Stock trading is a complex process that may be quite confusing and deceitful to a new trader. Therefore, if you plan to start investing your money in shares, you should first choose a stock trading strategy that is most suitable for yourself.
The major difference between stock trading strategies is based on timeframe. It means that an active day investor will act and react differently than a long term trader. Any stock trading strategy has its own pros and cons so analyse them carefully before starting investing your savings in stock shares.
The day trader is an active player; he is always buying and selling shares inside the timeframe of a day. This kind of stock trading has to advantage of saving you the trouble of facing any overnight risk. If a shares price is experiencing a sudden rise or drop, he can immediately take advantage of the situation. A day trader is usually targeting to get quick profits while facing small risks. The bad thing about this type of stock trading system is that it is very time consuming, you have to be permanently alert and focused on the stock trends. But the trading costs represent the worst thing. The commission tends to be very large when you sell and buy several times a day.
The swing trader is an investor who is focusing on longer periods of trading, meaning a few days or even weeks. This method has the advantage of having few commissions to be paid and the opportunity to experience some important changes in shares price. The main downside of this method is its higher risk due to the longer trading period.
The long term swing trader is an investor much alike the swing trader above. The difference between these two is the longer period of time, several weeks, he is targeting. This method has a good aspect: the long term swing trader is avoiding the inconvenience of being affected by minor trading swings. And the profit is bigger; experienced traders target even a 50% profit using this method.
But bigger profit brings bigger risks; you will be trading over a longer period of time, therefore you will be exposed to bigger trading risks. And it is likely for you to miss many short-term trend changes.
The buy and hold trader is the investor who is buying stocks and hold them for a very long period of time, even for years.
This type of stock trading can bring you a very good profit with a small effort. But be careful when you choose to use this method as it may turn against you if you dont have a good, strong investment strategy. This means that the secret to earn money out of this method is not just holding to the stock and hope for the best, but to analyse the stock trend, the market evolution and to set a profit target.
In conclusion, there are methods of stock trading for any type of person. You just have to analyse every type of method and use the one it represents you best. And remember that making profit on the stock market requires brains, instinct and luck!
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