Choose the Best Stock Trading Strategy To Boost Your Profits
Author: CarlG.Robertts Total views: 13 Word Count: 619
If you are going to be successful in stock trading, you need to figure out which trading strategy best suits you. This means taking into account your needs and resources, your expectations for return, and your tolerance for risk.
Even factors such as age can have an impact on the decisions you make in stock trading. A few stock trading strategies used today are:
Day Trading - A day trader is someone who buys and sells during the day (intraday) and may have a high volume of trading throughout the day. Advantages? No overnight hold exposures, capitalizing on both longs and shorts throughout the day.
You may reduce your risk of losing money by focusing on a greater percentage of winning trades by accepting faster profits. These profits are smaller due to the smaller risk. This strategy also has it downsides. It requires a lot of effort, time, and work. You must always be giving the market your attention during trading hours. The cost may be higher as you will be trading stocks at a high rate.
Swing Trading - Instead of day trading, you can hold your position in the market longer, for days or weeks, and look for opportunities to make larger profits. This type of trading is called swing trading. Because you are making fewer trades, you don't incur as many commission charges. The profits can be larger and you are less likely to be pressured into making a mistake.
Opportunities for swing trading can often be found using technical analysis. Typically, the aim is for a higher profit margin than that of day trading. Of course, this also means a higher potential level of risk per trade.
Long-term Swing Trading - The investor, who prefers to swing trade long term, is similar to the Swing Trader discussed previously. However, this investor usually tries to keep their stocks over weeks and even months or years. Long Term Swing Traders will concentrate on trading the indexes. Also they will time mutual funds and research the fundamental and technical analysis of the stocks that they have purchased.
The advantage to taking a longer-term approach is that you avoid being distracted by noise in the data, which occurs in all markets. Small fluctuations are less important because you are looking at longer-term trends, though you cannot ignore them entirely. Again, the longer you are holding the position, the greater the profit percentage you need to shoot for. In the case of long-term swing trading, you may want to set a profit target much higher than those found in day trading. The disadvantage to this approach is that you are not well positioned to capitalize on any short-term movements in the market, and your risk may grow with the amount of time the stock is held.
Buy and Hold Trading - The investor that uses this strategy is often one who buys it and holds onto it for years. This type of trader may use a great deal of fundamental analysis before picking this type of trade and understand market sentiment analysis. The profits can be great with this strategy. It usually has few costs for trading when compared with shorter-term methods.
Many investors who hold stocks for a long period of time are not actively carrying out a long-term trading strategy, but just picking up stocks and holding on to them for no particularly good reason. It may generally be better, even if you plan on holding on to a stock for a long time, to approach trading as a long-term swing trader. That way, if the stock does become less attractive over time, you are positioned to minimize your losses and maximize your gains. Go into the market with clear goals, and you will be better prepared.
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