What kind of trader am I?

There are many types of traders but we all have a few things in common. When people ask me what kind of trader are you? I always have to think about it. Am I a day trader? An intraday trader? A momentum trader? A technical trader? A fundamental trader? A market order trader?

I know I am not a scalper or a high frequency trader. That is way too much stress and pressure. But neither am I a long term trader. I am going to break down the major trading types. Yes, there are many subcategories and I am sure I will miss quite a few.

The Long Term Trader

This really is the tortoise in the tortoise and the hare. The long term trader looks at usually medium to huge cap fundamentally sound companies that have a decent dividend and growth over the long term. Actually choosing high volatility stocks goes against profits in this case. Stocks that are slow and steady (The Tortoise) are the ones to go for. A long term trader is looking at weeks, months and years of growth. He doesn’t concentrate on the short term and the newest fads in the industry the long term trader is buying blue chip stocks. This trader owns stocks like MacDonald’s and Coca Cola. He is obsessed by Beta, P/E and dividend rates. Undervalued could be his whole trading strategy or high dividend returns. There is no point talking to him about your fast scalp done on the newest IPO because he will just nod his head and smile at your simple delight in the game.

The Scalper

A scalp trader will see a buy trade execute the trade get out for a small profit then he will see a sell trade on the same company and again get in and get out. Quick small profits for short amounts of time. Or quick bursts of speed if you prefer. Like the Hare. Unlike the hare in the story though, a scalping kind of trader can get ahead and win. This strategy is not for the faint hearted and a lot of people seem to think it is easy. Until they start losing money that is.

The high frequency trader is very similar to the scalper they make lots of little trades to make a profit of one big trade.

Momentum Traders

Momentum traders seek stocks that are moving quickly in one direction in high volume. Then these traders swoop in like a bird of prey and grab their profits. Often called trend traders. These traders hover over the charts waiting for significant moves in a certain direction. More technical expertise is needed than fundamental. Technical trading is watching the movements of charts, candles and looking for patterns such as double tops or kangaroo tail candles.

If you think of the momentum traders and the technical traders as birds of prey swooping in for the kill.

Technical Traders

Technical traders focus on charts and graphs. They analyze candles on charts for strength, convergence and divergence that might indicate buy or sell signals. They also like the momentum trader look for candle stick patterns that may signal a trade. Naked trading is becoming more and more popular. Naked trading is a technical trading strategy that uses zero signals on the charts, no bands or RSI etc.

Fundamental Traders

Fundamentalists trade companies based on fundamentals which examines corporate events, particularly actual or anticipated earnings reports, stock splits, reorganizations, or acquisitions. A fundamental trader will check the news, how well the company is doing, earnings quarters, growth Earnings Per Share (EPS) among other things to see how healthy or unhealthy a company is. The fundamental trader will cull the weak companies and only let the strong and healthy survive.

Both fundamental traders and technical traders can trade over both short or long time frames. A strategy for fundamental traders is the short sell. By using the wolf tactic they find a weak company that has news coming for example a company that hasn’t been doing very well and also has an earning report out. The fundamental trader will short that company for a day trade maybe taking profit anywhere between 10 minutes to two hours.

A technical trader may do the same trade but she will be using the charts and candle sticks to wait until the right setup comes along. It’s the same trade just a different way of looking at it.

A technical trader may buy a stock such as Starbucks simply because the stock has been going up for a long time, the chart then goes drops. The technical trader spots a reversal pattern meaning the the stock will carry on with the uptrend. He or she will see this as an opportunity to get in and make some money with the continued uptrend of the stock. The fundamental trader may know that a temporary problem with supply from an importer has made the stop drop so he will buy the stock as soon as the news is released that the supply problem has been solved. Again same result different analysis.

So what kind of trader am I?

I am a fundamental earnings report intraday trader that also uses charts and momentum to understand when I should be buying a stock or shorting a stock. My trades last anywhere between 5 minutes and two days.

Thanks for reading

Paul Davids