This is for you if you want to be a trader

Traders on wall street

According to wikipedia A trader is person or entity, in finance, who buys and sells financial instruments such as stocks, bonds, commodities, derivatives, and mutual funds in the capacity of agent, hedger, arbitrageur, or speculator.

They buy and sell financial instruments traded in the stock markets, derivatives markets and commodity markets, comprising the stock exchanges, derivatives exchanges and the commodities exchanges.

They are different types of traders and here they are:

The Day Trader

Day traders place multiple trades throughout the course of the trading day and seek to profit from small movements in the markets. No overnight risk is typically held,and traders may look to place as many as 10 to 20 positions in a single trading session.

Day traders are extremely opportunistic, looking to get the most out of all market moves,especially during times of heightened market volatility. Day traders are known ,however to chase the markets and given the high frequency of trading ,you need to have a strong sense of understanding of the markets as well as be somewhat mechanical in trading ,taking loaawa on the chin and refraining from letting your emotions drive your trading.

The Swing Trader.

Swing traders look to get the most out of price swings in the markets in the markets when , when prices are in a definitive trend, and also seek to spot reversals in prices. swing traders are technical in nature, choosing largely to ignore the noise of breaking news or company earnings ro focus specifically on price action and trends.

Swing traders don’t let their emotions influence their trading behavior , and pay strict attention to pure price action to help them to determine their next trades.

The Technical Trader.

A technical trader or technical analyst seeks to utilize historical price trends to determine future price action. Technical traders adhere to the notion that history normally repeats itself, ignoring much of the noise in the markets that can be created from breaking news , earnings reports or boardroom instability etc. The technical trader is very mechanical and methodical , and utilizes a range of technical indicators such as a moving average to highlight where current prices are heading and how to trade them.

They can use the vast array technical indicators such as simple moving average (MA), relative of strength index (RSI) or momentum to help them to see the current price trend and spot trading opportunities.

The Fundamental Trader.

The fundamental trader seeks to analyze the true value of an asset, be it a share , currency or metal, highlighting potential trading opportunities when the underlying price in the market for that asset indicates if prices are overvalued or undervalued.

Fundamental traders are typically very methodical , with a good knowledge of a particular asset and of typical factors that may affect the pricing of that asset.For example , for a company, the fundamental analyst would look at earnings reports and trading updates and also evaluate major themes that may influence how that company is likely to perform going forward , such as interest rates or retail sales.

The Long term Trader

The long term trader typically adopts a buy and hold strategy, which essentially means buying an asset such as a share and holding onto that for a number of years until it increases in value.With the FTSE 100 or Dow Jones typically seeing average yearly increase in value between 5%-10%, this can prove to be a good long term strategy for many investors , who prefer to put their money into the markets as opposed to sitting in their bank account earning minimal interest.

Of course , there s a risk with this strategy , particularly in bear markets, that can see major indices see 20% corrections in a short space of time. This is where using spread betting o CFD’s can be even more worthwhile as a hedging tool to mitigate against the risk of your long term investments losing value.As you can use spread betting or CFD’s to profit from markets falling in value , long term investors can go short to the value of their physical holdings , meaning that nay loss in value in their portfolio can be countered by a profit in their short sell trade.

Conclusion

You need to analyze well about each of these type of trading and weight your current financial situations.. Always consult your financial adviser before making any decisions.

Investing is quite risky if you do not know what you are doing.

Hope that you enjoyed this article and please comment below about your view about this article.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s