When you start trading shares in the stock market, time is a major factor. Each type of trading is defined by the amount of time over which your trading strategy plays out. Think of it like a chess game: You can play a long, slow deliberate game, or you can play several lightning-fast tournament games in a single day. As with chess, so with trading: The speed at which you play is up to you.
The philosophy behind day trading is deceptively simple: You want to take advantage of market price movements over the course of a single day. Also, you want all your positions in place by the end of that day, without leaving any undecided overnight. If you’re a day trader, your share trading happens once or twice per day, at most. That doesn’t mean you’re inactive the rest of the day, however -- chances are excellent you’re doing research on your stocks and planning your next move.
Swing trading is something you can do without being a full-time trader, because it takes place over anywhere from several days to several months. The actual length of time you take from buying to selling is entirely up to you. Since you’re not trying to act within an extremely short period of time, you don’t have to keep such a close eye on your stocks during each business day. This makes it an ideal form of trading for traders who aren’t in the business full-time, because you can do all your research during off hours if you choose.
Long-Term Buy and Hold
If you want to hold onto your stocks even longer than swing traders, consider becoming a long-term buy and hold trader. As this type of trader, you’re in it for the long haul, and you’ll typically hold onto your shares for a year or more before selling. A different kind of stress is involved, since you’ll need to stay calm during small moments of volatility over the course of the year. What you’ll be looking for are larger indicators of a specific trend for your stocks, so you can reasonably predict when the best time to sell will be.
While the pace may be glacial for long-term buy and hold investors, you have to be the proverbial early bird swiping the worm if you’re a scalper. The types of momentary volatility in the stock market that you must ignore as a long-term investor are exactly what you thrive on and make money from while scalping. The scalping form of trading requires you to act quickly and decisively many times per day, sometimes as many as 20, to make the most of price fluctuations during times of volatility. According to Wall Street Survivor, that means the majority of your trades for this type of trading will come before 12 p.m. Eastern time.
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