Introduction to Stock Trader Types 5.00 / 5 (100.00%) 1 vote

There are many people who are dreaming of becoming successful stock traders. However, what these people may not realize is that there are different types of stock traders. These investors have different goals and risk appetites. Before venturing into stock trading, deciding what kind of stock trader a person wants to be is very important. This will help them to formulate a winning stock trading strategy that can be used for decades. The following is an introduction to stock trader types.

1. Value-Oriented Traders

The investment strategy of a value investor is to identify undervalued stocks in the stock market with the aim of buying and holding them. They often consider the book value of a stock relative to its market price. For instance, if the book value of a company is $10 per share but it is selling at $5, value investors can buy the stock knowing very well that they can make an unrealized profit of 100% by simply buying the stock. In case of liquidation, the investor will still make the same profit. Value investors benefit from both price appreciation as well as earnings since they hold stocks long enough to get a dividend payout. These traders do not usually expose their portfolios to unnecessary risks.

1. Growth-Centered Traders

These traders are often looking for capital appreciation. They simply buy low and sell high for profit. Most traders in the stock market fall under this category. To succeed in this type of trading, traders need to be familiar with technical analysis of securities. This will enable them to use technical analysis tools to identify stocks that are likely to increase in price in the near future. These are the investors who always look forward to Initial Public Offerings (IPOs). These traders also have a very high propensity for risk. The chances of seeing your portfolio depreciate withing a very short period of time is highest when you are trading as a growth-centered trader.

1. Income-Oriented Investor

This stock trader never buys a stock that does not pay a dividend. The main goal of investing in stocks for this type of investor is to get regular income from the stock portfolio. These investors only buy blue chip stocks that have a long history as well as a strong dividend policy. When analyzing a stock to purchase, these investors often look at three things. The first is the management of the company. The second is the companys market position, while the third is the cash flow. These investors usually have a very low propensity for risk. They never buy stocks in companies that have only been in the market for a couple of years. Their investment portfolio often consists of blue chip stocks, some index-linked bonds and certificates of deposits.

With this introduction to stock trader types, you can easily see that there are three different types of stock traders. You probably already know where you fall.