Not sure where you stand in your trading journey?
If you're an intra day trader you most likely fall under 3 buckets of trading style. In this post I'll be covering what those 3 are by the end you should be able to understand who you are as a trader and where you should focus your trading efforts on to better refine your edge.
Each trading style has its give and takes but ultimately each trader will resonate with one more than the other due to varying reasons. The goal is to be able to unravel the faculties of each style and be well rounded given the environment of the markets are always changing with levels of volatility .
1. Scalp Trader -
The edge in this strategy is found in very short term fluctuations in price that are more steadily predictable as you are working within a defined "range" in price before price becomes imbalanced and moves onto a new auction to facilitate new business. You might fall under scalp trading if you are more constrained in terms of time to trade, don't want to hold positions for longs periods of time. Due to this time crunch you are leveraging more capital for quick in and out trades that compound over time. This style of trading requires lower volatility environments and the edge found during slower price action during the lower volume period of a trading session. Due to the nature of the short term profits you must have a high win rate to find consistency in this style of trading usually varying from 70-80% depending on the risk to reward ratios.
2. Trend Continuation Trader -
The edge of this style of trading is found waiting for a wave similar to a surfer would ride when a favorable more comes in a general direction. The trend continuation has varying styles of entries and confirmation. Unlike a scalp trader the trend continuation trader waits for the range to break, form an imbalance and ride the imbalance of price into a new range before further contraction. This style of trading requires waiting for price expansion and for price to show signs of "acceptance" above or below a range in order to define the imbalanced move to ride away from its contraction period. Trend Continuation trading is a bit more forgiving in terms of win rate varying from 55-60% as most times the trade reward ratio are 2 to 1.
3. Reversal Trader -
This is style of trading I personally fall under and it entails, finding a mean reverting move away from its current trend whether up or down. This trading style is a little more complex as reversals can be found in range bound markets and currently trending ones. The key to this trading is finding points of trapped inventory or signs of exhaustion as price is moving in or out of a range / trend. This style of trading requires certain skill in reading order flow that "hint" at points of pivotal moves that can unwind rather quickly. Reversal Trading is more difficult to accomplish but due to the nature of the reward in terms of risk can be way more forgiving on a win rate percentage from 45-50% as most trades will be at min. 3 to 1 risk to reward.
