Trader Types

What Kind Of Trader Are You?

A beginning investor or trader usually focuses on trading methods early in their career. These are the whys and hows of trading, which cover the wide gamut of trading and investing strategies. As I’ve mentioned elsewhere in this blog, all traders eventually gravitate towards a style or method that suits their personality. In my experience, the traders I’ve met and spoken with can be grouped into two polarities:

• Technical-oriented, who follow price action vs. Fundamental-oriented, who look at underlying economic and financial information
• Trendfollowers who seek to capitalize on an existing situation continuing into the future vs. Contrarians who seek to capitalize on a new (usually opposite) situation developing in the future.

We can view the above polarities and put them into a diagram:

The point here, is that even amongst the warring camps of technicians and fundamental traders and investors there are commonalities.

Why is this significant? This is because not all groups of traders using their methods will be correct all the time. Who is buying and selling a market largely depends on how different camps interpret market conditions.

Over time, no types of analysis will be significantly better than the others, notwithstanding the effects of luck. The reason being: markets are always shifting from one mode to another, from trending to consolidating–so a market favorable to one camp of traders, will inevitably become disadvatageous to the same camp, favoring the other camp instead. And this proceeds in alternating fashion across all types of investments, asset classes, and market groups. What’s the edge? It’s not that it’s impossible to profit using any trading method, but that it’s the trader that keeps the profit he makes from his methods that succeeds in the end.