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

When referring to the investment world, it’s common to hear words like “trading” and “investing” used interchangeably. In actuality, though, these activities are quite different. Both traders and investors are participating in the same marketplace, but they are accomplishing very different types of tasks, and the strategies that they employ are also very different. Still, it’s essential that a marketplace have both traders and investors in order to properly function.

Stock traders are individuals (or entities) engaged in the trading of equity securities, or the transfer of other financial assets. They work either for themselves or on behalf of someone else, and may operate as agents, hedgers, arbitrageurs, speculators, or investors.

Stock investors, on the other hand, are individuals (or entities) who use their own money to buy equity securities. The goal of the stock investor is to gain returns, which come in the form of income, interest, or appreciation in value (capital gains).

For a bit more detail on these two broad categories, look below:

Stock traders

Traders participate in the market buy purchasing shares in a company. Their interest lies in the market itself, not in the company’s fundamentals. Most often, stock traders attempt to glean a profit from short-term price fluctuations, and their trades usually last somewhere between a few seconds to several weeks. Most stock traders are professional, although traders may work full- or part-time in this position.

Markets which include the trade of commodities are especially important to a stock trader’s strategy. Thus, when a trader buys a commodity like wheat, for instance, he or she is doing so to capitalize on small price fluctuations which occur because of supply and demand. For this reason, stock traders usually focus on:

  • Price patterns – Traders tend to look at the history of prices of a particular stock in order to predict future movements. While this is challenging, and there are many analysts who believe that past performance is not an indicator of future price, this remains commonly known as technical analysis. (For more, see Basics of Technical Analysis)

  • Supply and demand – Traders tend to observe their trades closely within a single day in order to determine how and where prices and money are moving.

  • Market emotion – One of the keys to successful trading is gauging the climate of the broader investing space. Traders may make use of techniques like “fading,” wherein they bet against the crowd after a major move takes place in the market.

  • Trader support – Market makers (typically one of the largest subcategories of traders) may be hired to generate liquidity by trading rapidly.

Traders provide an essential function in the market through the generation of liquidity, which aids both traders and investors. (For more, see Understanding Financial Liquidity)

Stock investors

Stock investors, on the other hand, are market participants who utilize fundamental analysis to make informed investment decisions. They tend to treat stock shares as part ownership in a company, rather than an opportunity to make money based on price fluctuations alone. It’s common for investors to subscribe to the “buy and hold” strategy, which entails purchasing stock ownership in a company and holding onto those shares for a long time (typically years). (For more, see Introduction to Fundamental Analysis)

For stock investors, some of the most important considerations when planning a purchase include:

  • Value – Investors look for company’s shares which represent a good value. One example of this would be a scenario in which two companies that are otherwise similar are trading at different earnings multiples. The lower of the two may provide the better value, as it is likely that the investor would pay less per dollar of earnings for that company than the other.

  • Success – Investors are generally interested in finding companies with the possibility of future success, and they measure those decisions by looking at characteristics like cash flows and financial strength.

Both traders and investors are crucial to the proper functioning of a market. Investors rely on traders for the liquidity through which they are able to buy and sell shares in their companies. Traders rely on investors for a basis from which to buy and sell. Together, these two broad groups form the financial markets as they exist today.

Decision-Making Methods: Informed, Uninformed, Intuitive
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