#TradingTypes101
Fundamental trading is a method where a trader focuses on company-specific events to determine which stock to buy and when to buy it. Trading on fundamentals is more closely associated with a buy-and-hold strategy rather than short-term trading. There are, however, specific instances where trading on fundamentals can generate substantial profits in a short period.
Different Types of Traders
Before we focus on fundamental trading, here's a review of the main types of equity trading:
Scalping: A scalper is an individual who makes dozens or hundreds of trades per day in an attempt to "scalp" a small profit from each trade by exploiting the bid-ask spread.
Momentum Trading: Momentum traders seek stocks that are moving significantly in one direction in high volume. These traders attempt to ride the momentum to the desired profit.
Technical Trading: Technical traders focus on charts and graphs. They analyze lines on stock or index graphs for signs of convergence or divergence that might indicate buy or sell signals.
Fundamental Trading: Fundamentalists trade companies based on fundamental analysis, which examines corporate events, particularly actual or anticipated earnings reports, stock splits, reorganizations, or acquisitions.
Swing Trading: Swing traders are fundamental traders who hold their positions longer than a single day. Most fundamentalists are really swing trading since changes in corporate fundamentals typically require several days or even weeks to produce a price movement sufficient for the trader to claim a reasonable profit.