Types of Traders
Day Trader
A trader who will initiate and offset a position within a single trading session.
Strength :
Day traders have the ability to capture intra-day moves in the market other traders
would not. With added risks, day traders have potential for larger daily returns.
Weakness :
Day Traders tend to be more volatile, more volatility equals more risk or susceptible
to larger drawdowns.
Discretionary Trader
A trader who relies solely on hi/her subjective judgments.
Strength :
Discretionary traders have the ability to adapt to changing market conditions.
Weakness :
Discretionary traders have an added element of emotion when trading. Emotions can,
at times, cause a trader to make decisions he/she would normally avoid.
A trader who either buys or sells contracts and holds them for an extended period
of time, usually weeks or months.
Strength :
Position traders ideally enter trades to capture large moves over a long period.
Position trading can bring on large profits over time.
Weakness :
Position traders often have to endure large drawdowns in unrealized p/l. A position
trader believes a large move will take place in a certain market over a long period
of time which leaves them with a higher tolerance in drawdowns.
A trader seeking profits by holding positions for relatively short periods, often
one day to one week.
Strength :
The ability to capture intra-day moves while focusing on a larger fundamental market
move.
Weakness :
Adopts the same high risk traits as a day trader while being susceptible to large
drawdowns on trades held over a longer period.
Is trading with an exact set of rule. No discretion is ever taken.
Strength :
Systematic traders have exact parameters set for each trade. The system will create
a buy/sell signal and an exit price/time. This element will negate human error,
emotion, and intervention. Most systems are developed by back testing the set parameters
in similar market environments using historical data.
Weakness :
With market conditions changing, systems are unable to adapt. A system must be redeveloped
when market conditions are no longer the same, which can ultimately change the performance
of the overall system.