Trading splits along a few clean axes: time horizon, instrument, decision process, and source of edge. Most methods are just combinations of those choices with different risk rules and tooling. If you already know what a limit order is and how margin works, the notes below focus on the practical differences that matter day to day, from holding period and cash flow to data needs and failure modes. Labels vary by desk and country, yet the mechanics stay consistent once you strip away marketing.
Time-horizon categories
Day traders open and close positions within the same session to avoid overnight gaps. They live on intraday data, care about opening and closing auctions, and watch liquidity around scheduled news. Costs compound quickly because of ticket count and data feeds, so edge must be large enough to cover spreads, fees, and slippage with room to spare. Risk control is position sizing and hard stops, but the real control is knowing when not to trade during disorderly prints.
Swing traders hold for several days to a few weeks, aiming to capture part of a move between obvious levels. They use daily and multi-day context, still care about earnings and macro calendars, and need stops that sit outside normal noise. Financing and borrow rates matter more than for day traders because positions cross the close. Tools are simpler: clean charts, event alerts, and a way to leave bracket orders working without babysitting.
Position traders hold for months or longer with lower turnover and larger moves in mind. The focus shifts to business quality, macro drivers, and risk taken at the portfolio level rather than trade by trade. Costs per year can be low, but mistakes compound quietly because thesis drift is easy to hide behind long horizons. Rebalancing and tax planning matter as much as entries.
Scalpers sit at the shortest end, working the inside of the spread or the first few ticks after micro events. They require stable tech, consistent routing, and discipline around inventory. Most retail setups are not built for this tempo, and even for pros the failure mode is death by a thousand small losses during slow tape.
Instrument families
Cash equities represent ownership slices in companies, with earnings, dividends, and corporate actions shaping returns. Liquidity is venue dependent, tick sizes are regulated, and settlement is short in major markets. Fees are transparent, though stamp duties or levies apply in some places. Shorting depends on borrow inventory and can be expensive in small caps.
Exchange-traded funds package baskets into a single line with creation and redemption plumbing that keeps price near net asset value. They are useful for top-down views, hedging, and systematic plans. Tracking error, distribution rules, and domicile taxation deserve more attention than most give them.
Futures are standardized, margined, and cleared, making them efficient for hedging and broad exposure in equity indexes, rates, commodities, and FX. They bring daily variation margin and contract rolls you must plan for, along with exchange fees and specific opening hours. Slippage during thin sessions and around rolls is a common sting.
Options let you trade direction, volatility, or time. They are flexible and unforgiving. Greeks, assignment, early exercise, and margin for spreads all matter in real cash terms. Liquidity concentrates in front-month strikes near spot on popular names. Wide markets in single names can erase edge very fast.
Spot FX is over the counter with quotes from banks and non-bank market makers. Costs are spread plus financing. Behavior changes across sessions, and leverage rules vary by jurisdiction. Indices, metals, and energy are often offered as CFDs on retail platforms; they look simple but add financing and dividend adjustments that must be read before use.
Crypto trades around the clock, mainly on exchange order books with varying custody and legal setups. Funding rates on perpetual swaps replace classic financing. Operational risk and venue risk sit higher than in listed markets, so sizing and withdrawal routines become part of risk management rather than a footnote.
Discretionary vs systematic
Discretionary traders make decisions with human judgment informed by rules, focusing on tape feel, patterns, and news context. Speed to adapt is the edge, but inconsistency creeps in if logs and checklists are an afterthought. Systematic traders encode rules and run them repeatably. Backtests, data cleaning, and slippage models decide whether the code describes the market or just past noise. Many desks blend both: rules for setup and risk, discretion for catalysts and outliers. The goal is not to pick a tribe but to reduce guesswork while keeping room to stop when conditions change.
Directional vs relative value
Directional trading leans long or short against cash or futures, hunting for price to move where the thesis points. Risk is concentrated in the path and the clock. Relative value puts one asset against another: pairs in equities, calendar spreads in futures, basis trades across venues, or multi-leg option structures that shape payoff. Direction fades and microstructure takes over. Slippage, borrow, and legging risk are the common pressure points here, and many small edges turn negative when those frictions are miscounted.
Style buckets
Trend following rides persistent moves with simple rules on breakouts or moving average slopes. Expect many small scratches and a few outsized gains that pay for them. Mean reversion fades extensions back toward a reference, working best in quiet regimes with bounded ranges. It fails hard when ranges break, so caps and time stops are not decoration.
Event-driven trades revolve around news you can schedule or define: earnings, guidance, product launches, policy meetings, lawsuits, and corporate actions. Spreads widen and liquidity steps away at the exact time many want to trade. The difference between a plan and a guess is preparation, expected scenarios, and position size set before the headline.
