Your trading style is a critical aspect of your journey on the eToro platform, as it dictates your approach to buying and selling assets. Trading style is influenced by factors such as investment objectives, available capital, time commitment, risk tolerance, and desired returns. To help you find your ideal trading style on eToro, we’ve compiled this comprehensive guide, filled with tips and information on popular styles and methods. Let’s dive in!
Key Takeaways
βTrading style is crucial to your success on eToro and is influenced by factors such as investment objectives, capital, time commitment, and risk tolerance. |
βPopular trading styles include day trading, scalping, swing trading, long-term investing, and copy trading. |
βChoosing the right trading style involves identifying your investment horizon, preferred assets, and risk appetite. |
βUnderstanding the pros and cons of each trading style can help you make an informed decision. |
How to Choose Your Trading Style
Table of content
- How to Choose Your Trading Style
- 1. What is your investment horizon? β³
- 2. What type of assets will you trade? π
- Common Trading Styles Explained π
- 1. Day Trading
- 2. Scalping β‘οΈ (Note: Scalping is not allowed on the eToro platform!)
- 3. Swing Trading ποΈββοΈ
- 4. Long-term Investing π
- 5. Copy Trading π
- eToro Trading Education: β’ Learn more about eToro Tradingπ
- Trading Patterns:
- Portfolio Management:
- Trading Platform and Security:
- Fundamental Analysis:
- GENERAL RISK WARNING
- Author & Expert Trader - Financial Analyst :
To select the most suitable trading style for you, it’s essential to answer the following questions:
1. What is your investment horizon? β³
Do you prefer long-term investments or short-term trading opportunities, such as day trading? Long-term investments require patience and a willingness to tie up capital for extended periods, while short-term trading demands time, research, monitoring, and higher risk-taking.
2. What type of assets will you trade? π
The volatility and liquidity of assets you are trading may also indicate the style best suited to profit off these assets. Highly volatile liquid assets tend to be more suitable for short-term trading and can provide a return for those who know how to trade them, while less risky assets may be more suitable for long-term. At the end however, it boils down to the way in which you want to profit off these various securities.
- Stocks: stock prices are influenced by quite many factors, both company specific and the ones resulting from various surrounding economic conditions. Depending on your own preferences and choice of stocks they can be used for both day trading and long term investments.
- Cryptocurrencies and cryptoassets : the popularity of cryptoassets keeps increasing despite their relative volatility and risks, but they remain quite a controversial market. Their return and suitability for long-term investments largely depend on how widely they are used; bitcoin for example, is one of the oldest cryptoassets and is seen as a long-term investment by many, while newer assets are more volatile and quite risky for that purpose.
- Commodities: some commodities like gold are suited for long-term investments, while other more volatile and very liquid ones like crude oil tend to undergo many price changes in a day; at the end, the choice boils down to your personal purpose of trading them.
- Currencies:Β Currencies market is the biggest traded financial market in the world in terms of volume. Currency pairs are quite suitable for day trading as they are relatively volatile and liquid.
- Indices and ETFs:Β Exchange traded funds are instruments made up of several assets blended together and traded on the market like a single asset just like any stock. These funds usually adhere to a specific market strategy or track an index. Usually index funds are used for longer term investments as the funds they track are passively managed; ETF’s are used for both short-term trading because of their liquidity but they can also be held over a long time period.
Common Trading Styles Explained π
Based on the duration of open positions and the speed of profit-taking, here are the most common trading styles:
1. Day Trading
Day trading, also known as intraday trading, involves buying and selling assets within a single day. Liquid stocks and currencies are popular choices for day trading, but it can be done in any market. Day trading strategies include scalping, news trading, high-frequency trading, and range trading. This style can be risky and may result in substantial losses for traders without adequate market knowledge and analytical skills.
2. Scalping β‘οΈ (Note: Scalping is not allowed on the eToro platform!)
Scalping traders sucess from small price movements in numerous trades rather than focusing on a few large single trades. This fast-paced, short-term style capitalizes on price misalignments generated by bid-ask spreads and order flows. Scalping requires discipline, as traders must close their positions after achieving desired success or reaching maximum loss levels. It also demands expertise in leverage, stop-loss, and entry/exit points.
3. Swing Trading ποΈββοΈ
Swing traders aim to make success from an asset’s volatility at the end of a price trend, focusing on short to medium-term returns. Positions in swing trading typically last from a few days to several weeks. Traders employ a combination of technical and fundamental analysis to identify potential future price movements and capitalize on anticipated upswings or downswings. This style is known for its flexibility and adaptability to market conditions.
4. Long-term Investing π
Long-term investing, or position trading, revolves around holding assets for an extended period, sometimes for years, with the aim of following a trend. Position traders are not concerned with short-term market fluctuations and instead focus on an asset’s long-term performance. This style often relies on fundamental analysis, but technical analysis can be employed to identify trends. Long-term investing requires patience, acceptance of low liquidity, and a willingness to tie up assets for a specific duration.
5. Copy Trading π
If you’re struggling to find a suitable trading style or strategy, consider copying a professional trader to generate returns. Copy trading saves time and effort by allowing you to follow a skilled trader’s activities. You can choose a trader whose style, asset preferences, and investment horizon align with your goals from a wide selection available on the platform.
Now that you have a clearer understanding of various trading styles, you can confidently choose the one that best suits your preferences and objectives. Remember, patience is key in the world of trading, and your ability to adapt and learn will go a long way in ensuring your success. Good luck! π
eToro Trading Education: β’ Learn more about eToro Tradingπ
Trading Patterns:
Portfolio Management:
Trading Platform and Security:
Fundamental Analysis:
- Fundamental Analysis on eToro
- Mastering Fundamental Analysis in Forex Trading
- What is Fundamental Analysis?
- Top 10 Fundamental Analysis Metrics
- How to Do Fundamental Analysis
- Financial Statements for Fundamental Analysis
- Earnings Per Share (EPS)
- Dividend Yields in Fundamental Analysis
- Calculating Intrinsic Value
- The Role of P/E Ratios
- The Impact of Interest Rates
- Fundamental Analysis to Pick Stocks
- Pros and Cons of Fundamental Analysis
- Fundamental Analysis to Successful Investment