Traders in financial markets are people who deal in stocks, currency pairs, crypto currency or other types of assets. Although the term investor is usually used to describe traders, there is an important difference between these two categories of people. An investor is someone who buys an asset with a long-term goal and holds it for a long time, not looking for short-term profits, while traders may also profit from transient fluctuations in the financial market.
In order for a person to be able to follow a trading strategy, he must know which type of trader he belongs to. Identifying the types of traders in the financial markets helps us to become more familiar with different trading styles.
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Types of financial market traders based on trading style
Financial market traders are divided into several categories based on the trading style they use:
- Scalper
A scalper is one of the types of traders who operate in the stock and capital markets such as the forex market and look for immediate buying and selling with immediate profit. Scalpers allocate their capital in a short period of time to buy a certain symbol, and after using minor price fluctuations and obtaining the desired profit, they immediately sell the symbol and withdraw the capital and profit earned. In fact, these people profit from small price changes in the stock market.
- Day Trader
A day trader is someone who uses price movements and fluctuations throughout the day and tries to make a profit from day trading. In this trading style, the transaction is terminated before the end of the day and the trading position created by the trader is closed.
- Swing Trader
Swing trading is a trading strategy in financial markets that uses short-term fluctuations in asset prices, and people who follow this trading style are called swing traders. In this method, the trader takes advantage of the fluctuations in the price of the desired asset by buying the asset at a low price and selling it at a higher price. Usually, this method is used a lot in crypto currency transactions. These price fluctuations may occur over several days or weeks.
- Positional Trader
Position trading strategy is one of the trading strategies of financial markets that is mostly used in forex, stock market and crypto currency. Traders who have a long-term view can use this method and not pay too much attention to market fluctuations. In this method, the trader examines the desired asset in terms of fundamental analysis and if he determines that this asset will enjoy acceptable growth in the next few weeks or months, he buys that share.
The risk of this strategy is very high as well as its profit. A position trader should have a long-term view and sell the currency or stock when he/she achieves the desired profit.
- Long-term Trader (investment trader)
Long-term traders are a type of trader in the financial markets who act as the opposite of a day trader. This style of trading can be considered a type of investment, where the trader stays in the trade for between one month and one year, and sometimes this period is more than a year. In this trading style, the trader must consider fundamental analysis and macroeconomics and try to predict the price movement in the long term.
These traders use long-term charts and do not need to constantly monitor the market because they are not looking to profit from minor fluctuations. The goal of these people is to identify a price trend that may continue for a long period of time and profit from this trend.
Types of traders based on the traded instrument
Traders can be divided into different groups based on the instruments they trade and what they buy and sell.
- Stock Trader
A stock trader is a type of financial market trader who deals in stocks. A stock trader may be a broker, investor or speculator or arbitrageur. The arbitrageur seeks to profit from price differences in geographically separated markets. Stock traders can provide advice to other traders and help them manage their trading portfolios. These people hold the stock for a long period of time and sell it after the stock has grown. The main job of these traders is to buy and sell shares of different companies.
- Forex Trader
A forex trader is a person who buys and sells different currencies. A forex trader may look at this work as his main job and first source of income, or trade different currency pairs as a part-time and secondary job. These traders may follow different trading styles and need technical analysis and fundamental analysis to predict the direction of market movement.
A forex trader may operate with his own capital in the forex market, or he can use free prop trading platforms such as FeneFX Prop Trading, which provide traders with the necessary capital to operate. A forex trader should check the daily news and identify the factors that affect the economy and national currencies of different countries and decide to trade with his analysis.
For more information about FeneFX Prop Trading, visit www.fenefx.com.
- Commodity Trader
A commodity trader is a type of trader who buys and sells basic commodities such as oil, gold, and wheat. In commodity markets, commodities are traded through futures contracts, and the traders of this market are either producers and sellers, or they act as consumers and buyers in this market. Buyers pre-purchase goods and sellers avoid the possible risk of price reduction in the future by pre-selling their goods.
The markets that are related to these goods are divided into two categories, physical and virtual, and are used to buy raw materials and raw goods. Currently, around 50 different markets around the world are known to use and trade more than 100 different types of commodities.
- Futures Trader
A futures trader is a person who commits to a futures contract and trades in accordance with it. A futures contract is a type of contract that obliges the parties to trade the underlying asset specified in the contract at a certain time in the future and at a certain price. These contracts are traded as one of the derivative instruments in the commodity exchange. Some products such as saffron, gold and silver funds are considered basic assets and can be bought and sold with future contracts.
- Option Trader
A person who trades options is called an option trader. These transactions can provide various options to people, but trading in this way is associated with high risk. These transactions are tools that allow you to buy and sell certain securities on a certain date and at a certain price.
The option contract is linked to another underlying asset, which may be the underlying asset, stocks or securities. These contracts are suitable for a certain period of time, which may be one day or several months. These transactions are in the form of buy option and sell option, both of which have expiration dates.
- Crypto Trader
A crypto trader is a trader who buys and sells crypto currencies and earns a profit in this way. Of course, today there is also a crypto currency trading robot that can buy and sell crypto currency. Some of these robots are also capable of checking and predicting prices and market trends and can replace crypto traders. This market is active 24/7 and the people who are active in this market must be on the system all day so that they can manage their transactions and get the maximum profit.
Types of financial market traders based on the trading pattern
Financial market traders are divided into several groups based on the trading pattern used in their transactions:
- Trend Trader
A trend trader is a trader who follows the long-term trends of the financial market, and the purpose of this trading style is to gain profit by analyzing and examining the price movement in a specific direction and trend. Price movement in a general direction is called a trend. A trend trader should enter a buy position when a stock is in an uptrend and a sell position when an asset is in a downtrend.
- Swing Trader
A swing trader is a type of financial market trader that operates based on the swing trading method, in which price changes and fluctuations in a short or medium period of time are considered and investigated. The goal of these people is to profit from price fluctuations that occur in the short or medium term. These traders enter into buying or selling positions as soon as they see small or large fluctuations.
- Pattern Trader
A pattern trader uses chart patterns to identify trading opportunities. There are different types of chart patterns that if traders can analyze them correctly, they will be able to make better decisions to enter or exit a trade.
- IndexTrader
These people are traders who trade based on market indices and use these indices to analyze securities, crypto currencies, forex market, etc. These indices help the trader to analyze financial markets and price charts. The most important and widely used trading indices include density/distribution index, Bollinger bands index, equilibrium volume index, directional moving average index, Aron oscillator index, Sar parabolic index and relative strength index which can be used in market analysis.
- NewsTrader
News traders are financial market traders who use news and economic events to predict price movements and buy and sell a specific asset based on this. This strategy is used in the financial markets, especially the forex market, and the order of its implementation includes the selection of news sources, time planning, analysis of forecasts, determining the trading strategy, risk management and finally executing the trade.
The risk of using this strategy for trading in the market is high, and if the trader does not have enough knowledge and experience, he may suffer heavy financial losses. Some of the most popular news trading strategies, especially in the forex market, include the trend following strategy, the spike breakout strategy, and the news reversal strategy.
The Last Word
The way of operating and investing in the financial market is closely related to the ethical characteristics of the investor, and each trader should decide which trading strategy to follow and which category of traders to be, according to his free time, knowledge, expertise, experience and purpose of operating in the financial market. be from traders. Based on the trading pattern or desired trading style as well as the traded instruments that traders follow in the capital market, different categories can be proposed that represent the types of financial market traders.
In this article, we tried to introduce some types of traders to you. You can proceed with a method that is more consistent with your characteristics and ensure your success in the financial market, taking into account your tastes and conditions.
