Everything You Need to Know About the 3 Different Types of Stock Trading
Just as there are a variety of ways to begin stock trading, there are also different types of investors who make trades in the market on a daily basis.
Which type of investor do you want to be? Your choice will depend on your personal comfort level with risk and your knowledge of how the stock market works. Learn about the different types of investors and what makes them unique; the more you know, the sooner you’ll be on your way to making more informed investment decisions.
Short Term Stock Traders
Some of the fastest stock trading investors are called short term traders. These investors buy and sell stocks in just minutes, minimizing trading risks by keeping the stocks for super short periods of time, meaning there’s little risk of stock price decreasing before they sell it. The profits earned from short term stock trading is also minimal, however, since there isn’t much time for the value to increase, either. Short term stock traders grow profits slower than other types of investors.
Day Stock Traders
A day trader is an investor who buys and sells different kinds of stocks and currencies within the same day. If the stock is purchased today, it is sold today before the markets close. The trick is to buy a stock when it’s at its lowest price and sell it the same day when it’s at its highest price. There are two types of day traders: retail day traders and institutional day traders.
Retail day traders are investors who normally work by themselves or with just one or two other stock traders. Retail day traders use their own money and capital to make trades.
Institutional day traders work for financial institutions and therefore have access to more resources, like high-tech software to analyze trading decisions, a direct line of access to data centers and more cash to work with at any given time.
Long Term Stock Traders
Investors who are in it for the long haul are called long term stock traders. They use strategies more likely to bring in higher returns over time, rather than quick wins. Long term stock trading investors know that over a period of time, the stock market will rise and fall and they are positioned to ride the wave until they reach their investment goals. They don’t suddenly veer off their chosen path for the next big company, hoping to buy a stock just before the company hits it big – instead, they select stocks based on their potential for steady and long-term growth.
Each type of stock trading has it’s own set of advantages and disadvantages. You should pick the type of investing you’re most comfortable with, considering the levels of risk associated with each and your long-term goals in the stock trading industry.