What are the options in speed trading?

Speed is defined by the rate at which the financial market is moving. Whatever instrument you may be trading at the market, the speed trading is a vital tool to measure the pace of the market. It is the speed at which the market moves shows the potential of a trade. It will also let you know if the trend of the trade is in accordance with your speculation. But to understand different options in speed trading you have to first realize what type of trader you are as different traders will have different sort of timeframe for trading and speed trading will definitely have different meanings for them.

Types of traders – Depending on the timeframe of trading traders can be divided in four different categories.

Scalpers – A trader is termed to be a scalper when he looks for a few ticks profit for each trade. These traders spend a few seconds or at most a minute for a trade. Though this type of traders are often referred as the day traders they are basically micro day traders as they indulge in high speed trading and end up doing at the most 10 to 50 trades a day.

Day Traders – Day traders are those who close their position within that trading day. Day traders can hold the position for minutes to even for hours. They spend about 5 to 30 minutes on an average for each trade. Usually day traders do 5 to 10 trades a day. Though this type of trading is less stressful it requires minute study of the market trends to successfully do day trading.

Swing Traders – Swings traders usually keep their positions from one to ten days at the most. According to some this is the best timeframe for trading as you can evaluate your trading calls for hours. Swing trading also lets you study the trading calls over the night that gives you enough time to consider the underlying factors.

Position Traders – Position traders usually hold their trading position over ten days to even a few months. In fact these traders have a long term investment plans and they close a position only when they reach the desired price level.

As we have already mentioned each of these types of traders will define speed trading differently and they will have different dimensions of speed trading in their mind while taking the trading calls. But there is no doubt about the fact that irrespective of the timeframe of trading, no trader can ignore the speed of the market for determining their trading plan and taking trading decisions.

When you will be analyzing the speed trading in the stock market or for that matter in any form of financial market you will see that speed can take place at different phases of the trading day and in different dimension – it can be at the opening, at the close, speed can be of the time and sales window, speed at the pattern developing on your chart, speed of each pattern triggering as per the rules and even at the exhaustion of the move. So it is evident that speed can be important at different times. Here we will concentrate on the three most important times where speed can be crucial indicator for trade.

Speed of Tape – This is the speed at which orders come to the market. The speed should ideally as fast as possible when you enter the trade. From entry to exhaustion of the trade this speed of tape is the most effective tool to understand when the trade will show a reverse trend.

Speed of the Set-Up – This is the speed at which the patterns are set up on the charts. The faster the pattern takes a shape the better it is for you. If a trend is taking to much time to take a shape it is better to ignore that trend and wait for the next set up. Ideally it can said to be a weak set up if it has taken more than five minutes to form the pattern.

Speed of Follow through – If the speed of follow through is low then it is not possible to make for the loss or recover a trade at that market. If you notice only 5 to 10 ticks in hesitate moves it is not at all wise to trade at that market.