Are you considering getting started as a beginner in the stock market? You’d be amazed at how much profit you can make at trading in the stock market. What you need to know are the strategies to focus your efforts on to generate income and wealth. Day trading and long-term investment trading are both lucrative forms of investment to make money. And while fluctuations in companies’ stock prices are influenced by many factors, you need to develop unique skills, personality traits, and know the requirements, and criteria to meet your investment strategy.
Day trading and long-term trading requires different levels of commitments, skills, risk and yields varying returns. Therefore, you’ll need to have an in-depth understanding of both trades, and how each works.
Day trading involves quick positions opened and closed within a single day for stock traders to take advantage of the short-term fluctuations in assets prices. Day traders do not keep positions overnight and make small profits from trading numerous stocks.
Long Term Trading
Long term trading involves positions that stay open for weeks, months, or years. In long term trading, traders do hold on to stock, and securities for an extended period of time. They are long term driven and rely on fundamental analysis of future outlook of the market for trading stocks.
Both day trading and long-term trading have unique key areas for traders who want to invest in stock. However, before making decisions at the stock market on which the trade to invest in, you have to consider the key areas to make decisions on the right trade to become a successful stock trader. But what are these key areas to look out for? Here are the key areas of day trading versus long term trading.
- Capital Requirements: Day trading requires little starting capital for investment, but commission fees are considered before buying stock. Long term traders save up huge sums of money for investment capital before making investment decisions.
- Time commitments: Day trading is time consuming because day traders monitor the market daily for trading opportunities. Long term trading are long term investments, and after long term traders have bought positions, they only spend a few hours to check news, or information about their stocks.
- Skills: In day trading, traders work independently, they are very skilled, diligent, decisive, disciplined, and they make and execute plans daily. Long term traders are skilled in conducting diligent research and making market analysis before investing.
- Risk: Day trading is based on a high level of risk. Day traders sell quick positions even if stock prices move in a negative direction that was not expected and make losses as well as profits. In long term trading, the risk is minimal because long term traders study the company’s fundamentals before investing, and losses occur from unexpected company’s deterioration.
- Personality trait: In day trading, traders do not make fundamental research into companies, and they are comfortable with taking risk as prices of trades fluctuates in a single day. Long term trading is based on fundamental research for growth potentials before investing.
- Taxes: Day trading income is more taxed on each daily transaction because of its short-term nature while long term trading income enjoys a lesser rate of tax because it’s a long-term investment.
Both day trading and long-term trading is a good source of income and earning good yields. More, and more stock traders who have become successful are well experienced with the market, they have mastered the art of trading, they keep learning, and make good investment decisions. These have made the stock market highly admired and are the wonders of the stock market.
Long term investors have an advantage over day traders because of the ability to invest in stocks that are more likely to continue to increase their value. While the volatility of the stock market is similar to day trading, the latter is less volatile because more people participate. The number of traders in the market has increased over the past couple of decades, which has resulted in the recent high volatility of the market.
Investing in the stock market long term is an option that a lot of people are considering these days. Day trading and long term investing have different sets of risks and rewards, but for a large number of people, both are worthwhile.