Stock Trader - The Different Types of Stock Traders

There are different types of definitions that are used to describe stock traders.  Many people confuse online investors and short-term traders with day traders. An online trader, who uses an online brokerage firm and makes his own investment decisions, on a short-term basis, should be considered a short-term trader, even if he or she exit trades the very same day they are entered.  A short-term trader, also known as a position or swing trader, speculates on a movement a stock might make over the next couple of hours or weeks. 

A day trader, on the other hand, never holds positions overnight.  This is also known as going to bed FLAT.  Scalpers, also known as Grinders or Fraction Traders, make numerous trades a day looking to make fractional gains, usually 10 cents to 25 cents on 1000 share lots.  They trade with a day trading firm, in a shop or remotely.  They normally hold stocks for less than five minutes and sometimes even less than 30 seconds.  At the end of the day, all positions are closed and they go to bed flat.

 Day Trading Live day trading scenario captured in real-time. Click to view this day trading lesson.

Swing Day Traders can be active traders as well, but they will hold stocks for longer periods than the typical five minutes a Scalper would, in which case a stock can be held for three hours or even longer.  A Swing Day Trader tries to capture the intraday price swing of a stock, but will also go to bed flat at the end of the trading day.  A Swing Day Trader may also have an account with a day trading firm, or with a browser-based online brokerage firm.

Position Traders, also known as Swing Traders (not Swing Day Traders), try to capitalize on a stock move over a few days.  They may exit positions the same day they enter them, but will hold positions overnight looking to maximize profits from a swing in stock prices over a few days.  They may have an account with a daytrading firm, but most likely they will have an account with a browser-based online broker.

 Swing Trading Finding a swing trading setup and trading it. Click to view swing trading lesson.

Online Investors make their own investment decisions without the assistance of a broker and save on commission cost.  They typically buy stocks for investment purposes and have accounts with a browser-based online broker.  They may also trade on a shorter-term basis, but not as often.

Now that we defined the different types of online stock traders, you should be able to know which one describes you best.  It is important that you identify which type of trader you wish to be as the strategies and trading style is different.  If you are just starting out, you need to ask yourself: what type of trader you want to be?  What kind of risks are you willing to take?  Which of these risk management approaches best fit your personality?  If you are already trading, then ask yourself the same questions and see if your current stock trading system fits your personality.