Entering the world of stock trading means learning a new language. Just as with any industry, stock trading has its own terms and vernacular. One of the more basic terms in the stock-trading glossary is the type of trading you are involved in. Or more exactly, what "timeframe" are you involved in?
When you see the terms "day trading," and "swing trading" swirling all around the Net, it can become confusing. Throw into the mix the term, "day trading penny stocks investor" and "long-term buy-and-hold investor," (and a few others) and it gets even more muddled. What's what?
There are numerous ways for traders to invest. A few decades ago - before PCs and online trading - buy-and-hold was the keyword. Stock brokers were as revered as much as a physician or clergyman. Stockbrokers ruled their world. And they made a pretty penny off their clients. It mattered not if their client made money or lost money in the market, the broker always made a buck! (Many bucks!)
In those days, people involved in the stock market were known as investors rather than traders. Because the main reason to buy stocks was for long-term investment. What a lot has changed in a very short time. Technology brought forth those who were looking, not for long-term investment, but quick profits. Profits that can be realized within a few months, a few weeks, a day, and in some cases, a few seconds.
So, let's look at each of the terms mentioned above and learn what each means. The clearer your understanding, the better trader you will be.
Swing Trader
This investor could be involved in stocks, options, or futures. Swing traders will hold open positions for a few weeks or a few days. As they follow a slower cycle of trades, they have fewer trades to make. This means fewer commissions, less chance of error, and the ability to catch the more vital multi-day profitable swing trades.
The swing trader relies mainly on technical analysis, but may also be interested in basic fundamentals. In other words, they will keep an eye on news releases in the industry in which they are trading.
Swing trading usually has an average profit target percentage that is higher than in day trading. Higher profit targets equals higher average risk per trade. One also has to factor in the overnight exposure during which time the trader would be exposed to any major developments that might occur.
Long-Term Swing Trader
There is that trader who has become comfortable moving with the longer timeframes of several weeks to a few months. This investor might be trading in the indexes, timing mutual funds, or assessing both technical and fundamental information.
This trader will be more apt to filter out the "noise" that is present in all trading. What this means is, it's easy to get fooled by small moves against the trend, or your trade, when day trading or even short-term swing trading. These little variations aren't as likely to trip up the long-term swing trader. The percentages these traders take off the table can run as high as 20%, 30%, and even 50% as they trade out over a few weeks.
The biggest disadvantage here is the chance of missing out on so many shorter-term swings that any market will make.
Day Trader
Day traders are buying and selling in the timeframe of a day. "Intraday trading" as it is known. Some traders will make two or three trades a day; others may make a dozen or more. They experience no overnight hold exposure. The stock may go up, the stock may go down, day traders are able to profit from both long and short. They take advantage of quick swings in both directions. In this way, they focus on higher winning percentage of trades by taking quicker profits and smaller risks. They are jumping in and jumping with a great degree of regularity.
The problem here is the need for attention during the trading day. The day trader has to be actively watching the charts; investing quality time in the endeavor. Many people don't have that kind of time to watch charts.
Attention must also be given to the costs of the transactions. Commission bills can run up very quickly. The day trader must be aware and factor this into the "cost of doing business."
Buy-And-Hold Investing
In this day and age, these investors are still around, but are almost thought of as old fossils to the faster-paced swing trader and day trader. The Buy-And-Hold investor may have a large portfolio of stocks, bonds, and mutual funds and looks to hold them... forever? Well, close.
If the investor has used plenty of fundamental analysis and market sentiment analysis, the gains can be quite profitable - and the commission costs are almost nil. By and large, the problem with this type of investor is their almost complete lack of plan for their investment.
Why did these buy-and-hold investors lose 90% or more of their holdings in the bear market? It's because they could not bring themselves to sell. (They hold hold hold! It's a mind-set.) So few of the buy-and-hold investors have any idea what a protective stop means. Having no plan for profit objective, nor any idea of when to give up and move on, spells disaster for this type of investor.
The best the buy-and-hold investor can do is move from no strategy to a specific strategy where their objectives are clear and exactly when and how they will exit. AND to place protective stops all along the way.
Which is Best?
Figuring out which trading system is best depends on who you talk to. "Swing trading," said one broker, "is easier to master, requires less attention and can be just as lucrative. There is no real reason to liquidate every position daily. Most of the news that may affect a stock's price also occurs during business hours."
Another professional is quoted as saying, "You have more control as a day trader. Overnight you are exposed to overnight risk, since the market doesn't necessarily open where it closed. Intraday you have far more control over your entry and exit prices."
And yet another opinion: "When the market turns, a good day trader can get out of a position and get back into it at better prices."
So there you go. Who is right? In the final analysis it all boils down to you. What are your objectives? What is your personality? What are your time restraints? Most people involved in the market may think they are traders, but indeed the true trader is the one with a plan and the discipline to adjust and follow it.
Trading Coaching
No matter whether you swing trade or day trade; whether you work with penny stocks, futures, or options; it's vital that you gain as much knowledge as possible. Knowledge is indeed power in this business. Rockwell Trading Inc. is a group of trading coaches. Their specialty is to turn failing or marginal traders into success stories by offering trading coaching. Rockwell brings their clients onto a path to success. Their success ratio for new traders is over 97.7%. Rockwell's Trading Coaching Program promises to improve the trader's trading techniques and increase returns, or they'll refund the purchase price. No other trading coaching company can touch their credentials. Rockwell Trading is the real deal.
Tired of floundering around all alone in your stock trading? Whether you day trade, swing trade, or buy-and-hold, let the wealth of knowledge, industry experience, and the renowned coaches of Rockwell Trading Inc. provide you with quality trading coaching. Turn your losses to profits TODAY. http://www.dblpennystox.com/rockwell
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