There are all sorts of participants seeking to profit in today’s markets. For every personality type there is a corresponding style of approaching Wall Street. Some are long term investors seeking to identify stable companies to park their cash well into the future. Others seek quicker profits through stock market trading.
One must look inward to determine which type best suits you. How high is your tolerance for risk? What are your investment objectives? Each person has different goals while at different stages of their life. A suitable strategy needs to be derived fitting your circumstances.
Many advise that the best time to take additional risks is when you are young. When a long life of earnings lay ahead, losses are easier to absorb. This is not the case as one begins to approach retirement. Advice from a financial advisor is often helpful when making these decisions.
If you end up seeking to be a long term investor this entails viewing things with a patient mind set. Buy and hold investors must ignore the everyday swings of the market and allow their portfolios to flourish over the course of years, not months. There are several methods to buy stocks if you seek this style.
One prominent such method is called dollar cost averaging. To employ this strategy one invests an equal amount of money in a given stock on a monthly basis. This investment is made no matter what the stock is doing at that time. It can be going up or down. This removes emotion and serves to reinforce discipline. It also translates to a basis equating to the stock’s average trailing trading price.
If you aren’t blessed with this level of patience then maybe trading is more for you. As opposed to investing, a trader is looking to exploit shorter term movements in a given stock. Many active traders use technical analysis to help guide their decisions. Others rely on an increasing array of automated trading programs on the market.
Some in this class hold stocks weeks to months. Others, referred to as daytraders, hold for minutes. A brokerage account with very low commissions is paramount for this class of trader. Great profits can be made, however studies have shown the majority of daytraders end up losing money in the end.
Stock market trading can be done in many different styles employing varying strategies. Some are passive investors who buy stocks for the long term. Others are hyperactive traders turning over positions several times within one day. Whichever path you choose do your research and trade intelligently.