There are two different types of investing strategies that people experiment with, which include short-term trading and long-term investing. Each of these strategies has their own advantages and disadvantages. Liking one type over the other does not make you a better or worse overall investor. You should pick an investing strategy that you want to use based on the amount of time you have free, and the amount of capital you currently have at your disposal.
Short-term trading happens when a person buys stock and holds it for a maximum of a few days. After a few days have gone by, they sell the stock. A stock will sometimes only be held for a couple minutes before it is sold, which is called day trading.
Short-term trading requires a lot of free time, as well as big commitments in order to make a good amount of money. Most short-term traders do it as a full-time job. These traders must constantly monitor the “tickers” and understand the technical side of investing. The technical side includes knowing about moving averages, Bollinger bands, and candle shapes.
Short-term investing requires a lot of risk, but the rewards can be great. These traders must have good money management, and know when to cut their loses. They should use stoppage points to ensure that they do not lose too much money.
Because short-term traders buy hundreds of the same stock, they require a lot of capital. Generally, short-term traders will buy $5,000 to $25,000 worth of stock and wait for the stock’s price to move 1% before they sell the stock for a good amount of money. The stock’s price did not move much, but because of the huge amount of money invested in the stock, you will receive a good return.
Long-term investing is what most people typically associate with the stock market. Almost all Brokerage firms are long-term investors who hold on to their stock for a minimum of one year. Long-term investing does not usually deal with the technical aspects, but focus on fundamental analysis.
This type of investing is great for people who already have a full-time job, and can only spare a few minutes per month on investment opportunities. Because long-term investing requires investors to hold their stock for a year or more, you should not be worried about the occasional dip of stock prices.
Any person, no matter their financial situation can be involved with long-term investing. It is not a “get-rich-quick” strategy but, assuming you invest wisely, it will give you a nice pool of extra capital when you decide to retire.
Both short-term trading and long-term investing appeal to different types of people. These strategies have advantages and disadvantages that make each one unique.