Another interesting type of traders are swing traders. These traders open positions of different lengths - from several minutes to several days. Most often, they use charts with a high frequency - minute and hourly. The peculiarity in their strategies is the fact that they base their trading strategies not on stock price changes, but on trades. Swing traders prefer highly liquid stocks. All of the above traders are speculators. Traders in this category use only technical analysis, because they are only interested in prices.
Traders of this group do not pay any attention to the reports of companies. They make transactions in the market solely for the sake of profit. Traders with higher opening and closing times are called investors. Investors base their actions in the securities market on portfolio interaction. They believe that a long wait can bring better profits. Moreover, investors consider transactions in the market not from the standpoint of dry profit, but from the standpoint of competent and profitable investment in a particular company and industry. Short-term investors open positions for a period of one day to several weeks.
The analysis uses hourly and daily charts. Representatives of this group close positions before periods of reduced liquidity, for example, before weekends and holidays. Another group in this classification includes medium-term investors. Investors of this type make several transactions a year. The length of an open position ranges from one month to a year. They pay attention to the change in the weekly trend. Along with technical analysis, methods of fundamental analysis are also used.
Long-term investors make transactions for a period of one year. Most often they invest in stocks of companies with great prospects. Traders of this group take into account the factors of economic development, industries, and many macroeconomic indicators. Fundamental analysis for this type of investor plays a more important role than technical analysis. Touching upon technical analysis, I would like to say that long-term investors use charts for a period of a week or more. If you evaluate traders by their behavior in the market, then it is worth mentioning the classification based on the trader's risk appetite. Based on this classification, all traders can be divided into three groups: aggressive, moderate and conservative.
Aggressive traders are those who value profit making much more than investment safety. Aggressive traders are ready to take maximum risk in order to maximize their capital. Moderate investors are more thoughtful in making decisions about investing their own money. Such traders base their decisions on a full comprehensive analysis. Investors of this type are willing to take risks if the risk is justified. More often than not, however, in order to reduce risk, moderate traders diversify their portfolio by levels of risk in order to simultaneously have in their portfolio of stocks both potentially very profitable high-risk stocks and practically risk-free assets. This approach reduced risk and increased the likelihood of a significant increase in profits.
Conservative traders complete this classification. Their main goal is to keep what you have. This approach allows them to trade only in risk-free securities, where the probability of losing money is minimal. Traders can be classified according to the purposes for which they make transactions in the financial markets. Professional traders view stock trading as a job. They are given the task of acquiring a certain stock, making a profit, or some other task. Hedgers make transactions in the securities market in order to reduce or fix the level of risk of changes in prices for certain goods and services.
The services of hedgers are often used by manufacturers of goods, because fixing risks allows you to make up-to-date long-term budget planning. Arbitrageurs are engaged in stabilizing the market as a whole. By counter selling assets, they increase the price of one asset and lower the price of another asset. This approach allows you to regulate the position of shares in the market. Investors aim not only to extract long-term profit from the purchase and sale of shares, but also to make a profitable long-term investment. Speculators are traders who trade for profit. Traders can also be classified according to the form of ownership.
Guided by this division, professional traders and private or independent traders are distinguished. One of the distinguishing features of a professional trader is a specialized education and the presence of many certificates. Professionals work on the side of large financial companies (banks, funds, brokers, dealers, insurance companies). Merchants work for the benefit of their companies as well as the clients of those companies. Specialists are held in all countriesrated certification. Independent merchants work for themselves in their own interests at their own expense. Most of these traders do not have specialized education.
The operations they perform do not require licensing. They use the services of brokers and financial advisors.