1. Introduction to Stock Trader Types
  2. Stock Traders’ vs. Stock Investors' Roles in the Marketplace
  3. Decision-Making Methods: Informed, Uninformed, Intuitive
  4. Informed Traders: Fundamental Traders, Technical Traders
  5. Swing Traders
  6. Buy and Hold Traders
  7. Value Traders
  8. Trend Traders
  9. KISS Traders
  10. Momentum Traders
  11. Range-bound Traders - Break-out Traders - Channel Traders
  12. Options Traders
  13. Options Seller Traders
  14. Day Traders
  15. Pattern Day Traders
  16. Intra-Day Traders
  17. Intra-Day Scalp Traders
  18. Contrarian Traders
  19. Active and Passive Traders
  20. Futures Traders
  21. Forex Traders
  22. Online Stock Traders
  23. Pivot Traders
  24. News Traders
  25. Noise Traders
  26. Sentiment-Oriented Technical Traders
  27. Intuitive Traders
  28. Price Action Traders
  29. Price Traders
  30. Detrimental Traders
  31. Unsuccessful Types of Stock Traders
  32. Conclusion

Trading in the financial markets is the result of a successful, bilateral search between buyers and sellers. When there are many buyers and sellers, they (or their brokers) can easily arrange for trades. Those traders who display their interests in this way make it easier for other traders to find them. On the other hand, traders who expose their trading intentions may see negative consequences for their actions. These costs may be the result of the actions that other traders take when they encounter this exposed information. The responses can be categorized as follows, according to the type of trader in question. (For more, see Trading’s 6 Biggest Losers)

Market manipulators

Market manipulators use false or misleading appearances to deliberately attempt to interfere with the market. They may aim to create an artificial change in the price of a security for their own profit. There are many types of market manipulators:

·  Wash sellers - Traders who sell then quickly re-buy the same security, hoping to create the impression of increased trading volume, and therefore raise the price.

·  Churners - Traders who make both buy and sell orders through different brokers to create the impression of increased interest in the security and raise the price.

·  Poolers - In which agreements, often written, are made among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses.

·  Stock bashers - Bashers make up false and/or misleading information about the target company in an attempt to get shares for a cheaper price. This activity, in most cases, is conducted by posting libelous posts on multiple public forums.

·  Rampers (of the market) - Traders’ actions are designed to raise artificially the market price of listed securities and to give the impression of voluminous trading, in order to make a quick profit.

·  Pumpers and dumpers - This scheme is generally part of a more complex grand plan of market manipulation on the targeted security. The perpetrators (usually stock promoters) convince company affiliates and large position non-affiliates to release shares into a free trading status as "Payment" for services for promoting the security. Instead of putting out legitimate information about a company, the promoter sends out bogus e-mails (the "Pump") to millions of unsophisticated investors (Sometimes called "Retail Investors") in an attempt to drive the price of the stock and volume to higher points. After they accomplish both, the promoter sells their shares (the "Dump") and the stock price falls like a stone, taking all the duped investors’ money with it.

·  Bear raiders - Traders attempting to push the price of a stock down by heavy selling or short selling.

·  Runners - Traders who create activity or rumors (painting the tape) in order to drive the price of a security up. An example is the Guinness share-trading fraud of the 1980s.

Market manipulation is illegal under the Securities Exchange Act of 1934, but it occurs nonetheless.

Parasitic traders

Parasitic traders are those who earn a profit by exploiting other traders. They typically do not add value to the market, nor do they provide liquidity. Too many parasitic traders can degrade the health of the market.

One example of a parasitic trading activity would be when a large trader reveals his or her interest by revealing three types of information useful to others: why they want to trade, the potential price impacts of future trades they might make, and their valuable trading options. Parasitic traders may attempt to front-run the larger orders, thereby imposing costs on the exposing trader.

Defensive traders

Defensive traders make use of exposed information to protect themselves from parasitic traders. Typically, this means that they will refrain from trading. This can actually make markets more price-efficient, but it can also impose costs upon the exposing trader.

Squeezers

A squeezer is a trader who attempts to profit by controlling one side of the market. The result is that anyone who needs to liquidate a position on the other side must transact with them. In a sense, they are also parasitic traders, as they design strategies which generate profit through exploitation. Squeezers tend to secretively corner the market before traders on the other side realize they have lost negotiating powers.

Arbitrageurs

Arbitrageurs buy undervalued stocks and sell overvalued ones. Arbitrage transactions in most modern securities markets are carrying low risks, but some of these situations may lead to extremely high levels of risk. There is risk associated execution; if one part o the deal closes first, a quick shift in prices may prevent another part of the package from being closed at a profitable price. They also take on risk due to mismatch (when items being bought and sold are not identical). There are counterparty risks associated with counterparty failure, and liquidity risks if the assets used are not identical, meaning that a price divergence makes the trade temporarily lose money. These can be magnified by the use of leverage in the arbitrage process.

Bargain-hunter traders

Traders who look for companies which have been beaten down in the market. They will then swoop in and buy up stock when it is available for a fraction of its former cost.

Player traders

Player traders are those who don’t necessarily maintain their own profit as the top goal. These are traders who simply wish to roll their money over and trade stocks constantly. They can be disruptive to the natural forces of the market, although they typically don’t operate in great enough numbers to have much of an impact.

Bluffers

Bluffers are traders who attempt to fool other traders into trading unwisely. They accrue a substantial position through quiet trades, then buy aggressively to try to convince uninformed traders that there is profit to be had from a piece of news about the stock in question. They can then sell as the price of the stock goes up, although it has risen for artificial reasons. This strategy is most effective when other traders are easily fooled, but it fails when value-motivated traders recognize the bluffer’s actions.

Bluffers tend to want to expose their trading after they have acquired their positions. In order to trade out of their positions profitably, they have to encourage other momentum traders to follow them. One way they attempt to do this is by trading aggressively, as if to suggest that they are well-informed.

Rogue traders

A rogue trader is an authorized employee who makes unauthorized trades on behalf of a larger employer. In many cases, these traders cause significant issues for their institutions; Nick Leeson of Barings Bank lost $1.3 billion, while John Rusnak of Allied Irish Bank lost $691 million. Typically, these traders are not looking to cause major problems through their unauthorized activity. Rather, the trouble usually starts small: it can be an attempt to cover up a modest portfolio loss or to make a poor reporting period seem better.

They attempt to make a small amount of money quickly and secretively. Surely, there are some rogue traders who are successful in this effort, and they are usually never found out. But those who aren’t successful tend to see their deception snowball. When problematic losses become bigger and bigger, these traders become increasingly desperate. Eventually, everything unravels.

Rogue traders walk the line between civil and criminal illegality, as they are legitimate employees of authorized companies or institutions, but they have entered into transactions on behalf of those employers without permission to do so.


Unsuccessful Types of Stock Traders
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