What is the Most Profitable Strategy? Scalping, Swing-Trading or Trend Trading?

What are the main types of traders?

If you have been operating in the financial markets for a while, you will have noticed the great versatility available when opening and closing oppositions.

You probably already know different strategies to obtain the highest returns with the minimum of possible risks and you will also have been able to see first-hand that what works for others does not always work well for you.

If, on the other hand, you have just landed in the exciting world of investing and trading, we warn you that there is no single valid approach when it comes to making money with your operations.

We are going to talk about all this today on eToro so that you know all the options you have at your fingertips.

We already anticipate that they are varied and for all tastes.

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Traders and investors, are they the same thing?

There are many who use trader and investor as synonymous words that can be used interchangeably.

But the truth is that they refer to two activities that are not exactly the same.

Although traders and investors participate in the same markets, they do not do it in the same way.

That is, the definition of trading and investment is not the same.

While a trader generally maintains a considerable level of participation in the markets, with more or less frequent entries and exits, an investor tends to make a purchase and forget about it for a long period of time that can last several years and even entire decades.

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Types of strategies that are classified by time frames

Scalping

Scalping is a strategy of trading in which the trader focuses on open and close operations in a short time frame, with a short path between the entry price and output.

We are talking, then, of a very short-term operation, in which an operation can remain open for just a few seconds or minutes.

A scalper can open a buy position and hold it for one minute and immediately close it thereafter.

It is a trading strategy aimed primarily at active traders who want to make immediate decisions and jump into the water without hesitation.

We are also talking about a trading style that requires great concentration.

Therefore, it is not recommended for people who have a tendency to be distracted.

It should be noted that the figure of the scalper is more threatened than ever today by the irruption of automatic high-frequency trading.

Against the sophisticated automatic trading systems of the large investment banks, human scalpers have a very difficult time making profits on a constant basis.

Therefore, it is perhaps not the most recommended option, especially when starting out in the competitive world of trading.

Arguably the scalping pool is teeming with hungry sharks.

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The difference between the scalper and the swing trader

There are those who confuse the figure of the scalper with that of the swing trader, but the truth is that they do not have much to do with it.

While the first is committed to concatenating entries and exits in the market in periods that can range from seconds to minutes, the second operates in a time frame of more than one day.

The figure of the swing trader is one of the safest for less-experienced traders.

On the one hand, it allows us to distance ourselves from the market by avoiding obsessing over its movements.

And on the other hand, we are still able to benefit from volatilities.

While we may not be able to get the returns available in intraday trading that we are going to talk about next, we can certainly be very successful with a swing trading approach.

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Intraday trading

Halfway between the scalper and the swing trader, we find the figure of the day trader or intraday trader.

This operating style is committed to opening and closing operations within the same trading session, thus avoiding the risks of leaving operations open at night.

Thus, at the end of each day, traders close their open positions and record their profits and losses.

The key here is in money management and in the calculation of inflows and outflows.

Day trading is one of the most popular trading strategies on platforms such as eToro, as it allows for balance by being somewhere in the middle compared to other trading styles.

In addition, it allows us to take advantage of volatility, which will ultimately allow us to obtain better returns if we know how to play our cards well.

And it is that few operations manage to exploit in their favor so well the benefits of compound interest.

It is an aggressive trading style that seeks to take advantage of all the opportunities that the markets offer every day.

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Long-term investment

At the opposite pole to scalping, we find long-term or long-term investment, also known among traders as positional.

It reflects a totally different time preference than scalpers.

In this style of trading, the operator opens a position and holds it for more or less prolonged periods, which can be several years.

In this style, traditional investments are normally framed, although they can also be considered trading.

Proponents of this style highlight as the main advantages of this strategy the less need for detailed monitoring of the evolution of technical charts and the possibility of catching very large trend movements.

In return, it is required to weather the storms of the bear markets without batting an eye.

This style is recommended for people with a cold mind, who will not rush to pulse the sell-at-first-trade button and they have the ability to ignore the small short-term fluctuations unavoidable in any financial market.

