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An Introduction to Day Trading and Swing Trading
Business Feb 25, 2020
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If you’re active in the stock exchanges, then there’s a good chance that you’ll define yourself by one of two names, a day trader, or a swing trader. While both types of people will spend their money and time attempting to profit from short-term trades and small movements in the market, they have some major differences between them that are worth considering. If you’re moving into this industry for the first time, before you can begin to concern yourself with things like the pattern day trader rule, or penny shares, you’ll need to ask yourself what kind of buyer and seller you’re going to be. Fortunately, this article should help with that.
What is a Day Trader?
Trading every day promises the opportunity to potentially embrace huge profits over a relatively short period of time. However, not everyone who gets involved with short-term investing in this way is guaranteed to make huge amounts of money. You’ll need the right skills, combined with traits like discipline and decisiveness. Many people in this space can actually end up losing a lot of money during the initial months when they’re first finding their footing. Eventually, however, you may find a strategy that works well for you.
If you decide to become this kind of trader, then you’ll work on your own, rather than operating as part of a larger group. You may choose your own flexible schedule and use your timing to compete with high-frequency hedge fund investors, and other market professionals. Usually, you’ll buy and sell a number of different securities in the same day, not holding onto anything that you purchase overnight. This can be a very stressful experience, as you’ll need to keep an eye on multiple environments to make sure that you’re exploiting every opportunity correctly.
What is Swing Trading?
Alternatively, this form of investment involves identifying changes and swings in the commodities, currencies, and shares of your market. Your swing trade may take a few days or weeks to work out, which means that you can hold onto your investments for a little longer. Additionally, unlike with the DT strategy, you won’t be making this kind of buying and selling routine into your full-time career.
Since this kind of money-making plan will involve more positions held over time, the margin requirements are often a little higher. Your maximum leverage could be as high as two times your capital. However, in day trading, pattern solutions allow you to access margins of up to four times your capital.
Swing trading can also be a lot less stressful for many people, as it comes with numerous methods that you can use to protect yourself against loss. You can set up stop less orders, which means that you can instantly sell something if it’s beginning to lose value. There’s also the option to work with other people if you need to. There’s no one-size-fits-all strategy to finding the perfect way to build your wealth. Your plan of which definition to embrace will depend on the kind of risk that you’re open to, and how comfortable you are in each trading environment.
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