Trading–Different Types of Trading and Traders

The stock market is a good place to invest your otherwise “surplus” money. It is also a good place for risk takers who simply want to take their money on an adventure. It is a good place because stock trade can make you little but fast money or huge but slow money. In rare cases, it can bring huge money fast. Of course, there is that risk of losing money, but risks of losing is a given in any investment.

Stock trading involves buying a “part” of a company in forms of stocks. Offering stocks to the public is a great way for companies to raise necessary capital. It can also result to slicing the company’s profits yet it also divides the risks of each individual. In the long term, these profits can actually go to stockholders in form of dividends. But in the short term, stock trade capitalizes on the fluctuation of stock market and stock prices.

Traders, the people who do trading, can be summed up to two types. The first type is the more traditional type called the fundamentalists. They analyze balance sheets and financial statements of companies they are eyeing. They do this to check whether the company is good enough to put their money in. Another type of traders is the technicians. They use market patterns and stocks history to figure out what company will be doing well. A good trader mixes both fundamentalist and technician practices to suit different scenarios and available data. Being flexible when it comes to processing these data is crucial when making informed decisions

Trading can also generally be divided to types depending on how the trader goes about the handling of the stocks available to him. These types vary in length and strategy. They can also, to some extent, demand cunning and luck in the part of the trader to be able to give considerable gains. The types of stock trading are:

• Day trading – this type of trading offers the shortest term of holding a stock since it buys and sells within the shortest amount of time needed for it to mature which is usually less than a day. This type of stock trading is risky in the sense that shorter time can afford only a fast analysis of information and thus, decisions tend to be shortsighted and ill-timed. However, there are traders who specialize in day trading and are actually making good money out of it. It involves in-depth and up-to-date analysis and thus is not suited for people with short fuses.

• Swing trading – a moderately short form of stock trading, swing trading usually takes two days to two weeks from buying to selling. This longer time frame results to a less cramped work schedule but trades this advantage off to more data analysis required. Swing traders tend to be technicians. They rely more on charts that are readily available as the days go by. There is also that overnight risk, which can greatly affect the stock prices the next day. Returns tend to be greater though.

• Position trading – a trading that takes a couple of months to half-a-year, this type of trading promises much higher returns at the price of a more extensive analysis of data. Like swing traders, position traders primarily use charts, but instead of daily charts, they use weekly charts giving a much more generalized view of trading patterns. Having a longer term also affords them access to financial documents which can prove to be helpful in a more careful study of company performance. Bigger returns call for bigger risks.

These are the different types of trading available for anyone interested in the stock trade. Needless to say, sufficient knowledge and practice is needed by whoever wants to indulge in any kind of economic trading there is.