Stocks

Stock trading involves buying and selling shares of corporate assets based on a trader’s expectations for future changes that may occur in financial markets. Stock traders can operate either as professionals that invest on behalf of an investment firm or as individuals, so there are many different ways for stock traders to interact with the financial markets. Individual traders are usually referred to as “retail” traders because buying and selling shares requires a trading brokerage. At the institutional level, traders might be employed by pension funds, portfolio managers, or hedge funds, and their profits are often dictated in percentages (based on the total gains generated by each account).

To become a successful stock trader, it is important to devote the proper amount of time it takes to research the wide variety of trading strategies that have been developed by financial experts. Fortunately, a significant amount of trading capital is no longer a concern in today’s trading environment, as many brokers offer limited funding requirements when the first deposit is made into a stock trading account. In the past, the world of stock trading might have been limited to those with inside access at large financial institutions. However, extensive broker competition throughout the market has resulted in the establishment of trading company’s with software platforms that provide easy access to stock shares in many different countries around the world.

Trading in Stock Markets

To begin trading in stock markets, the first step is to become educated on the various elements that go into a stock trade. Of course, this means dealing with terms like “technical” analysis and “fundamental” analysis that might seem overly complicated at first glance. In our stock market tutorials, we cover these topics so that new stock traders can develop a strategy that can consistently produce profits over time. New stock market traders tend to produce the best results when they build upon the strategies and experience implemented by the markets most successful traders. So, new traders should not be afraid to make a few mistakes because stock trading is a learning process that requires time and patience in order to avoid unnecessary losses.

Stock traders will primarily deal with different equity securities to achieve the preferred goal of buying shares before an uptrend (or to selling shares before a downtrend). When this is accomplished, stock traders can profit from both short-term and long-term price moves that become visible in the market. Stock market traders actually play several critical roles in the financial marketplace because they help to generate liquidity, which is an essential part of the economy (not only for stock market traders but for everyday consumers, as well). In practice, stock market traders usually focus on key financial/economic factors that include:

• Supply and Demand: Stock market traders examine fundamental economic factors that should impact stock prices through changes in the market’s supply and demand levels.
• Chart Patterns: Stock traders also implement technical analysis strategies as a way of determining likely price trends a certain stock might experience in the future (bullish or bearish).

In addition to fundamental economic analysis, stock traders might also use technical analysis indicators as a way to consider past price performance as a way to project trends that may develop in the future. Of course, there is nothing wrong with combining fundamental analysis strategies with technical analysis strategies, and this is why many expert stock traders will implement both techniques in live positions. This tactic can lead to favorable outcomes and produce results that are very successful in the world of stock trading. In this educational section devoted to trading in equities markets, we outline a wide variety of stock trading strategies that individuals and new traders can use to generate consistent profits over time.

Stock Trader Types

Stock traders are often classified into subgroups, so there is no “one size fits all” type of approach that will work for every person. The reality is that individual traders have different trading goals and investment needs, so personal factors will often determine the trading philosophies and market strategies that eventually inform particular trades. Generally speaking, this list of stock trader types can give traders an overview of the different approaches that define a majority of the trader styles present in modern stock markets:

• Day Traders: Also referred to as “intraday” traders, this term refers to individuals that enter and exit several different positions in a single market trading session. Day traders will sometimes hold positions for longer than one day but this is usually not the case.
• Swing Traders: Swing traders might take more time selecting individual stock trades in order to evaluate the potential of a trend reversal. Swing traders might choose to buy an asset at the end of a downtrend or sell an asset at the end of an uptrend. For these reasons, swing traders are also referred to as contrarian” traders.
• Buy-and-Hold Traders: Buy-and-hold traders tend to enter into even longer-term positions. This strategy is most popular with conservative traders that are looking to build wealth over time (rather than actively monitory markets for new trading stances).
• Momentum Traders: Stock traders that focus on their trading strategies on trend velocity are typically referred to as “momentum” traders. These stock traders might take a long position when an uptrend is clearly present in the market. Conversely, momentum traders might also choose to sell an asset when market prices are falling sharply.

When trading in stocks, market experts recommend gaining as much knowledge as possible. Before conducting live market trades, keeping informed will help new traders avoid many of the losses that are often seen when investments are approached in a reckless fashion. As long as time-tested trading strategies are implemented, traders can refer to historical results in order to see what is likely to influence share valuations in the future. In any case, a stock trader’s main goal is maximizing profits (capital gains) in a way that is consistent and repeatable. So, while stock market traders might not follow the same approach in all market environments, the ability to combine multiple stock trading strategies into one philosophy should be viewed as a technique that can yield terrific returns for investors.