If you’re new to trading stocks, but wanting to get into the market, your head may be spinning around strategies. After all, there are so many of them out there that it can be hard to pick the strategy that works best for you. Well, I’ve got some good news for you! Choosing a strategy for trading stocks is actually relatively simple. The key is understanding that all strategies fall into one of two categories and choosing the category that fits you best based on your personality. Here’s how it all works…
There Are Really Only 2 Different Types Of Stock Trading Strategies
While everyone seems to have their own strategy that they love to use, the truth is that every stock trading strategy falls into one of two overall categories. Those categories are technical and fundamental. Here’s what separates the two:
- Technical Stock Trading – Technical stock trading strategies revolve around charts and patterns. Essentially, stock values tend to follow clear patterns that have been mapped out time and time again. By paying attention to where in these patterns the value of stocks are, you can get a good idea of where they are going… at least in the short term.
- Fundamental Stock Trading – Fundamental stock trading is more of a long term way to go. Fundamental traders follow news that can change the intrinsic value of a stock in the long run. Instead of paying attention to charts and graphs, fundamental traders are paying attention to the news. They are watching for product launches, earnings reports, management changes and more. At the end of the day, they really could care less about charts.
How To Decide If Technical Or Fundamental Is Best For You
At the end of the day, stock traders that use both types of strategies can be overwhelmingly successful. However, choosing the strategy that fits you is all about your personality.
High Strung, Aggressive, And Ready For Action
If you’re an aggressive person by nature, chances are that the technical trading strategies will suit you best. You see, people with an aggressive nature will find themselves paying attention to what’s going on right now. Are there profits right now? Are there losses right now? What should I do next? These are all questions that someone with an aggressive personality will ask when trading. These types of people would go absolutely nuts with fundamental trading as fundamental traders look for long run gains. Nonetheless, because of the short term nature of technical trading, they tend to thrive with technical strategies.
Laid Back, Anything Goes, I Can Wait If Gains Are Big Enough
If you’re more laid back and patient, fundamental trading is likely best for you. The long run gains can be very big, and if you’re patient, you’ve got the time to wait. Technical trading doesn’t work very well for these types of people, and for good reason. Technical trading requires more time focusing on the here and now. You’ll have to open charts often and see what’s going on right now! Whereas, with fundamental trading, you find the fundamental news, make the trade, and wait for the gains to come to you. It’s really a perfect way to go for the laid back trader.
What Type Of Trader Are You?
Are you a fundamental or technical trader? What personality traits do you have that helped you make that decision? Join the discussion in the comments below!