The market participants are broadly categorized as traders and investors.
A trader is someone who will look for an opportunity and will then initiate a trade with the aim of exiting the trade early as soon as he gets the desired profit. The trader will have a short-term outlook on the market. A trader will be scanning for opportunities in the market all throughout and will base his trading decisions on the risk and reward that he gets from each trade. He can go long as well as short and has no bias towards the kind of position that he takes.
The traders are further classified as:
- Day trader – A day trader will take a trade and close it before the day ends. He will not carry forward any of his positions overnight.
- Scalper – A scalper is similar to a day trader; however, the quantity of trades is huge. The time period is less for the scalper and he aims to make a small but a quick profit. A scalper is ready to take on a lot of risks.
- Swing trader – A swing trader holds on to his traders for a long period of time and the duration of his trades can extend even to weeks.
An investor, learn more is someone who invests into a stock expecting it to appreciate in value in the future. He will wait until the investment evolves and the holding period of stocks for an investor will usually be a few years.
Investors are further classified as:
- Growth investors – The growth investors will scan for companies that may grow significantly because of the macroeconomic trend or because the industry is emerging.
- Value investors – The value investors look for the good and well-performing companies which may be in the growth or in the mature phase. These companies, however, are undervalued now because of the sentiments of the market.
It is your style of participating in the market that should let you decide whether you are a trader or an investor in the market. Traders mostly trade using technical analysis which is the study of charts. Investors do a fundamental analysis of the companies to look for good opportunities.