Once you decide that you like to be a trader in the stock market, your first step is to decide which type of trader style you like to be.
Let's explore a few trading style now.
Firstly, we can classify trader based on the trading timeframe. Some people complete a trade in just a few hour, a few days or few weeks. I define a trade as a complete cycle of buy then sell or sell then buy, meaning that you can either have a profit or incur a loss in completing the trade.
Day traders are people who complete the cycle of buy & sell or sell & buy with a day. They start trading when the market opens and they will complete the trade before the market closes. These people do not hold the stock position over night. Advantages of day trading is to avoid over night interest charges if you are using a margin account. However, day trading is a very stressful job. They have to monitor the price movement from second to second full time in front of the PC. Day trader must make decision fast and shape, otherwise, the market will not tolerate and can penalize them for their wishy washyness.
Contra traders are people who complete the trading cycle within the contra period. The contra period varies in different exchanges and different stock brokers, typically it is 3 days now. So, the trader has slightly longer time to react compared to day traders. The advantages of contra trading is to avoid the capital outlay. The trader need to be very cautious of the market price movement as well and usually, they must be prepared to monitor the market in front of the PC as well. Due to the fact that no capital outlay is required, there is a tendency that many people like to open a large position size. This has hurt many contra traders when the market turns. The traders are forced to close their position when the contra period expireds and they can suffer a huge loss.
I classify day traders and contra traders as short term traders as well. They can complete the trading cycle within a week.
Position traders are another group of market participants who are prepared hold the position for days till weeks. They are not constrained by the day or contra period period as well. Therefore I will classify them as mid-term trader. Position trader like to ride the up trending or down trending market. "Ride the trend" & "Trend is your friend" are their motto. Many of them are not full time trader. They do not monitor the market in front of the PC all the time. Many position trader analyse the market based on daily charts.
In order to be successful in your trading business, it is important you select the trading style that suit you and I hope these short description give you an essence of the various trading styles. I am a position trader most of the time because I do not have the time to monitor the market every second. Also, day trading and contra trading are too stressful job for me to swallow as well.