Traders can use different approaches to trading. There are the following types of trading:
- day trading is the most commonly used. A trader opens positions in the morning and closes them in the evening, all transactions are carried out in one day;
- Scalping is a type of day trading characterized by a high intensity of transactions. In this case, the trader buys and sells assets with minimal price fluctuations – we are talking about minutes, sometimes even seconds between opening and closing positions. With this approach, the profit from one transaction is small, but, as a rule, there are so many of them per day that the trader wins significantly if all or most of them are successful;
- Swing trading is playing on the trend. It is not limited to one day. But seeing a certain trend, the trader tries to make the most of it. As a rule, we are talking about closing a position in a few days;
- position trading is the opening of a position for a short time and for a specific event. For example, buying a certain currency for an event that will increase its value, and dumping a position before a decrease in the value of assets;
- medium-term and long-term trading is already typical for investors. Here we are talking about closing positions several times a year or once every few years.
Trader’s strategies
In addition to the time approach, traders also differ in strategies for buying and selling assets. For simplicity, financiers have come up with a system of definitions of traders. The name of the animal corresponds to the actions of the trader in the market. This “zoo” has taken root so much that monuments have been erected to them on the stock exchanges in New York, Shanghai and Frankfurt am Main.
- “Bulls” are distinguished by the fact that, when attacking, they raise their victim up on their horns. Actually, this corresponds to the strategy of such traders – bullish play. This means that the participant buys assets at a low price and sells at a higher price.
- “Bears”, on the contrary, the opponent is pressed to the ground, that is, in exchange language, they play for a fall. They offer to buy a position from them while it is expensive, and put it after some time in the expectation that its value will fall. Then the trader buys this position at a lower price and transfers it to his buyer.
These categories of traders are the main market participants. The metaphors are very handy. Now they characterize even trends in the markets. For example, when there is an active sale of assets, the market is called “bearish”.
There are other names that rather describe the behavior of a trader in the market:
- “hares” are active and trade frequent, but small transactions, for example, using scalping;
- “sheep” are determined for a long time and are in no hurry to make spontaneous decisions;
- “pigs” are very greedy and try to squeeze the maximum out of the position;
- “wolves” are experienced traders, they act confidently and aggressively.