It’s not necessarily whether or not trading stocks is right for you, because that’s like saying whether or not putting money into a savings account is right for you. Anyone can learn how to make trades, it’s the criteria involved with each person’s trading style that varies, determining how you interact with the markets. There are three basic styles that are universally recognized by the short term trading community. If you trade in the stock exchange that doesn't mean you need to stay glued to fifteen computer screens all day as a day trader, not everyone has that certain threshold for pressure and level of awareness that is required for that type of performance. Thank goodness the market creates set-up situations for those with different styles and schedules.
Trend Trading
Trend trading is also recognized as short term investing. Traders use this style when following trends in the market, and will hold a position in a stock from a couple weeks to a full month or the entire duration of a particular trend. At least this is the trader’s intention, because they speculate for large profits of multiple points in exchange for a longer term. Out of the three basic trading styles, this style requires the least amount of time monitoring. A trader may do some initial fundamental research and technical analysis on a stock that meets their criteria before taking a position, but afterwards may only keep one eye on market activity for the next several weeks until it is time to liquidate. This style is a great for individuals who have little spare time and/or only a small amount of cash in their trade account. This can also be a great way to supplement a retirement fund.
Swing Trading
Similar to short term investors, swing traders screen stocks for one’s that meet their personal preferences and suggest at least a 1:3 risk to reward. A swing trader holds a position anywhere from a couple days to a week on average. Swing trading is great for those who have enough time to treat trading as a part time endeavor. It is also appropriate for those just starting an account with minimal funds or more, because individuals with this style typically trades smaller lot sizes starting at ten to hundred shares. With the possibility of making multiple trades per week, a swing trader’s profit objective is anywhere from at least one to multiple points per trade.
Day Trading
This style may also be referred to as momentum trading. The mission of any momentum trader is to open and close positions taken within the same day. Their objective is to get their profits and get out, trading on the ups and downs taking place within several minutes, so it is imperative for success to keep a close eye on chart activity and be aware of any developing news that may affect the market. These are the individuals you may see with three, four, and six or more computer monitors running at once. Intraday traders need to see a stock’s average daily range at one point or more, because they make several trades a day, with the intention of scalping at least a half point of profit per trade before getting out. Their ideal stocks trade in high volumes on a daily average, usually at least one million shares a day. This increases the odds they will be able to liquidate when they want to, because every minute of activity could mean the difference between a profit, or taken a loss on the trade. Momentum traders look for a risk to reward of 1:2, and trade larger sized lots starting from five hundred to one thousand shares or more. This style is best suited for experienced traders who have an account with at least thirty thousand dollars at their discretion.
Creating Multiple Streams of Income Trading in the Stock Market
Day trading, and other styles of short term trading are ways of making your money work for you. This income falls under your “Paper Income Stream”. If you don’t understand what a paper income stream is, don’t worry, please refer to: “How to Create Multiple Streams of Income” where I explain the four major ways of generating income streams. Trading is a way of making capital gains, buying and selling shares through the stock exchange. Unlike investing, you use technical and fundamental analysis of charts and company data/news to take strategic positions in the market in order to make profitable gains when cashing-out, or going liquid.
Trend trading is also recognized as short term investing. Traders use this style when following trends in the market, and will hold a position in a stock from a couple weeks to a full month or the entire duration of a particular trend. At least this is the trader’s intention, because they speculate for large profits of multiple points in exchange for a longer term. Out of the three basic trading styles, this style requires the least amount of time monitoring. A trader may do some initial fundamental research and technical analysis on a stock that meets their criteria before taking a position, but afterwards may only keep one eye on market activity for the next several weeks until it is time to liquidate. This style is a great for individuals who have little spare time and/or only a small amount of cash in their trade account. This can also be a great way to supplement a retirement fund.
Swing Trading
Similar to short term investors, swing traders screen stocks for one’s that meet their personal preferences and suggest at least a 1:3 risk to reward. A swing trader holds a position anywhere from a couple days to a week on average. Swing trading is great for those who have enough time to treat trading as a part time endeavor. It is also appropriate for those just starting an account with minimal funds or more, because individuals with this style typically trades smaller lot sizes starting at ten to hundred shares. With the possibility of making multiple trades per week, a swing trader’s profit objective is anywhere from at least one to multiple points per trade.
Day Trading
This style may also be referred to as momentum trading. The mission of any momentum trader is to open and close positions taken within the same day. Their objective is to get their profits and get out, trading on the ups and downs taking place within several minutes, so it is imperative for success to keep a close eye on chart activity and be aware of any developing news that may affect the market. These are the individuals you may see with three, four, and six or more computer monitors running at once. Intraday traders need to see a stock’s average daily range at one point or more, because they make several trades a day, with the intention of scalping at least a half point of profit per trade before getting out. Their ideal stocks trade in high volumes on a daily average, usually at least one million shares a day. This increases the odds they will be able to liquidate when they want to, because every minute of activity could mean the difference between a profit, or taken a loss on the trade. Momentum traders look for a risk to reward of 1:2, and trade larger sized lots starting from five hundred to one thousand shares or more. This style is best suited for experienced traders who have an account with at least thirty thousand dollars at their discretion.
Creating Multiple Streams of Income Trading in the Stock Market
Day trading, and other styles of short term trading are ways of making your money work for you. This income falls under your “Paper Income Stream”. If you don’t understand what a paper income stream is, don’t worry, please refer to: “How to Create Multiple Streams of Income” where I explain the four major ways of generating income streams. Trading is a way of making capital gains, buying and selling shares through the stock exchange. Unlike investing, you use technical and fundamental analysis of charts and company data/news to take strategic positions in the market in order to make profitable gains when cashing-out, or going liquid.
