7 Types of Finance Traders in Market: No matter what is your online stock trading style is, you fall into one of the types of traders in the market. Some traders get their hand to make money, some use it as a hobby, and some trade out of sheer ego. Their motivation, goals, and objective are different. Till now, you must have heard the types of traders as per their strategies, like swing trader, day trader, trend trader, etc. However, this article differentiates them as per their style or psychology in Finance traders market.
Types of Stock Market Trading Investors
In this article, we would be discussing seven different types of stock traders. At last, there would also be a conclusion.
1. Sentiment Traders
These types of Traders execute their actions based on market interest. Sentiment analysis is the interest or mood of the whole market interest, i.e. the combined desired movement of all the people towards an asset.
A sentiment trader tries to anticipate this market mood. In other words, he works with the flow and does not try to go to extreme low and high points. There are two types of sentiment traders; first, the one who goes with the current trend. And second, the one who waits for a reversal in the market.
Also read: Guidelines for Stock Trading
There are significant risks in this type of online stock trading. The sentiment of the market is volatile and thus, can change anytime. It also requires the trader to do intensive research and analysis, both fundamental and technical.
2. Market Time Traders
Market timers are the traders who try to predict the future prices of assets. They get affected by technical indicators and news & events to buy and sell the commodities. These types of traders are generally short term as long term investors do not appreciate it much.
The reason is that while the current financial environment can execute short term stock market trading, it is almost impossible to predict the long term prices of a commodity.
Long traders also call these traders as gamblers. Remember, do not try to predict the extremes and exit the market at a reasonable time. Many traders, in the greed of extreme selling, face crashes.
3. Noise Traders
These are types of financial traders who execute their traders irrationally and illogically. They use incomplete or inaccurate data to perform their trade. Their decisions are not based upon any fundamental and technical analysis. Instead, they get influenced by little price changes. There are both positive and negative sides here.
The positive side is these are short term traders and don’t influence the asset for the long term. The negative side is most of the traders are noise traders in the market, and they trade with high volumes. They overreact to news & events, whether bad or good; their timing is not right, and they create a noise risk for rational traders who use proper analysis and research.
4. Fundamental Traders
These are the most logical types of traders on our list. They perform in-depth primary research and analysis of the company’s financial data. These are usually long term traders; however, some short term traders also use this technique. They reach to company-related events rationally and then predict the action.
It is also the safest strategy as the investment stands upon the fundamental analysis. And, the fundamental of any company is not volatile, thus not affecting the price much. However, any unpredictable hype or news can severely affect the costs here too. But, it can happen with any trader. Remember, the fundamental online stock trading requires skill, knowledge, time, & effort from the trader’s side.
5. Arbitrage Traders
These traders buy and sell the assets from one market, or derivative, to another. It is quite a simple method to make money, but it requires high capital to earn substantially. The profit is the difference between the market prices. For example, you buy a stock, say Unilever Limited, from National stock exchange of India at $329. But the same stock is trading at $330 at BSE, which is a stock market trading exchange of India.
So, the traders can buy it from NSE and sell it on BSE, effortlessly making the profit of $1. Although the difference between the markets for the same asset is negligible, the person with high capital can make profits.
The difference between the prices of the same asset is due to market inefficiencies. But, technological advancements have solved most of the problem now.
6. Paper Traders
These are not active traders; instead, they love the market. They read the market, study and analyze it more than anyone, and have written everything on paper. These are comfortable traders who like online stock trading as a hobby and do not want to risk their money (or don’t have it for trading).
Many times they also help other people with their knowledge and experience.
7. Other Traders
There are also different other types of finance traders in the market. But, the above ones were the most common and broad. Some more include:
- Aggressive Traders
- Greedy Traders
- Scared Traders
- Bull & Bear Traders
- Prophet Traders Etc.
So, these were the different types of finance traders in the market. The market is full of them, and each of them has its purpose. All influence the market in some way. Thus, it is crucial to keep the point of view of all of them in mind.
The Bottom Line
Although there are different types of traders, you can fall into one or even two/three of them. For example, you can simultaneously be a fundamental and market timer both. However, take the aggregate interest of the exchange, and then make your decision.
If you are an aspiring finance trader, then understand each of the types and then make your first move. It is also vital for you to develop your stock market trading style and strategies that work for you and apply them.
At last, remember each of the types is a significant contributor and disregarding any kind is not a good sign. Even a noise trader can make good money with online stock trading.
Have a Good day!