There are different types of traders, as you are aware, if you have ever traded stocks. You could belong to one of several groups of traders, depending on your risk tolerance level and financial objectives.
Before we begin looking at the different types of traders, let’s start by defining a trader and discussing how they differ from investors.
Difference Between A Trader And An Investor
Someone who buys and sells stocks with the intention of making a quick profit is a trader. They achieve this by predicting how quickly stocks, currencies, and other financial assets will change in price.
In contrast, investors purchase securities to hold them for a long time and earn returns via dividends, interest, and capital growth.
Investors and traders are distinct in a number of ways. Their risk profiles are one of the key variations. Since they are attempting to capitalise on volatile short-term price movements, traders typically assume greater risk than investors.
On the other hand, investors have the financial resources to adopt a longer time horizon and is more tolerant to market swings.
The time horizon is another difference. Securities are often held by traders for far less time than by investors. Investors may keep onto a stock for years or even decades, whereas traders may just hold onto it for a few minutes or hours.
Finally, the kinds of stocks that traders and investors invest in vary. Since buying and selling quickly is simpler when a stock is highly liquid and has a high trading volume, traders frequently concentrate on these stocks.
Conversely, investors might be more drawn to stocks with solid fundamentals and the potential for long-term growth.
After knowing the difference between traders and investors, let’s look at the different types of traders.
Traders that try to make tiny profits on many deals are known as scalpers. They often only keep stocks for a short period of time(a few seconds or minutes), and they frequently trade (dozens or even hundreds of times) in a single day.
Scalpers rely on minute price changes and utilise technical analysis to spot transient patterns.
2. BTST Trader
A “Buy Today Sell Tomorrow” (BTST) trader purchases equities today and sells them the following day. They use this to avoid having to take ownership of the shares, which would necessitate full payment.
BTST traders frequently focus on stocks with significant trading volume and solid momentum.
3. Swing Trader
Swing traders try to profit from swift market changes by holding onto securities for a few days or weeks. They employ fundamental and technical analysis to find equities that are likely to experience quick increases.
More risk is typically assumed by swing traders, as compared to scalpers and BTST traders.
4. Position Trader
In order to achieve long-term gains, position traders keep onto securities for weeks or even months. They frequently concentrate on stocks with solid fundamentals and prospects for long-term growth.
Position traders are more interested in the company’s overall health than they are in short-term price fluctuations.
4 Different Types Of Traders
In conclusion, there are many different types of traders, each with a distinctive strategy for the market. Regardless of whether you are a scalper, swing trader, position trader, or BTST trader, it’s crucial to know your risk tolerance and investment objectives before you begin.
By doing this, you can create a trading strategy that suits your needs and contributes to your market success.