What Type of Trader are you?

An Stock exchange offers investors many opportunities to make money. There are many types of players. Based on their risk appetites and investment capacity, investors have been divided into three categories: conservative, moderate, and aggressive. As time passes, traders begin to identify their preferred trading style and analyze the type of traders they are. This article will help you determine what kind of trader you are.

1. Fundamental trader

Fundamental traders are traders who concentrate on specific events within a company and then decide when and which stocks they should buy. Fundamental traders analyze stocks and then enter into trading after considering both the short- and long-term perspectives. Fundamental traders tend to rely on the long-term buy-and-hold strategy rather than short-term trading. The company's financial health and management are all factors that influence their trading decisions. A fundamental trader is a good choice for beginners trying to identify their trading type.

2. Noise Trader

Noise traders are people who buy and sell without doing any analysis or using data specific to their company. These traders often trade short-term and try to profit from economic trends. These traders are known to react to both good and bad news.

3. Sentiment Trader

Your trading style could also be called a sentiment trader. These traders try to spot trends before they participate. They don't want to invest in securities that are profitable, but they do not wish to predict the market. They instead try to find stocks that follow the market's momentum and combine elements of technical and fundamental analysis. Further, sentiment traders can be classified as swing traders or contrarian traders. Swing traders try to capture the price movements and avoid idle periods, while contrarian traders use indicators that indicate excessively positive or negative sentiments to predict possible reversals.

4. Market Timer

Market timing traders are those who attempt to predict how security will move and make money from that prediction. To predict the direction of the movement, they often look at technical indicators (also known as economic data). Market-timers tend to have long-term strategies and invest for longer periods of time. This allows them to be profitable and successful in their trades. If you are able to consistently time the market, rather than randomly or intermittently, then you might be a perpetual market-timer.

5. The arbitrage Trader

Arbitrage traders are traders who simultaneously buy and sell assets to make money from price differences between financial instruments. Such traders execute trades in different forms in different markets. Arbitrage traders are a result of market inefficiencies. They provide mechanisms to ensure stock prices don't deviate significantly from their fair value over longer periods. Hedge fund trading is a common place where arbitrage traders are involved. This can be very profitable, if it works.

Last note:

As you become a trader, the answer to the question "What type of trader do you want to be?" changes. With experience, you may start as a noise trader but then become a fundamental or arbitrage trader.