Page 5 - Trading #101 Course – PART II TWO: SUCCESSFUL TRADING PIE – www.traderscoach.com

TRADING #101 COURSE – PART II TWO: SUCCESSFUL TRADING PIE – WWW.TRADERSCOACH.COM

where you start today is just the beginning. Your trading rules will be a work in progress
and will change as you grow and develop your skills.

Scalping & Trend Trading Definitions

Let me mention a couple of misconceptions regarding trading and investing styles. First,
many people feel that scalpers only trade the lower time frames and are only day
traders, that is not true.

The definition of scalping is when you trade, and scalp, in between reversal bars in any
time frame. Position traders and day traders can both use this style. The same goes
for trend trading. You can follow the trend as an investor or a day trader, again, the
style is to follow the trend and this style works on any time frame.

Day Trading versus Position Trading

When building your foundation, you will need to determine if you will be day trading,
position trading, or investing. These three approaches are different from one another
and provide you with a differing set of pros and cons. Refer to Table 1.1 in Chapter
One for a thorough outline of this. Carefully consider your personal situation and what
will be the best approach for you now.

A day trader: is anyone who closes out a trading account to cash every night, and
looks at shorter intraday time frames like the 1-minute, 5-minute, and 10-minute charts.
Trades can last from minutes to hours.

A position trader: is anyone who can stay in a trade overnight, can assume overnight
risk, does not need to convert to cash every night, and looks at longer time frames like
the daily and weekly charts. Trades can last for days, weeks, or months.

You will see in Table 1.1 in Chapter One, there are many differences between day
trading and position trading. You may encounter varying schools of thought regarding
which path to take when you are a novice trader.

Some believe that position trading is the best solution for new traders because the pace
is slower and it is easier for the novice to process market information at this pace.

Others will argue that the faster pace forces you to learn faster when you day trade.
The most significant difference between day trading and position trading is the speed at
which your profit and loss can move and change. In day trading the profit and loss
feedback comes at you much faster and you need to be able to handle that emotionally.
As a position trader, the pace is slower so it is easier to process the wins and losses
from a psychological stand point.

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