Gone are the days when trading is only left to the experts. Today, almost everyone with the internet access, fundamental and technical analysis tools, and basic knowledge can buy and sell stocks, currency pairs, and CFDs. Still, engaging in the financial markets is not that easy. Unlike investing, trading takes more than just using a "buy and hold" approach and building wealth slowly over time.

Trading is a more active way of participating in the market, which aims to surpass the standard, laid-back investing. We can say that unlike traditional investors, traders tend to be busier folks. They buy and sell investment vehicles and watch shorter-term price moves closely to gain profit during fluctuating markets.

If you're a newbie, you have four basic trading styles to keep in mind: Position, Swing, Day, and Scalp. The main difference among these strategies is the time period the trades are held for, from years to within a few seconds. Choosing the right trading style which would best suit your personality, risk tolerance, the level of trading experience, and time, is key to becoming a professional and profitable trader.

1. Position Trading
Position, often regarded as a “buy and hold” strategy, is a trading style that is quite similar to investing. It has a long-term timeframe, with a holding period of a couple of days to several years. But unlike investing which only uses long trades, position trading may utilize a mixture of long and short trade strategies.

Position trading is best suitable for the patient and experienced traders. They use a combination of technical and fundamental analysis in making decisions. Unlike day traders, position traders utilize longer term price charts, like weekly or monthly charts, and other methods to evaluate the current market trends. They are also called “trend traders”, as they benefit from market movements by jumping on when the trend starts and exiting when it breaks.

2. Swing Trading
Swing trading is a style that has a shorter timeframe of days to weeks. Swing traders are people with the patience to wait for a trade but they once they've got their hands dirty in a trade, they want to become profitable at the drop of a hat.

Swing traders usually hold their trades overnight so it may not be the perfect trading style for folks who can't seem to hold a trade while they're asleep or when they have no internet access. Swing traders seek to capture short-term market moves. While they rely less on the fundamentals, they focus on technical analysis as well as the price action to evaluate profitable entry and exit points. Swing trades are often based on rules and algorithms which dictate when to buy or sell.

As opposed to trend traders, swing traders get in the game when the trend breaks. They use the volatile period to their advantage as they buy and sell when a new trend is emerging.

3. Day Trading
Day trading is the most popular trading strategy. As its name implies, day trading refers to a style in which entering and exiting positions are held on the same day. All trades are closed by the end of the trading session and there are no positions held overnight. The given short timeframe works for traders who won't be able to sleep at night knowing they have an active trade which might be affected the overnight price fluctuations.

Day traders use profit target, stop loss, or time exit, such as an end-of-day exit. They rely primarily on technical analysis to determine intraday price movements. It's rare to see large price moves with day trades so traders rely solely on frequent small gains to build profits.

4. Scalp Trading
Scalp trading or “scalping” is an active form of day trading. It has a very short-term time frame, which lasts seconds to minutes with no overnight positions. Scalping builds profits on small price changes, typically as soon as the trade has been entered. Likewise, the quick strategy involves buying and selling frequently throughout the trading session.

Since the timeframe is very short, gains are small here. Scalpers target the smallest intraday price movements and depend on frequent and very little gains. Scalpers take as many small profits as possible. To build profits, they may place dozens of trades each session. It is also crucial for scalpers to have access to low trading commissions. Scalpers have three assumptions: (1) lessened exposure limits risks, (2) smaller moves are easier to obtain, and (3) smaller moves are more frequent than larger ones.

However, scalping is a considered a risky trade since traders succeed by making more winning trades than losses. The catch? The average winning trade is generally smaller than the average losing ones. It only takes one or two losing trades to wipe out many small gains that the trader has obtained.

It's assumed that impatient yet laser-focused traders make the best scalpers. They expect their trades to boom immediately and they quickly exit the trade once it goes against them. They devote their full attention to the markets and can make sharp decisions and act on those without any hesitation.

Author Bio: Sophie Harris is one of the resident writers for FP Markets CFD Trading, a CFD and Forex Trading provider in Australia with over 12 years industry experience serving global clients. Writing informative content about business and finance is her cup of tea.