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Types of strategies that are not classified by time frames

Although some of the main types of trading stand out for following more or less fixed time periods, the truth is that there are also trading styles that are governed by other parameters.

Here we briefly explain some of the more popular trades that are not based on specific time horizons.

Trend trading

In all time horizons, we can apply an operating style based on following the trend.

That is, we will operate not according to fixed time frames, but according to the development and maintenance of a given trend (bullish or bearish).

In order to put this type of trading into practice, it is necessary to have a minimum knowledge of technical analysis that allows us to identify trends and evaluate their health.

For example, a very common strategy adopted by trend traders is to buy an asset when the 50-period moving average crosses the 200-period moving average and sell it when the 200-period moving average crosses the 50-period lower.

In the periods of laterality, that is, without a defined trend, the trend traders remain without open positions.

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Social trading

Social trading is one of the latest revolutions in investment trading.

Following the development of social media, a new trend has emerged in the investment world, known as social trading.

It is a new style of trading that is based on the replication of the decisions made by other operators.

The main advantage is that with this approach it is no longer necessary to learn fundamental or technical analysis to develop a successful trading strategy.

It will be enough to limit yourself to copying what traders who have a good historical record of profits behind them do.

If you want to opt for this new operating model, it has at its disposal the innovative solution of trading social offered by eToro: copy other investors is no longer a science fiction thing!

This novel style of trading offers unique advantages, unthinkable until recently.

The main one is that, for more and more traders, social trading has become a decision tool in its own right, at the same level as technical analysis or fundamental analysis.

And thanks to the creation of classification filters traders like eToro offers novice traders can look at the ranking of the best traders to find out which copy should.

This way, they can also diversify their money among several veteran traders, to increase the possibility of obtaining profits and reduce the risk of replicating the operations of a single trader that is governed by a single strategy.

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Value Investing

Value investing, also known as value investing, is an investment style that requires good analytical skills.

Some investors like Warren Buffet have been enriched by this style of investment, which consists mainly of buying assets that have a solid fundamental analysis, without taking into account so much the technical analysis, but the intrinsic value that they offer us.

For this, we will go, for example, to the financial statements of a company to try to find out if it is in a situation of overbought or oversold.

Sometimes we will find discrepancies and thus we can open operations with possibilities of success.

However, we may have to wait several years before traders realize through technical analysis of the real value of the company.

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Growth Investing

In contrast to investment in value or value investing, we find growth investment or growth investing.

It is mainly based on investing in those assets that we believe will offer us the highest possible return on our investment.

We speak of an offensive approach since we do not look so much at the solidity of a company, but at its potential to offer us succulent returns in the short and medium-term.

For this, it is necessary to bet on assets that are not already in the maturing phase, since we would not be able to obtain the returns we are looking for.

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What is the Best and Profitable strategy?

Deciding on one strategy or another is something very personal.

The advice for investing in the short and long term are not the same and the psychology of the different styles is not the same.

Precisely in all this lies the appeal of trading: there is a style for each trader profile and by exploring all of them you will discover which is the one that best suits your personal characteristics.

In the end, it cannot be said that one or the other strategy is better or worse since what works for one operator may not work for another.

Trial and error, together with good management of the risk assumed in each operation, will be your best allies when it comes to finding the ideal trading style for you, as suggested by the latest advances in microfinance.

It is important, of course, that once you decide on one style of trading, you give it a reasonable time before jumping to another.

Many novice traders make the mistake of alternating one style over another without discipline trying to pursue results that often turn into real headaches.

In short, there are many different types of trading and everyone is welcome at eToro.

Whether you prefer short time frames or longer, our platform offers you all the possibilities to explore your trading style: scalper, swing trader, day trader, long-term trader, trend trader, social trader, investor value and investment growth.

Remember that your success will not depend so much on magic formulas but on your adaptation to a time frame and a trading style that suits your experience and your personality.

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