If you are looking to get into the markets, you have to really educate yourself prior to actually risking any money. Most people are attracted to the markets because they hear of person X making 50% this year, person Y doubled their money on a trade and on and on. People are not apt to share in the major disasters they have had, and often exaggerate the profits and underestimate the losses when speaking about what they have done. It is human nature to avoid pain, even in casual conversation with others. So before you decide to take the plunge, you will have to figure out what exactly it is that you are tying to accomplish
In order to start down your path, you will need to recognize the three methods to get involved with the markets: short term (minutes to days), swing trade (days to weeks) and long term investing (weeks to years). Simply discovering which type of trading suits you might seem like an easy task, but it is most likely the most important decision you will make. To make the most of it, you will need to match up the trading style with your level of risk and type of personality you have
Short term trading is also synonymous with day trading, although positions can be held overnight and still be considered a day trade for the most part. Day trading is probably the riskiest type of trading for most people, and really requires almost a full time effort. For those who have a full time job when the markets are open, this type of trading is not appropriate other than in rare circumstances. Some people who engage in day trading use a day trading robot to help them find ideas during the day.
As opposed to trying to learn day trading, swing trading is a great alternative for most people. With swing trading the amount of time and concentration required is far less than with day trading, but it will still require you to monitor your positions each evening, and if something is close to a price target or stop area, monitor during the day as well. The goal of swing trading is to capture a much larger move than with day trading, often targeting a 5%, 10% or even higher move in price. Since swing trading entails holding for bigger gains and for longer periods of time, the actual trading activity of buys and sells is far less than with day trading. One should keep in mind that while it is less risky than trying to day trade, it is still betting on the short term direction of a stock and by nature is risky in itself.
Long term investing is what most people are familiar with – buy and hold. The main thing that has diffentiated over the last ten or so years is the economic climate, which makes it a riskier proposition to just buy something and forget about it. Many investors have learned a hard lesson when they watched a significant gain turn into a big loss because they just held on. One thing every investor must do is to have a cut off point even on a long term position where they are out no matter what.
Recent Comments