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Investment style

Every investor should know his investment style

Deciding to start an adventure with investing, the investor must be aware that the nature of his decisions is connected with his own, unique investment styles. At the beginning it is worth emphasizing that there are no bad investment styles.

There are only different strategies and different analytical approaches that investors use. The investment style should be understood as the choice of the time frame within which an investor decides to trade, the investment strategy and the type of analysis on which to base his or her buying or selling decisions.

Examples of investment styles

Day trading (trade in one session)

The positions are opened and closed in one session, the investor does not have any instruments on the account at the time when the exchange is closed.

Day trader can execute several to several hundred transactions a day, trying to earn on very short price movements. It bases its investment decisions mainly on technical analysis and publication of macro data. Some daytraders hunt for a few hours of trends, others earn some ticks on their movements (scalperis).

With such a strategy, the investor must devote a lot of time to market observation and trading. It should also be used on the liquid and volatile markets - most often it is the futures and Forex market. In addition, there is also a high leverage available in these markets, especially for those who close positions before the end of the trading session.

Day trader should be characterized by low risk aversion and high resistance to psychological pressure.

Medium term investment (swing trading)

Investors who prefer this style keep their positions open for several to several days. This means they do not have to search for the most volatile markets or use high leverage. The concept of swing trading stems from attempts to capture local wells and peaks, basically based on technical analysis signals.

Long term investment (position trading)

In this investment style, the investment horizon can range from a few weeks to several years, and the long term investment is aimed at maximising the current trend.

The long term investor in decision making mainly uses fundamental analysis to buy undervalued companies, currencies or raw materials. This makes it easier to cope with short term price fluctuations and devotes relatively little time to ongoing analysis. Many retail investors choose this style, having little time to analyze the market, and investing in a distant target over time (e. g. saving for retirement).

The extreme form of long term investment is a "buy and forget" strategy. Traditionally, it refers to the stock market and is based on the belief that it is always possible to earn money on the stock market if you are patient enough. Unfortunately, it does not always work because much depends on the moment of entry and exit. For example, if an investor bought shares during the peak of a boom, he can wait very long until they regain their value.

Choice of the appropriate investment style

Knowing the most important investment styles, the investor should decide which of them suits him the most. Most of them depend on the type of personality, time and knowledge of the market, but above all, on the chosen investment goals.


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