Becoming a trader involves going through a discovery process. You’ll put yourself in a number of new situations that might make you feel fearful, greedy, anxious, aggressive, nervous and nearly every other emotion under the sun. This eventually leads to developing an identity as a trader. You learn what your strengths are as well as your weaknesses.
You hear it all the time being asked…What kind of trader are you?
Of course, the time frame in which you trade is also part of that equation. Some traders like to only trade intraday, closing out all their positions by the end of the day. They find comfort in this because there is no overnight risk and everyday they start clean from scratch.
On the other hand, some traders are uncomfortable trading intraday, they don’t like all the volatility, plus they don’t have the time to stare at the computer screens all day. Sure. it’s more passive than day trading; however, it can be more lucrative…especially if you catch a high flying momentum stock and ride those profits.
Don’t get me wrong…I like to both swing, as well as day trading. In my opinion, they both have their place. They both offer awesome benefits, like the ability to work from home, being your own boss, setting your own hours, and placing no cap on your income.
For those who can see the big picture, swing trading is really suited well for them. Not only that, you’re less likely to get screwed by high frequency traders and other alien life forms. However, if you’re the type of person who just doesn’t feel comfortable holding positions overnight because of fear and anxiety, day trading makes much more sense.
If you are capable of doing both, I suggest that you trade them on separate accounts. It’s easier to measure performance that way. If one style of trading is working better than an another, maybe focus on what’s working, and even consider putting more capital behind it.
Imagine being an ice cream store owner, you look at your sales and notice that vanilla flavor sells out all the time, but you could barely sell any strawberry flavor. If your goal is to increase profits, you’re probably going to buy less strawberry and more vanilla. Same concept here, go with what works and what has proven to make you money.
Trading allows you to have a greater awareness of the market. We sometimes get so caught up watching every tick and lose sight of the bigger picture. Taking a step back, and looking at charts that stretch out a month to three months can give us a different perspective.
For example, let’s say XYZ corp is down 15% today and you think the move is excessive given the lack of news in the stock. You play for the bounce, but it never materializes and you end up losing money on the trade. Now, if you looked at a longer-dated chart, you would have seen that the stock price had risen 85% over the last week, and even though a15% move lower seems excessive, it’s not relative to the type of move the stock price has had.
Even if you don’t trade both styles, taking both viewpoints can give you a greater perspective on your trading.
Have questions? Contact me directly on Facebook