What type of trader/investor are you?

It's fair to say that there are many different ways of trading and investing in the markets. Often, stereotypical images emerge to describe a trader, usually someone who is a day trader or very active. This is perhaps why trading is often seen as gambling as focus is placed on short term, fast gains, but it is often overlooked that there are many different ways to trade, over different time frames and using different methods of trading, it's up to each individual to find what works best for them.

Another false image that often emerges, especially between traders and investors themselves, is the idea that you are either a fundamentalist or a technical trader. True, many do simply concentrate on one as against the other. Chartists will tell you that all you need to know about a share is already in the charts, while fundamentalists will focus on things like value, growth, valuation momentum, etc. There is a tendency that never the twain shall meet and often one side will attack the other, Chartists are seen as the equivalent of tea leaf readers, while fundamentalists, because they might never look at a chart may often just buy because they think something is cheap on valuation, although the charts might show them that the company is in a nasty downtrend, if only they would bother to look.

As a trader/investor I've often wondered where I fit in all this as the system that I've developed tends to mix both fundamental and technical analysis. For example, I won't buy a share unless certain tick boxes are ticked when it comes to fundamentals. Occasionally, especially with "blue sky" growth opportunities, I will take a punt on the technology winning through, but even here I try to avoid one trick pony companies who basically will go bust if their one trick doesn't pay off.


In reality, I do have a chart screening system that will often present me with a list of companies that are showing the qualities that I look for from the indicators and chart set up that I use. At this stage I might know nothing about the company, but I will then look at those fundamentals to see if the tick boxes are ticked. But if I come across any other opportunity I will then measure it against my chart screening system.

So, you might say that I look at charts first, but that is only because the screening system is giving me a list of potential opportunities, but I then need to find out about the company. Pure Chartists don't do this as they will act on the basis of what the charts alone tell them, whereas I like to know something about the actual company. My feeling is the better the fundamentals, the better any future trade is likely to be. However, I also wouldn't buy anything without looking at a chart, as this is the only way you can really see past market sentiment in action.

A further example of this is company reports. I do like to see a history of positive company reports with as few red flags as possible. Chances are that a company which has consistently reported well in the past will continue to do so in the future. Then look on the charts to see how the market reacted to each release and to the company in general. I want to find positive sentiment and only charts show this. Of course, the dreaded profit warning or lost contract can come out of the blue and increasingly in recent times companies have been hit by more general sentiment surrounding their closeness to austerity measures, but whatever the negative is being nimble to move on is necessary when faced with them.

It has taken me several years to develop my own system or way of doing things and it is an ongoing process. This is like the apprenticeship or years of training that you would have to do to learn any skill, it is only after a period of time that a level of comfort emerges in what you are doing, although there are always doubts that can creep in, which in itself is a good thing as it keeps you on your toes.

So, I don't know how I would describe myself, a fundamental, technical, sentiment trader? Sounds very long winded. Perhaps the simple term trader fits the bill? But then I do go for some things that are quite long term positions, which is more like an investor Warren Buffet style, even though I use the same methods described above whether I'm trading or investing. Does it matter what you are called, in one sense whether you are fundamentalist, technical, investor, etc, whenever you buy you are making a trade, you are a trader.