What Type Of Pattern Day Trader Are You?

There are two main strategies used by pattern day traders.  Knowing what strategy you prefer is the first step in understanding your own psychology when it comes to the stock market.  Some traders like to go against the herd.  This is called contrarian trading.  Other traders like to go with the majority, this is called trend trading.

Both of these pattern day trading strategies make sense.  It really depends on what you are most comfortable with.

Here’s a closer look at each of the strategies

1. Contrarian trading

Like the name suggests, contrarian trading is going against the majority of investors. It means fading or going against sharp stock market moves in the anticipation of the move reversing. Contrarian investing works when moves have started to become exhausted and reverse.

The reason it works is that after everyone is convinced the market is going to go one way or the other is the very time that markets usually reverse.

Contrarians can fade bullish moves by going short and bearish moves by going long.

Caution is advised and the use of stop losses can help save your account should you accidently go the wrong way on a strong trend by being a contrarian.

2. Trend Trading

Trend trading believes that once a price trend is in place it is more likely to continue than to end.  Trend traders buy breakouts  and sell break downs in price.   Trend traders often try to catch the big, all day type moves in the stock.  However, trend traders can also search for very short term trends such as hourly or even 5 minute trends on an intraday basis.

Source: http://tradingtips.com/daily/day-trading/type-pattern-day-trader/