Types of investors in the stock market Types of investment in stocks:
First, I will introduce you to three types of people involved in the market: individual investors, short term traders, and professionals, and when you finish the first part, you will definitely have a better idea of how to participate.
Investors buy shares of companies they think are selling for less than their value, and they plan to hold their shares for the long term (usually for years). Investors generally choose to ignore the short-term daily price fluctuations of the market. If everything goes according to plan, they find that the value of their investment increases over time.
One of the most successful long-term investors, Warren Buffett, likes to say that he does not buy shares, but rather buys a business, and he buys stocks at the best possible price and holds them for as long as possible.
But bear in mind that Buffett buys shares of traditional companies (and some may describe them as stagnant trading shares) like insurance companies and banks, and rarely buys shares of technology companies. Buffett has become a billionaire by using the long-term investment strategy in stocks (the strategy is a plan that helps the constant to determine which stocks he buys and sells). For more, you can refer to the long-term investment article. A popular strategy among investors
Investors who bought and held Home Depot, Wal-Mart, and 3M shares saw their investment value rise over time.
In fact, there were many periods in the past when the investment was educative, and during those years, the stock market rose dramatically, and stock prices increased two and three times. This is the best that investors can get.
Unfortunately, there are also times when the investment is not profitable, usually through the bear market. The strategy of buying bearish stocks is another well-known strategy. It goes as follows: If there is a fall in the price of a share you own (or want to own), especially if you think the decline is temporary because the company has a firm foundation in the market, blond shares of this stock (or more share shares). The idea is that because the market tends to rise over time (or it was generally so in the past), the stocks that you bought at a lower price will eventually increase in value. People who buy falling shares make money when the shares they buy continue to rise.
The problem with buying falling stocks is that shares sometimes fall two or three times and never recover, in the past, millions of people put their life savings into stocks that looked like profitable deals but in reality, there was an overvaluation. Many financial stocks, which were at an all-time low, continued to decline, even as new buyers entered. In the worst-case scenario, not only did some stocks fall, but they hit rock bottom.
And when you buy bearish stocks, you take a risk. You are hoping to buy a stock for sale at a discount, but perhaps what you are buying is a stock that is more like a lunar commodity.
Exception: there are times when buying bearish shares makes sense. First, if the major stocks are temporarily landing with the entire market, you can buy these stocks at a low price. But I know that you may buy very early while the share price continues to fall, in addition, if you use short-term trading methods and the main share suddenly falls because the entire sector is falling, you may be able to make a quick profit if you buy falling stocks and choose the right time but it is difficult). These are strategies that require expertise and work with specific speculators.
Bottom Fishing Find lucrative deals among unwanted stocks
If you are a bottom hunt, you are looking for stocks that are low so that they seem to have hit rock bottom and have nowhere to go but to go up again. If you find one of these treasures, you can make a lot of money if you finally recover. Many stocks are unknown and undesirable in their early days, and one of these stocks is found after a rewarding experience. However, this strategy requires patience and is not suitable for those who have a short-term vision.
The danger of fishing from the bottom is that you do not know exactly when the arrow has reached the bottom. For example, when an entity’s shares were falling too high from $ 100 per share to $ 15 per share, many people think this is a winning deal and buy more shares, assuming that the stock cannot fall more than that (perhaps these are They are the same people who bought the stock at $ 50, $ 40, and $ 30.
At this point, the stock is most likely in a "struggle with death" and the falling stock price suggests that there is a major error, although you may not know what the error is until later.
Given that it may take years before the price of these shares that were desirable went up, you must be very confident that this company, which was great in the past, has the ability to rise from the wreckage, but it is unfortunate that most companies do not. Bottom arrows usually stay there for a while. However, I spoke with bottom-hunt fishing professionals ready to wait two or three years before choosing their preferred stocks which had been ignored by other investors. Successful professionals can choose between the shares that are likely to recover and the shares that will not recover, and this is not easy; That is why bottom fishing is a strategy that is not intended for the faint of heart.
Unlike investors, short-term speculators are not concerned with the company's long-term outlook; As their goal is to take advantage of short-term price movements. This means that they may sell and then buy an arrow within five minutes, several hours, days, or sometimes within a month. Today, ultra-fast speculators - speculators who rely on very fast computer software to conduct trades - (HFIS) hold shares in parts of a second; Speculators focus on the stock price, and not on the company's commercial activity.
There are many types of speculators. Speculation or trading strategies include trading positions by holding shares for a month or two), swinging trading (holding shares for a week until the target price is reached), and daily trading (not holding shares for more than a day). Daily speculators buy and sell stocks secretly (hoping to get a higher price), but always before the daily market hours are up. Generally, they convert all of their money back into cash by the end of the day.
Professional speculators use other people's money (and sometimes their money) to make investments or make trades on behalf of clients. The professional category includes speculative / trading institutions such as pension funds, banks, brokerages, mutual funds, and hedge funds (you will learn more about investment institutions later in this book).
Investment institutions have the freedom to dispose of billions of dollars, and not only affect the price of individual stocks but the entire market. Some of these institutions have developed computer programs that sell or buy shares automatically when certain conditions are met, and, as I mentioned earlier, ultra-fast speculators use
Computer arithmetic operations to perform thousands of trades per second taking profit of a portion of a penny. And accumulate these parts to become huge profits every day.
It is estimated that professional speculators constitute approximately 90% of the daily trading volume of the market, while individual investors constitute 10%.