Types of Traders in Stock market:
Types of traders can be primarily classified on the time frame and methodology used by trader.
Types of trader based on time frame
Types can be classified into three types
Short term traders: Time frame of the trades will be from 5 minutes to 2 days.
Generally this type of traders would have trade to make use of leverage given by the stock brokers. They tend to keep holding the stock to cover the loss of their position. When using leverage, the risk of losing the money is pretty high and you can also multiply the money. These traders gamble the position for the stock to move in the expected direction.
Mid-term traders: Time frame varies from 2 days to 2 months.
This type of traders try to make use of the opportunity of trend or news of any particular stock. Trader will almost every time buy the stock and wait for the stock to move high and also follow the rules of stop loss. Once the required levels are reached they tend to sell their position and book profit/Loss. Target of profit will be 5-10 per trade with risk of 5-10% loss.
Long-term traders: Time frame varies from 1 month to 10 years.
This type of traders are wealth creators, they buy high size position in one particular company based on today’s performance and wait for the company to run its course to reach their pinnacle of success before closing the trade. Some traders buys the high dividend paying stocks and never sells till some very bad news hits the company. These trades get 3 to 20 times returns based on the time frame and performance of the company. Good company tend to out-perform and can also provide 50X returns if invested for more than 10 years.
Type based on the technique of picking the stock:
This type can be classified into two types
Fundamental analysis: This type of traders to check the facts and performance of particular stock and its pricing/value. This needs several analysis parameter before choosing the stock. Company provides its quarterly results and traders predicts the performance of company based on several parameters of socio-economic reasons and pick the stock if the value is lesser than the measure of intrinsic value.
Technical Analysis: This type of trader checks the price and movement of the stock and predicts the movement of the stock. The charts, graph and volume will be usually checked and invest in the stock believing in the breakout of stock. This may involve several tools for picking the stock like graph, indicator, and price action and so on to determine the movement of a stock. All short and mid-term traders may follow this rule to pick the stock.