Saturday, October 6, 2007

Online Stocks - Swing or Stay the Day

Online traders enjoy the convenience of being just a click away from buying or selling. As they become more sophisticated in trading strategies, traders may consider which approach they prefer; day trading or swing trading. The major issue is timeframe whether you prefer rapid fire trades or longer term investing.

Day traders are geared for instant gratification or instant desperation depending on the success of the transaction. The day trader may follow a few stocks or skip around within an industry to take profits from sudden swings in the market. This strategy eliminates exposure from holds. It can be an exhausting process, sitting at the computer screen intensely for hours. Frequent trading can pile up big bills for trading fees. Thus for day traders trading fast also means trading smart. When not at the computer screen, the dedicated day trader is wired to information using notifications sent to the cell phone or other mobile electronic device. Almost like the thrill of a hunt, day traders are driven by the excitement as well as the profits from beating other traders to a winning score.

The swing trader searches for cycles and hopes to be on the right side of the cycle for maximum profits. Swing traders make use of technical analysis in trading decisions. The swing trader may use options and future as well as stocks. With this approach, the swing trader does not make as many trades in a given day as a day trader does. Waiting for that right opportunity increases the risk of each trade. But the willingness to avoid jumping at fluctuations rather than trends is part of the strategy. Also the swing trader spends less in trading fees and commissions by trading less often.

Another variation is the long term swing trading strategy. The long term swing trader counts on information from the indexes combined with fundamental and technical analysis to make trading decisions. The longer timeframe of weeks or months gives the long term swing trader some protection against those odd blips in the market day which are not real trends. Some stocks need time to level out, which can be missed by day traders. What the long term swing trader misses is the fast break day trading style; it can be made up with patience and persistence. Holding for longer periods definitely increases the risk, particularly for stocks in volatile industries. When the long term trader wins, its often a big win worth the patience.

Many online stock traders cut their teeth with day trading. Moving into the longer timeline of swing trading may seem slow at first, but also gives the trader great opportunity to become expert in one or two industries rather than being the generalist that some day traders attempt to be. The former buy and hold investor can find that long term swing trading gives the slower pace preferred with the chance of making profits from online trading.

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