Thursday, May 22, 2014

What kind of trader are you?

In order to trade stocks or other equities effectively, it's important to know and understand what kind of trader you are. Have you ever looked at a stock chart and thought you saw a bullish pattern (an upward trend)? Select a different time frame with the same stock and you might find yourself not so confident anymore. Different time frames tell different stories.

Basically figuring out which kind of trader you are determines which time frame you 'like' to trade. Do you think you can profit from quick drops or peaks in the market, you may fall under the category 'scalper'. A scalper applies the so called 'fade strategy' in trading. When there's a quick drop in the markets the scalper buys at the low and sells it quickly when the price of the security goes up just a bit, or the other way around, short selling when there's a spike in the security's price with the underlying thought that the security is too overbought, or previous traders who bought the stock are cashing in on profits. The scalper won't last very long though. It takes a tremendous amount of stress, and it's simply an exhausting technique.

You may be a 'day trader'. Day traders trade on the 'intra day chart', and only hold on to securities for a day, no longer than that. They profit from the volatility of the security during the trading session, and are overall very active with their investments which they keep a close eye on.

Then there's the 'swing trader', those who hold securities for simply a few days, maybe weeks. These traders are usually a bit more patient and rather give their stocks some time to rise in value. The majority of traders nowadays may fall under this category.

There's also 'position traders'. Position traders give their investment a few weeks to months to rise in value. These traders usually have some capital, and are not active daily with their investments. They implement the 'set and forget' strategy and trade with hourly, or daily charts (charts that show how the stock performed over the past few months or years).

Finally, there's the 'investor'. When you're an investor you are basically a 'long term trader'. Though most investors speculate that their investment will go up over time, there are those that only buy a stock with a great dividend payout and don't care about the stock's overall performance. They're 'dividend investors', and buy stocks of companies that pay out a certain amount of money to stockholders on a scheduled time. Investors have a lot of capital to trade with and don't really worry right away if their stock drops a bit, but rather look in the future and hold on to securities for years, sometimes months.

VDM Trading: Trading Stocks In Volatile Times
Download the e-book ($4.99)
If you are interested about trading stocks, and would love to know more about it, I wrote an excellent e-book titled Trading Stocks in Volatile Times in which I will provide new traders with a detailed road map to making their first trade. I've always been a firm believer you have to have some basic knowledge about how the stock market works, only then you'll have a higher change to make consistent profitable trades. Most other (e)-books and educational material regarding trading the stock markets will only leave you more confused. After doing tons of research I decided to write my own e-book about stock trading, an e-book which is easy to understand, yet still highlights all the main aspects of what you'd need to know. There's a demo for you to look at, the full-version included detailed charts, images and simple, clickable, navigation through the e-book (PDF).

I hope you'll enjoy it as much as I enjoyed writing it :)

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