Stock Trader Definition
A stock trader buys and sells stocks or other financial instruments in the financial markets, as defined by investorwords.com. The lucrative promise of increasing stock prices entices a variety of types of stock traders who try to cash in using different styles.
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Position Traders.
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Position traders, also sometimes called fundamentalists, buy stocks and hold on to them for a long time. Sometimes they hold on to stocks for months or even years. These traders do careful analysis of the stock markets before making decisions to buy or to sell. Hence, they concern themselves with the long-term performance of stocks rather than short-term fluctuations in the price. Many stock traders practice this style of trading.
Day Traders.
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Day trading practices buying and selling stocks or other financial instruments within the same day. They rely on significant price changes of a stock during the day, attempting to make a profit on short movements in the stock market. Day traders often make profit or loss fast, and they have to pay close attention to stock prices throughout the day.
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Trend Traders.
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Trend traders practice trend following. These traders rely on long-term fundamental trends of a stock. They often hold a stock for a few weeks to several months. According to the NASDAQ, these traders "jump" on a trend and ride it until the price shows a downtrend.
Swing Traders.
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The NASDAQ defines swing trading as a trading practice where the trader buys or sells the financial instrument at or near completion of an up or down price swing caused by daily or weekly price volatility. Investopedia further clarifies that swing trading lies somewhere between day trading and trend following. Unlike day traders, they tend to hold on to a stock for more than a day, usually several weeks or more.
Momentum Traders.
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According to Investopedia, momentum trading follows a style of trading in which a trader looks for stocks moving significantly in one direction in high volume. Momentum traders try to jump on board to ride the momentum train to a desired profit. Trend traders differ from momentum traders with the length of time they hold on to the stock. Momentum traders also practice day trading, which means that they often hold on to a stock only for a day. In addition, momentum trading places importance in high volume, one of the first indicators that a momentum trader looks for.
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