What Kind Of Trader Should You Be?

You may be aware that the stock market provides an opportunity to make money, but you are unsure how traders decide when to buy and sell.

You might have also heard of terms like “swing traders” or “scalp traders”, which are different stock trader types, and want to learn more about them.

Either way, you’ve come to the right place.

As a trader, the trading strategies you adopt will determine the type of trader that you are. Once you’ve chosen a trading strategy, you should study it very well to see how profitable and applicable it can be.

Understanding how different traders make decisions will help you establish yourself as you venture into the stock market. It’ll also help you understand how the market moves and fluctuates.

Difference Between a Stock Trader and a Stock Investor 

Both stock traders and stock investors are necessary for the market to function correctly.

Trading and investing are two usually interchangeable words, but in the context of the stock market, they are entirely different activities.

Although stock traders and stock investors are both part of the market, they perform different functions, as discussed below.

Stock Traders 

The dictionary defines a stock trader as buying and selling stocks / shares. A stock trader is actively involved in the activities of the stock market. They buy shares in a company and focus on the market rather than how they operate or on any of its fundamentals.

A stock trader’s goal is to take advantage of short-term price volatility and make a profit. However, the trades may last from a few seconds to several weeks or even years.

Stock traders are professionals in what they do. Luckily, anyone can be a full-time or part-time stock trader/investor.

Stock or share trader types are primarily concerned with:

  • Demand and supply – Stock traders, closely monitor their intraday trades to determine the direction in which the money is moving and why it moves in that particular direction.
  • Client services – Stock traders can also be hired by clients to provide liquidity through rapid trading.
  • Price patterns – Stock traders use technical analysis to determine when to buy and sell their stocks. Technical analysis has to do with using history to predict future price movements.
  • Market emotion – Stock traders are significant risk-takers. They sometimes play on the investors’ fears through strategies like fading.

Stock Investors 

A stock investor can be an individual or a company that purchases stocks and intends to hold the stock for an extended period. The stock investor can hold onto their stock for months or years. The investment decisions are mainly based on fundamental analysis, and they generally consider their investment as a part ownership of the company.

Most stock investors believe in the buy and hold strategy, which implies buying stock ownership in a company and keeping them for an extended time. They think that the company has excellent prospects, and as such, they concern themselves with two things: value and success.

A stock investor must pay attention to the value that the company’s shares represent. They must also determine the company’s future success by looking at their financial strength and future cash flows.

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Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are ...

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