Types of Stock Traders
Everyone wants to make money trading the stock market. After all, who does not wish to tell his friends that they made a fortune because of buying and selling stocks? The stock market might be a great place to make fortunes but stock traders are not the same. There are different types of stock traders.
The reason there are different types of stock traders is that human beings have different reactions to stressful moments. Trading the stock market can be stressful and as such, different people react differently to the same market conditions.
Stock traders also have different goals while trading. Some traders look for quick profits while others are only interested in using stocks as long-term investment tools. Overall, there are three different types of stock traders. Position traders, Swing traders, and Day Traders.
Position Traders
The position stock trader is a stock trader is probably the most common trader. Most investors fall under this category since most traders buy a stock and hold on to it for a very long time. The position stock trader can hold on to a stock from months to years in the hope that the stock will make them a profit.
Other than individual investors who hold on to stocks even forgetting that they own the stocks, institutional investors also participate in this type of trading. Mutual funds and investment banks are interested in stocks that they think will make them high returns over a long period.
The position trader relies heavily on fundamental analysis to make decisions to buy or sell a stock. They are more interested in looking at the financial strength of a company than using technical analysis. They are also not interested in any short-term fluctuations in the prices of a stock.
Swing Traders
Swing traders are also regarded as mid term traders. Swing traders normally hold on to a trading position from weeks to months. The swing trader is motivated by making large profits from holding large positions in a stock over a longer period.
For example if the Swing trader believes that a company will perform well over a particular quarter, he would be willing to hold on to the position until the next quarter to sell the stock for a profit.
The swing trader relies on fundamental analysis as well as technical analysis to make their trading decisions.
Day TraderPosition traders and swing traders have always been around. However, a new breed of trader is strongly emerging as very important to the liquidity of all stock markets. Due to recent technological breakthroughs that have made it easy to make stock trades, the day trader is slowly emerging as very important.
A day trader is only interested in making short-term profits. He does not intend to keep a stock for more than a day and uses the stock market as a source of income, not an investment. Day traders mainly rely on technical analysis to make their trading decisions.
