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What Type of Trader Are You?

#cityindex CITYINDEX What type of trader. you? are The Day Trader v Looks for multiple daily trades V Seeks to profit from small market movements v Not interested in overnight risk v Aims for 10 to 20 positions a day v Extremely opportunistic v Excited by heightened market volatility The Swing Trader V Focuses on price action and trends V Looks for definitive trends and reversals in prices V Ignores breaking news e.g. company earnings V Highlights specific entry and exit points The Technical Trader v Utilises historical price trends v Predicts that history normally repeats itself v Ignores breaking news e.g. earnings reports, boardroom instability V Is very mechanical and methodical in approach The Fundamental Trader V Analyses the true value of an asset ??? V Looks for overvalued or undervalued prices V Attentive to economic data, company earnings and research The Long Term Trader V Adopts a buy and hold strategy v Typically puts money into the markets as opposed to sitting in the bank account earning minimal interest. v Utilises Spread betting or CFDS as a hedging tool against losses to investments A little more detail The Day Trader Day traders place multiple trades throughout the course of the trading day and seek to profit from small movements in the markets. No overnight risk is typically held, and traders may look to place as many as 10 to 20 positions in a single trading session. Day traders are extremely opportunistic, looking to get the most out of all market moves, especially during times of heightened market volatility. Day traders are known, however, to 'chase' the markets and given the high frequency of trading, you need to have a strong sense of understanding of the markets as well as be somewhat mechanical in trading, taking losses on the chin and refraining from letting your emotions drive your trading. The Swing Trader Swing traders look to get the most out of price swings in the markets, when prices are in a definitive trend, and also seek to spot reversals in prices. Swing traders are technical in nature, choosing largely to ignore the noise of breaking news or company earnings to focus specifically on price action and trends. Swing traders don't let their emotions influence their trading behaviour, and pay strict attention to pure price action to help them to determine their next trades, The Technical Trader A technical trader or technical analyst seeks to utilise historical price trends to determine future price action. Technical traders adhere to the notion that history normally repeats itself, ignoring much of the noise in the markets that can be created from breaking news, earnings reports or boardroom instability etc. The technical trader is very mechanical and methodical, and utilises a range of technical indicators such as a moving average to highlight where current prices are heading and how to trade them. They can use the vast array technical indicators such as simple moving average (MA), relative of strength index (RSI) or momentum to help them to see the current price trend and spot trading opportunities. The Fundamental Trader The fundamental trader seeks to analyse the true value of an asset, be it a share, currency or metal, highlighting potential trading opportunities when the underlying price in the market for that asset indicates if prices are overvalued or undervalued. Fundamental traders are typically very methodical, with a good knowledge of a particular asset and of typical factors that may affect the pricing of that asset. For example, for a company, the fundamental analyst would look at earnings reports and trading updates and also evaluate major themes that may influence how that company is likely to perform going forward, such as interest rates or retail sales. The Long Term Trader The long term trader typically adopts a buy and hold strategy, which essentially means buying an asset such as a share and holding onto that asset for a number of years until it increases in value. With the FTSE 100 or Dow Jones typically seeing average yearly increase in value of between 5% - 10%, this can prove to be a good long term strategy for many investors, who prefer to put their money into the markets as opposed to sitting in their bank account earning minimal interest. Of course, there is a risk with this strategy, particularly in bear markets, that can see major indices see 20% corrections in a short space of time. This is where using spread betting or CFDS can be even more worthwhile as a hedging tool to mitigate against the risk of your long term investments losing value. As you can use spread betting or CFDS to profit from markets falling in value, long term investors can go short to the value of their physical holdings, meaning that any loss in value in their portfolio can be countered by a profit in their short sell trade. Spread betting, CFDS and Forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks. Illustrations by Jade Spranklen exclusively for CITYINDEX

What Type of Trader Are You?

shared by Toycel on Nov 16
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Each trader is different, depending on their style, strategy and personality which one do you fit into?

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City Index

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Economy
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