It is very easy to make the decision to become a trader, but understanding what type of trader you are or would like to be is something that you will only be able to discover with time and experience. Listed below are a number of trading strategies, which will help you determine what type of trader you are and what trading style would suit you the most.

An individual’s trading attributes are very closely related to their thinking and personality. Discovering the type of trader you are can help you to understand your own personality better.

Introduction to the different Type of Traders

Fundamental Trader

A fundamental trader is a trader who works on the basis of specific events within a company or wider economy. It is on that basis that traders plan their purchase or sales strategy. Fundamental traders work on both short and long-term basis. Most short-term investments are made on basis of a fundamental, instant or quick consideration. However Fundamental traders are better known as long-term investors, who wait to take advantage of events that directly affect the performance of their instrument of investment.

Technical Trader

Technical traders do a lot of homework and spend a lot of time reading charts and graphs. They study market trends closely and study their instruments of investment thoroughly. They identify levels of entry or exit and determine price points to make their investments.

Scalp Traders

These traders are referred to as volume traders; they have huge volumes of transactions and work on very small margins of profitability. As the name suggests they try to scalp whatever little profit they can harness.

Momentum Trader

These traders are like the bandwagon group of traders; they follow the market momentum to trade. They identify potential stocks which have high volumes of trade and momentum in terms of direction movement before placing their investments accordingly.

Sentiment Trader

Sentiment Traders don’t try to out-smart or second guess the market; they instead follow market sentiments and work along with it. These traders are a mixture of fundamental, technical and momentum traders.

Direction Trader

These traders identify the direction of the market to place their investment. Direction trading involves some understanding of the technicalities and understanding of the overall economic situation. This helps them to predict the direction of the market; most direction bound traders invest for the short-term and can also be known as same day traders.

Arbitrage Traders

Arbitrage trading is based on simultaneous purchase and sale of assets in order to profit from the price differentiation of the same or similar instrument in two different market places. The arbitrage effect is created due to market inefficiency and arbitrage ensures market stability and minimum fluctuation in the market value. An example of Arbitrage Trade is buying an instrument that trades in more than one market. This involves buying it at a lower price in one market and selling the same product in another market that is willing to pay a higher price for it.

Social Trader

A social trader is someone who uses the information from social platforms to make an investing decision. This decision can be based on what the majority of investors are doing, or it can be based on the decisions of select individuals. A social trader can then decide to follow the decisions of others, or go against them.

The social trader usually doesn’t have the educational background which allows him to invest based on a certain strategy, but in this way he can copy the strategies of traders whose judgment he believes in.

Conclusion

Above are just some of the most widely used trading strategies; you may find yourself in a mix of two or more of the above trading styles. Trading has no definition; it is purely carried on to achieve one goal; Profitability. However it is very important for a trader to experiment with various styles of trading. Only then would you be able to find out what you are actually best at (in terms of trading). It is also advisable to experiment with any new forms of trading strategies within permissible levels of risk bearing.