Six Different Types Of Traders
Trading in the stock market has become one of the ways in which people make money. Many people are making their living out of it. While some have made generational wealth from it. Here are six different types of traders that you must know about.
The Day Trader, Momentum Trader, Option Trader, Swing Trader, Trend Trader, Buy & Hold Investor
The Day Trader
Day traders are active traders who execute intraday strategies to profit from a given asset’s price changes. Day trading employs a wide variety of techniques and strategies to capitalize on perceived market inefficiencies. Day trading is often characterized by technical analysis and requires a high degree of self-discipline and objectivity.
Day traders are traders who execute intraday strategies to profit off relatively short-lived price changes for a given asset. Day traders employ a wide variety of techniques in order to capitalize on market inefficiencies, often making many trades a day and closing positions before the trading day ends.
Day trading is often characterized by technical analysis and requires a high degree of self-discipline and objectivity. Day trading can be a lucrative undertaking, but it also comes with a high degree of risk and uncertainty.
Never, ever argue with your trading system. — Michael Covel.
Momentum Trader
Momentum investing is a trading strategy in which investors buy securities that are rising and sell them when they look to have peaked. The goal is to work with volatility by finding buying opportunities in short-term uptrends and then selling when the securities start to lose momentum. Then, the investor takes the cash and looks for the next short-term uptrend, or buying opportunity, and repeats the process.
Skilled traders understand when to enter into a position, how long to hold it for, and when to exit; they can also react to short-term, news-driven spikes or selloffs. Risks of momentum trading include moving into a position too early, closing out too late, and getting distracted and missing key trends and technical deviations.
Amateurs think about how much money they can make. Professionals think about how much money they could lose. — Jack Schwager
Option Trader
An options trader is a trader who trades in options. An option is a contract giving the buyer the right — but not the obligation — to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
People use options for income, to speculate, and to hedge risk. Options are known as derivatives because they derive their value from an underlying asset. A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.
We don’t care about ‘why’. Real traders only have the time and interest to care about ‘what’ and ‘when’ and ‘if’ and ‘then’. ‘Why’ is for pretenders. -JC Parets.
Swing Trader
Swing trading involves taking trades that last a couple of days up to several months in order to profit from an anticipated price move. Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price.
Swing traders can take profits utilizing an established risk/reward ratio based on a stop loss and profit target, or they can take profits or losses based on a technical indicator or price action movements.
Trend Trader
Trend trading is designed to take advantage of uptrends, where the price tends to make new highs, or downtrends, where the price tends to make new lows. An uptrend is a series of higher swing highs and higher swing lows. A downtrend is a series of lower swing highs and lower swing lows.
In addition to looking at swing highs and lows, trend traders utilize other tools such as trendlines, moving averages, and technical indicators to help identify the trend direction and potentially provide trade signals.
Trading doesn’t just reveal your character, it also builds it if you stay in the game long enough.-Yvan Byeajee
Buy & Hold Investor
Buy and hold is a long-term passive strategy where investors keep a relatively stable portfolio over time, regardless of short-term fluctuations.
Buy and hold investors tend to outperform active management, on average, over longer time horizons and after fees, and they can typically defer capital gains taxes. Critics, however, argue that buy-and-hold investors may not sell at optimal times.
