadex can help put you on the right path. Check out our guide to day trading, join one of our daily live streams on YouTube, or tune in to our weekly webinars to get insights into the world of trading and learn how to develop your own trading strategy. These sessions are run by experienced traders who discuss potential opportunities and strategies for new traders like you!
You can also download our free guide, The trade cycle for short-term options trading, to learn the process many traders use to stick to their plan and avoid common pitfalls.
Once you’ve identified your trading style, practice trading risk-free using our demo account.
What are the main categories of traders?
The main categories of traders are:
Day traders who engage in intraday trading to profit from short-term market movements. Trades last from several minutes to a few hours.
Scalpers who trade frequently to make small profits from short-term, rapid price movements on a daily basis.
Swing traders look for trends and take short-to-medium-term positions to take advantage of these price swings.
Event-driven traders look out for major political, corporate, and economic events that lead to market volatility.
What type of trading is best for beginners?
The best trading strategy for beginners comes down to personality, the amount of time available to trade, and risk appetite. What works for one beginner trader may not work for another. The key is to find a strategy that works for your trading style and objectives.
Due to its simplicity, the most popular strategy for beginners is day trading. Read our helpful guide to day trading and get started.
What is the riskiest type of trading?
The riskiest type of trading is position trading. The long-term nature of this strategy means traders are exposed to risk for longer periods of time. To minimize risk, position traders need to have enough discipline to stick to their trading plan, especially when exiting positions to take profit or minimize losses.
Which type of trading is most profitable?
The most profitable type of trading tends to be position trading. While position traders hold fewer trades for longer, these tend to be of higher value, making this trading style potentially more profitable than most. It’s important to keep in mind that holding relatively large position sizes over longer periods of time also increases one’s exposure to risk.
What is the difference between a swing trader and a day trader?
The difference between a swing trader and a day trader lies in the timeframe. Day traders make numerous short-term trades and profit from fast-paced price movements, all within a single trading day. Swing traders seek to profit from short-to-medium-term price movements. Their trades are less frequent and based on swings in market conditions which can last anything from a few days to a few weeks. Learn about the pros and cons of day trading vs. swing trading.