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Different Types of Traders

The trader is an individual who engages in the buying and selling of financial assets in any financial market, either for himself or on behalf of another person or institution. The main difference between a trader and an investor is the duration for which the person holds the asset. Investors tend to have a longer-term time horizon, while traders tend to hold assets for shorter periods of time to capitalize on short-term trends. well, now we will discuss different types of traders.

Types of Traders

A Scalper is a person who holds a position in a security for a short period of time in an attempt to make a profit. Scalpers buy and sell many times in a day with the objective of taking small consistent profits out of the market. They may trade manually or automate their strategies using trading software. A scalper also refers to a person who buys large quantities of in-demand items, such as new electronics or event tickets, at regular price, hoping that the items sell out. The scalper then resells the items at a higher price. For example, a scalper may buy 10 tickets to the Super Bowl and attempt to sell them on eBay several days before the game at an inflated price. Such transactions often occur on the black market. This type of scalping is illegal under certain conditions.

The Day Trader is a trader who adheres to a trading style called day trading. This involves buying and subsequently selling financial instruments within the same trading day, such that all positions will usually be closed before the market close of the trading day. These traders may work in stocks, options, currencies, futures, and more. It’s even possible to find day traders operating in cryptocurrencies nowadays. They usually hold their purchases for seconds or minutes before making adjustments, either by buying more or selling what they have. There are two general types of day traders.

  • Institutional day traders.
  • Retail day traders.

The Swing Trader is a short-term strategy used by traders to buy and sell stocks whose technical indicators suggest an upward or downward trend in the near future generally one day to two weeks. Most swing traders work with the main trend of the chart. If the security is in an uptrend, the online trader will go long that security by buying shares, call options, or futures contracts. If the overall trend is down, then the trader could short shares or futures contracts, or buy put options.

The Position Trader is someone who holds a position, usually stocks, for the long-term from weeks to months, and even years. Position traders do not trade actively and the fewer trades they make in a year, the closer they are to becoming buy-and-hold long-term investors. Position traders may use a combination of technical and fundamental analysis to make trading decisions, and often perform more thorough evaluations of the companies behind the stocks. Unlike day traders, they have the luxury of time.