Deciding from the start what type of investor or trader you want to be is by NO means a prerequisite for your investing journey. The type of investor or trader you become can, and most likely will, change many times.
However, having an idea of what direction you want to go in can help you chose the right courses, follow the right markets and most importantly of all come up with the correct investing plan.
This is probably the most common. Most people who have little training, or work with financial managers, are in this category. It requires the least amount of time and effort in the long run, after you’ve done your due diligence.
Basically what a buy hold investor does is find companies (stocks) they like and believe will bring value/dividends over a long period of time.
A good example of buy and hold is similar to real estate. Chances are, when you buy a house or land or an investment property you are betting that it’s going to increase in value and/or bring you regular income. You wouldn’t buy the property for one day, you hold on to it for at least one year. This is exactly what buy and hold investors do. They buy the stocks (shares of a company) and sit put – especially through the tough times!
For people who are least interested in researching all the different sectors and companies, and for major diversification, mutual funds and ETFs are the most popular methods to own a stake in many different types of companies. Never put your eggs in one basket, and mutual funds or my favorite choice – ETFs, to some extent, do the diversifying for you.
One important note, when investing in mutual funds you are basically forced into the buy and hold mold. Most of the funds have time frames anywhere between three to five years. If you want to sell your shares of the fund beforehand, you will have to pay a fine.
ETF’s – which bring similar returns, if not better, don’t strap you in to a time line you can buy and sell whenever you want without any fees.
Even if you chose the route of being a day trader, you will need to be a buy and hold trader as well. This is what is most recommend when working on your retirement portfolio and plan.
This type of trading doesn’t involve too much time. However, with swing traders you have different time goals. For example you found a few stocks you’re interested in buying or selling. But set your holding time anywhere between overnight to two weeks.
Instead of just holding the stock until it goes to whatever price range as with buy and hold, you have specific targets and stops.
Swing trading is mainly stocks (either long or short positions) and rarely for longer than two weeks.
This is pretty much self-explanatory. You only trade during one single day and close out all your positions before the market close. Your charts are set to one to five to thirty-minute intervals.
Day trading is probably the most exciting part of playing the market. Even though it sounds like you have to sit in front of your charts from 9:30 am until 4, in reality, you can be done by noon and still have the full day. But if you truly love it, you definitely can enjoy a full day of trading.
The saying goes – ‘Successful day traders are out before lunch, the ones recovering their losses sit until the closing bell.’
To be a full-time day trader, it is highly recommended you take a course before committing to this career path. Although, if you want your money to work for you, I believe everyone needs to take a course! On this site, you’ll read a lot about indicators and charts and you will get a basic idea of what they are about. But to fully put them into proper use, classes are the only way to go.
Related Read: Fixed Income Investments
I’m a day trader. I trade futures. Most of my trades are between one minute to, the longest held ones, thirty minutes. I’m usually done by one. (Not all days are winners, but I’ve learned if I sit through the afternoon recovering my losses, my emotional state of mind leads to more losses.)
I’m also a buy and hold investor. This is for my Roth IRA retirement fund, I focus on value stocks and dividend stocks.
What kind of trader do you want to be?
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