There are many methods and styles used by online traders to trade. The categorization of these online trading styles can be done using many criteria such as the trading products, trading interval between buying and selling, methods/strategies used for trading, etc.
Based on the product traded, online trading styles include stock trading, options trading, futures trading, commodity trading, forex trading etc. Stock traders trade equities or shares from companies. Option traders trade options, which enable one to buy or sell a right at specific time periods under specific market conditions. Online futures traders and online commodity traders trade contracts; contracts for products like crude oil and natural gas or contracts for treasury notes and bonds. Online forex traders trade currency pairs, they buy one currency and sell another one according to exchange rate changes.
According to the interval between buying and selling of products online traders can be broadly classified in to short-term traders and long-term investors. Usually traders with trading interval less than one year are known as short-term trader and those with trading interval more than one year are known as long-term investors. Short-term investors, forms the majority of active traders, trade products according to short-term trends. They trade products usually according to its merits. Long-term investors trade with long-term goals; they are usually company/industry specialists want to invest in growing fields.
Short-term trading can be further classified in to day trading, swing trading and position trading. Online day trading is the most active type of trading. Day traders’ trading interval does not exceeds one day. They buy and sell products with in seconds, minutes or hours for usually small gains. Day trading eliminates overnight risks. Day trading involves scalpers – those buy and sell large amount of shares/contracts with in seconds or minutes for very small per share gain, and momentum traders – trades according to the trend pattern of specific shares/contracts with in a day.