Volatility trading uses options to express a view on the distribution rather than direction, via long vol, short vol, skew, or dispersion. Payouts are nonlinear, and risk lives in gap days and in how quickly you adjust. Carry strategies earn small amounts regularly by selling insurance in quiet periods; they repay that income on bad days unless hedged.
Market making posts two-sided prices and earns the spread while managing inventory. It is a technology and risk-control business more than a chart business. For most private accounts it appears as a flavor of intraday mean reversion with strict inventory rules.
Global macro mixes rates, FX, commodities, and equity index expressions driven by policy, growth, and flows. It is less about precise entries and more about aligning with regimes, then surviving the path with hedges and size that respects uncertainty.
Cash vs margin and the role of financing
Trading on cash means no borrowed funds and fewer surprises. It also means waiting for settlement in some places before recycling capital. Margin increases flexibility and drawdown speed. The number that matters is not headline leverage; it is maintenance level during stress and the broker’s right to change requirements. For short positions, borrow costs and recalls can decide P and L more than the chart does. Futures embed leverage at the contract level with daily variation margin; options embed convexity and decay that shift with time and volatility. Financing is not a detail to check later. Write it on the first page of the plan.
Time of day and session effects
Open, mid, and close are different markets. Open brings price discovery and gap resolution. Midday often grinds with thinner books, good for range methods and bad for breakouts. The close concentrates volume and rebalancing. In FX, Tokyo, London, and New York hand the baton with distinct liquidity and behavior; crosses respond differently to each. If a method only works in one window, treat the others as off-hours rather than forcing trades to fill the day.
Data and tooling needs by type
Short-horizon methods need reliable real-time data, stable charts, alerts that fire on time, and routing that behaves during busy moments. Swing and position methods need clean end-of-day data, earnings and macro calendars, and simple portfolio analytics that show sector and factor exposure. Options work needs chains, Greeks by leg and by strategy, assignment calendars, and a way to test fills in wide markets before you rely on automation. Systematic work adds durable APIs, sane rate limits, version control, and a habit of logging fills and rejects for later review.
Risk framing across types
Every type reduces to a small set of controls: size risk per idea as a percent of equity tied to the distance to invalidation, cap total exposure so several correlated positions cannot take you out together, write time exits for methods that drift, and fix daily or weekly stop numbers to avoid trading when tired or angry. For strategies with many small trades, the variance of outcomes at the ticket level is low and the danger is slow bleed from costs; for concentrated methods, variance is high and the danger is one bad day. Both cases need a plan for when to pause and reduce size.
A compact comparison
| Type | Typical hold | Main tools | Cost drivers | Common failure |
|---|---|---|---|---|
| Scalping | Seconds to minutes | Depth, fast routing | Spread, slippage, data | Trading dull tape, overtrading |
| Day trading | Minutes to day end | Intraday charts, news | Fees, spreads, slippage | Chasing moves near news |
| Swing | Days to weeks | Daily/weekly charts, alerts | Financing, borrow, gaps | Stops too tight for noise |
| Position | Months to years | Fundamentals, macro | Patience, taxes, rebalancing | Thesis drift, crowded stories |
| Event-driven | Hours to days | Calendars, scenarios | Wide spreads at event time | Size too big into headlines |
| Volatility | Days to months | Options analytics | Theta, vega, commissions | Selling vol into regime change |
| Relative value | Hours to weeks | Pairs, spreads, DOM | Borrow, legging, fees | Correlation breaks |
Picking a fit and building around it
Start with what you can actually maintain. If your day is full, intraday methods that ask for constant attention will fail on logistics before they fail on math. If you have the patience for low turnover, position or swing work with strict review dates matches life better than a method that depends on split-second choices. Choose one primary type, write down its rules, and run it with size small enough that losses feel like data, not drama. Add a second type only if it naturally hedges the first and does not double your workload.
What changes by country
Tax, settlement cycles, shorting rules, leverage caps, and investor protections vary. A plan that works fine in one place may carry extra costs in another because of stamp duties, withholding, or platform limits. If you cross borders, put FX conversion methods, statement formats, and local holidays in the plan. That is not paperwork trivia; it shapes the true cost and the way your stops behave around the close.
Closing note
Most labels in trading exist to describe a handful of repeatable choices about time, tools, and risk. Pick a lane you can sustain, count the true costs, size trades from the stop rather than the entry, and let the method run long enough to show its nature before you judge it. The names matter less than the discipline to keep the boring parts the same while the tape changes its mind every few hours.