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Traders use a variety of techniques to source information. This is essential for Traders to make informed decisions and be profitable in their activities. The types of information that traders access include fundamental, technical, or market timing, noise, and sentiment. With this information, traders can even develop a contrarian view or find arbitrage opportunities.
Fundamental Information
Fundamental information, or fundamentals, refers to data that provide insights into the underlying intrinsic value of the financial asset, such as a stock, bond, future, currency, or commodity.
Fact: Fundamentals are generally gleaned from economic, industry-specific, and financial data and include economic data, industry trends, company news and events, and financial statements.
Technical and Market-Timing Information
When using technical and market-timing information, traders analyze past and current market data to spot patterns and trends. This is to anticipate future price movements in assets such as stocks, bonds, futures, currencies, or commodities.
Traders use technical analysis and other market-timing information to identify buying and selling opportunities. They use charting techniques and momentum indicators such as moving averages and oscillators to accomplish this. Examples of market-timing information include economic and financial releases and market sentiment indicators.
Noise Trading
Noise trading involves making decisions on factors that seem to be helpful but would usually generate profits equivalent to a random choice. Some of these factors can include rumors, gossip, or emotions. Noise can create market imbalances that rational traders can profit from. Also, noise traders are often associated with retail or inexperienced investors who lack the necessary tools to profit from trading.
Sentiment
Sentiment refers to the overall view of financial market participants. This can be bullish, neutral, or bearish. These views can be toward the financial markets or assets such as stocks, currencies, or commodities. Market sentiment can be attributed to factors such as economic and financial data, geopolitical events, or company news.
Sentiment indicators
Sentiment indicators are based on data comprising trading volume, price movements, and news coverage of financial instruments or markets. Sentiment is also developed through the quantification of surveys or polls. The data helps to gauge the level of optimism or pessimism in the financial markets.
Contrarian Trading
Contrarian trading involves analyzing market conditions and taking an opposing side of the prevailing consensus view of the financial markets. This is based on the premise that market participants often overreact to events, leading to significant price movements in financial markets.
Contrarian traders
Contrarian traders identify overbought or oversold conditions in conjunction with trend reversals. High conviction in the trades is required, as the contrarian view by its very definition is often unpopular.
Arbitrage
Arbitrage refers to exploiting price discrepancies between two or more instruments or markets. The assumption calls for taking advantage of mispricing in different markets, buying an asset in one market at a lower price and selling the same asset in another market at a higher price, producing a profit.
These opportunities can occur in stocks, bonds, currencies, and commodities over different exchanges or geographical regions. Arbitrage occurs because of market inefficiencies or temporary imbalances in supply and demand.
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source: https://www.investopedia.com/terms/t/trader.asp
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