Facebook
Twitter
Trading securities is not a monolithic activity. Everyone comes to it with their own angle and opinions, their own strengths and investment horizon. It’s a game that’s as individual as the number of participants involved, as personal and idiosyncratic as each personality in the investment arena.
Obviously, therefore, what’s on the mind of the day trader will not be of any concern to the intermediate- or long-term trader. Nor will the tools they bring to the table be the same – nor should they be.
It’s with that in mind that we launch this new series for our valued Wyatt Research readership. It’s a program that we hope will illuminate some of the darker corners of the investment process and shed new light and understanding on some that until now might have appeared self-evident.
The Trader’s Toolkit aims to give you all the tools you need to profit from the markets. But it won’t be of any help unless you, as an investor, know exactly where you fit in the vast spectrum of market participants. In short, knowing who you are will help you better decide which tools to employ in your quest for wealth generation.
To that end, we’ve formulated the following thumbnail breakdown of seven of the more popular investor types, the better to help you find your bearings in your search for trading success.
Where do you fit in?
- Fundamental traders generally take a longer-term view of the market and make their trading decisions based on widely accepted valuation metrics and documented growth rates of select companies. They focus their research on financial reports, economic data and an evaluation of company management.
- Technical traders play the market over a variety of time horizons. They base their buy and sell decisions primarily on price and volume patterns evident in the charts of securities, and employ a number of indicators that are price-volume derivative. Trend traders are a type of technical trader.
- Day traders or “scalpers” attempt to buy and sell securities anywhere between a few minutes to a few hours, and rarely hold positions overnight. They trade with a large stake and seek to capitalize on volatility, pulling in anywhere from a few cents to a few dollars from every trade – depending on the price of the stock and the size of the line they’re trading.
- Swing traders hold their positions longer than day traders, but usually not for more than a few weeks. Their goal is to capitalize on the overall momentum of the market and/or any given security and ride the short-term waves higher and lower. Swing traders often focus on just a few stocks or industries and rely on both fundamental and technical analysis to inform their trade decisions.
- Buy-and-hold traders constitute the majority of market participants. They seek to own the best companies for the long haul, taking advantage of time, dividends and stock splits to accumulate their fortunes.
- Value traders are longer-term traders who focus on finding good companies that are selling at a deep discount to their “true” value. Fundamental analysis is relied upon almost exclusively for both buy and sell decisions, the latter of which are made when a company’s shares are deemed “fully valued.”
- Momentum traders chase the hottest names for as long as they’re hot, relying on both technical and/or fundamental indicators to inform their trades. Everything from elevated volume figures to consistent quarterly earnings beats will define a momentum stock that might be traded on a daily or weekly or even long-term basis.
It’s not exhaustive, but the foregoing should offer a framework from which to determine the tools and strategies you need to achieve greater wealth and portfolio security.
The three most profitable days of your life?
On each of these specific days, you could be making thousands of dollars in extra cash. With minimal risk. So get out your calendar…and get ready to step behind the curtain…and into a world of fast, easy money few investors will ever see. Click here to discover it.