Types Of Technical Trading

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  • 18 Apr 2023

Technical trading in share market involves technical analysis to scout trading opportunities across price trends and patterns which are observed in charts.

Here are five different types of technical trading:

1. Micro Trading (Scalping)

A scalper makes several micro trades on a daily basis. On each micro trade, the trader would aspire to make a tiny profit. These traders could last from a few seconds to a few minutes. Traders could place anywhere between 10 and 100 trades in a single day.

2. Intraday

Intraday trading involves closing one’s trading position on the same day. Therefore a trader would buy and sell shares on the same day without holding his positions overnight. As compared to scalping, an Intraday trade can last from a few minutes to a few hours. For instance, a trader purchases 100 shares of a stock at Rs 400 by 10 am and it reaches Rs 420 by 12 pm. If the trader decides to sell it off by then, then it becomes an Intraday trade. Intraday share trading is usually done with stocks which are volatile.

Day trading is perceived and even promoted as a glamorous profession which can make a trader wealthy almost overnight. However, one needs to understand that successful intraday traders have tremendous experience and most importantly are experts at managing risk.

3. Momentum Trading

A trader identifies a stock which is ‘breaking out’. Due to certain factors, a stock could gather momentum and its price could either rise or fall with high volumes. The timeline for a momentum trade could be from a few hours to several days. However, a momentum trade could quickly change direction. Therefore a skilled trader must be able to figure out when is this likely to happen and accordingly change the strategy.

4. Swing Trading

A swing trader tries to capture the short-term trend. Using swing trading, a trader tries to capture gains within one day to a week. Technical analysis is used by traders to identify stocks with short term price momentum. Swing traders aren’t interested in fundamentals or the intrinsic value of a stock. They only look out for price trends and patterns.

5. Position Trading

Position trading is the exact opposite of day trading. A position trader could take a position and maintain it for weeks or even months. A positional trader looks to anticipate whether the existing trend will prevail for much longer than momentum or swing trade. Although a position trader doesn’t trade frequently, that doesn’t diminish the profit potential. In fact, position trading is most appropriate for those who depend on a business or a full-time job for primary income.

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