Day Trading Versus Investor - Find Out What's Ideal For You
The day trader's ultimate objective is to trade expensive and volatile stocks on the NASDAQ and NYSE markets in the amounts of 1000 shares or more, and then cash in on the smaller intra-day price movement.
The day trader may make several trades in one day, holding onto stocks for only a few minutes (or hours), and almost never overnight. Day traders are short-term cost speculators. They are not investors, and they are not gamblers.
Day trading isn't investing. The day trader's time period of analysis is rather brief: one day. Their only intent is to exploit the stock's intra-day price swings or daily price volatility. Unlike stock investors, day traders do not seek long-term value appreciation.
Stock volatility is generally a rule of the market instead of an exception. Most stock costs move up or down in any given day as a result of various external factors.
Even if the market is relatively calm, there are usually stocks that are volatile. Day traders seek to identify a stock that has a trend and then go with that trend. "Trend is actually a friend" is a popular motto amongst day traders.
Day traders seek to pick up a relatively little stock movement, 1/8 or more on that stock. If day traders are trading a large block of shares (that is, 1000 shares per trade), then day traders will profit $125 from a 1/8 price movement.
On the other hand, if a day trader obtained 1000 shares and the trader was incorrect, which also occurs, then the day trader will lose $125 from a 1/8 price movement. Volatility is really a double-edged sword.
For pricey stocks that trade for $100 or more, a 1/8 or 13 cents movement is such a small relative price change that it happens all the time. Consequently there are many day trading opportunities.
It's not common to see a day trader performing many, sometimes as many as 100, trades in a single day. On the other hand, an investor's time frame is a lot longer. Investors seek a much larger price movement than 1/8 to earn the preferred rate of return. That takes time.
In short, day traders seek to extract a revenue from intra-day value volatility by trading the stock regularly, while the investors seek a long-term capital appreciation.
If you're in need of instant business capital and are thinking about putting your money into the stock market, success doesn't happen overnight.
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Day Trading Versus Investor - Find Out What's Ideal For You
The day trader's ultimate objective is usually to trade expensive and volatile stocks on the NASDAQ and NYSE markets in increments of 1000 shares or more, and profit from the small intra-day price movement.
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