If you are looking to get into the markets, you have to really educate yourself prior to actually risking any money. Most people are attracted to the markets because they hear of person X making 50% this year, person Y doubled their money on a trade and on and on. Many people will tend to overstate the profits they have made while at the same time understate the losses they have taken. It is very common to not want to relive a painful moment when speaking to others about your investment decisions. So before you decide to take the plunge, you will have to figure out what exactly it is that you are tying to accomplish
There are two 3 types of trading that can be done: short term (minutes to days), swing trade (days to weeks) and long term investing (weeks to years). Just identifying which one is appropriate for you can seem easy, but in reality it is probably one of the most important decisions you will make. You have to match up the trading style with your personality and your level of risk
Short term trading is also synonymous with day trading, although positions can be held overnight and still be considered a day trade for the most part. Day trading is probably the riskiest type of trading for most people, and really requires almost a full time effort. For those who have a full time job when the markets are open, this type of trading is not appropriate other than in rare circumstances. While some people do Day Trading manually, others prefer the help of a day trading robot to automate things.
Swing trading is much more manageable than trying to learn day trading for most people, but still requires constant monitoring during the day. With swing trading the amount of time and concentration required is far less than with day trading, but it will still require you to monitor your positions each evening, and if something is close to a price target or stop area, monitor during the day as well. Swing trading tries to capture a bigger move in a stock, such as a 5% or 10% or more move in a single direction with limited risk. Because you are holding for bigger gains and a longer period of time to reach those gains, the amount of actual trading activity is far less than with day trading. Anyone looking to swing trade should keep in mind that its far less risky than day trading, but still entails betting on the short term direction in the price of a stock.
Long term Investing is what most people are familiar with – buy and hold. The only thing that has changed in recent years is the economic climate has changed so that you no longer can just hold something indefinitely and figure you have very little risk. Many investors have learned a hard lesson when they watched a significant gain turn into a big loss because they just held on. Every investor these days needs a fixed plan to exit a position rather than hold and hope.
