In the stock market, there are many types of traders who pull money from trades using various methods. You are probably also following a specific trading type, but may not be aware of your kind. But what are these types, and why do they matter? Well, we have got you covered.
What are the different types of traders in the stock market?
Fundamental traders believe in doing good market research before making a place in any trade. They not only look for the recent stats of the company but also analyze its historical performance. Moreover, they mainly hold for a longer term. They also refrain from overreacting to news and rumors. Instead, they choose to hold until the confirmation.
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Noise traders are the exact opposite of fundamental traders. They don't look for market research and make decisions based on news and current affairs. Apart from analyzing the company, they trade according to the economic trends. Their decisions are very instantaneous. They usually prefer to make short-term investments.
You may have already guessed from the name that these traders make a trade based on the market sentiment. They make their position after analyzing the technical and fundamental aspects of the market. Moreover, they mostly try to spot the stocks with a momentum similar to the market trend, keeping themselves away from the over or under-performing ones.
In addition, there are two further categories of sentiment traders: swing traders and contrarian traders. Swing traders mostly make trades during significant price movements. On the other hand, the contrarians trade during a trend reversal, which they identify with trend reversal indicators.
Market timers are traders who also make trade based on market movement, but they hold their position for the long term. They also look for technical indicators during their research to make investments. This long-term holding strategy, where trade is made based on technical indicators, mainly results in a good deal with a handsome profit.
These traders make money from price differences. Their holding is always short-term and includes buying and selling simultaneously. They take advantage of the moment when the stock is not at its fair value, which occurs for a very short period. Arbitrage traders make handsome profits if their strategies work but can also attract a considerable loss if they fail.
Final Words
It's essential to know what type of trader you are as it opens the gates to learn more. Further, it lets you know if your trading type suits you.
Motilal Oswal is here to help you on your trading journey, regardless of your trading type. So, open your Demat Account with us and enhance your trading experience.
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