Forex Trading Library

The 3 Types of Investors – Which One Are You?

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Everyone has their own investment style, which is a reflection of their personality.

This is why certain investment tricks may work great for one person but may be useless for another. We all have different strengths to exploit and weaknesses to protect.

On the other hand, there are some generalities that can help us find similarities in different trading styles. Doing this might help us connect with other traders, and watch out for certain phenomena in the markets.

Also, we can see certain commonalities that could give us inspiration for new strategies. Or, perhaps, it can help us find compatible ideas on how to improve our results.

1.- Spec trader

Perhaps the most (in)famous. The speculative trader is generally looking for an opportunity to jump on that others haven’t spotted yet. It’s also understood to be one of the hardest types of trading, since you have to constantly be consuming information looking for that unseen opportunity.

Spec traders typically have to have more “give” in their trading account, because they have more variance in their results. They typically rely on diversity to ensure they make money in the long run; jumping on several opportunities by not risking much of their balance.

That way, they can take advantage of bigger opportunities, while limiting their losses.

The ups and downs make it quite stressful; though the constant action can be appealing to certain people. Examples abound in popular media, such as the WallStreetBets guys.

2.- Investor trader

Sometimes called a “deep trader,”  this type of trader is kind of the opposite of a spec trader. A spec trader narrows their focus to particular areas and make a deep dive into finding data.

For example, they might specialize in mining stocks, and specifically copper miners. And then they might obsess over knowing everything about copper mining to the point of actually taking a guided tour of a copper mine.

Typically, an investor trader is looking to find a company they can know all the ins and outs of, and can then take a larger stake with more confidence.

They try to beat the spec traders by specializing in a certain area. Although larger investments typically imply higher risk, the objective is to offset them by investing in solid assets that appreciate over time.

Activist investors can fall into this category, so think of the Icahn or Elliott.

3.- Value trader

Value traders don’t care about all the hubbub around the markets. They are looking for a solid investment that will provide a return over time.

Generally, they are mathematical in their approach to the markets, focusing more on quantifiable measures. For example, focusing more on dividends than price action.

Often they are found obsessively tracking bond yields.

The idea is to combine a comfortable range of assets and minimize risk by focusing on the underlying value of the asset. They tend to be more interested in consistent, long-term returns, and don’t really care about a quick profit.

The classic example of a value investor is Warren Buffet.

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