What Kind of Stock Trader are You, Anyway?

All stock traders attempt to make the most money in the least amount of time. All “investors” try to do that same thing, except their earnings timetable can be substantially longer. But even “buy-and-hold” investors like Warren Buffet are looking for the most value gained in the least amount of time. But position traders like the Buffets of the world aside, short-term traders fall into one of several categories.

The Day Trader

A day trader has little interest in a company’s fundamentals, its line of business, or much else about a company. He or she is looking only for a stock’s movement during a single day. Accordingly, this trader will seek stocks that are more volatile than most, and offering a greater opportunity to make money.

A day trader will hold a stock anywhere from a few seconds to a few hours, but rarely more than a day. Often, such a trader will buy stocks in lots of 1,000 shares or more, and make his profit with small increments of change, even as little at .10 or .20 of a point.

The Trend Trader

A trend trader, on the other hand, studies the long-term fundamental trends of a stock and may hold a trade for weeks or even months. As the name implies, the trend trader seeks out and takes advantage of market trends in particular stocks.

This trader tries to capture gains through the analysis of an stock’s momentum, either up or down. That’s why they’re sometimes called “momentum” traders. They will enter a stock position when a stock is trending upwards and enter a short position if the stock is trending down, which is usually marked by lower lows and lower highs.

The Swing Trader

The swing trader is in the middle of the continuum between day trading and trend trading. Swing traders hold a particular stock for a few days or two or three weeks and trade the stock on the basis of its intra-week or intra-month “swings” or oscillations. Swing traders attempt to combine the best of two worlds—the slow pace of investing and the rapid potential gains of day trading.

Through the use of technical analysis, traders attempt to identify precise entry and exit points to capitalize on short-term trends to capture consistent profits with minimal risks. This type of trading is suitable to Runaway Traders because when you’re playing swings, you don’t have to be glued to your computer. And travelers, as you know, are often struck with all sorts of connectivity problems in distant lands and foreign ports.

The Reality

Truth be told, there is a bit of all of these styles in most traders. No traders that I know are strictly day traders or swing traders. They try different strategies for different stocks at different times. And that’s the way it should be since the market is shifting and changing.  Every single day there is a new challenge and a new opportunity.