A Small Privately Held Investment & Asset Trading Company
What Is Short-Term and/or Day Trading?
What exactly is Short-Term and/or Day Trading?
Strictly from a personal perspective, why I believe that "Short-Term Trading" has many advantages over "Buy & Hold" Investing.
The World and Global Equity Markets are constantly changing, second by second, moment by moment, hour by hour.
The World has always changed, and it always will, with or without our help.
However now, through technological advancements, the change has become so rapid, it can leave the Buy & Hold Investor at a huge disadvantage.
Short Term/Day Trading allows the Trader to change with the market sentiment, immediately, getting in and out of the market with a simple click of a computer mouse button.
While many Day Traders continually attempt to daily "grind out" profit several times a day, I take a "lazy man's" approach to Day Trading, and my daily goal is to simply do one ?successful? trade a day, and preferably, that trade will occur within the first few minutes following the markets opening. I am exceptionally over-zealous in my conservative and very strict approach to trading, and I will only trade when the odds of making a profitable trade are in my favor, and if they are not, and the sentiment of the stock market is not in total alignment with my trading rules, I will not trade!
Day Trading, provides me with the excitement, stimulation, and financial returns necessary to fulfill my personal goals, and although Colorado based, I can do business and/or live anywhere in the world that interests my wife and me, if internet access is available, although usually in the mountains or shores of America or the world.
If my wife and I want to go on an adventure for a short period of time, and there is an internet connection available, we can pack our computers up, and move our business location in just a brief amount of time, and if I choose not to work, and shut my doors for a day, week, month, or year, my business will remain intact until I open my doors again. There are many rules to Day Trading, but my extremely conservative trading philosophy has presented me with 4 trading rules that I constantly adhere to and never deviate from:
1, Know the stocks you are buying and selling better than you know the back of your hand. 2. Cut losses quickly and take profits quickly. 3. Never get greedy. 4. Never leave a position open over night!
There is of course the other side of the coin, opposite Day Trading, which is called "Buy and Hold", but based upon recent observations of market trends and the devastation that occurred leading up to the Financial Bailout of 2008, I personally believe that "Buy and Hold" trading is an obsolete way of trading, and is the most dangerous investing, anyone can participate in.
Here are just a few examples of what can happen in the "Buy and Hold" environment.
And you wake up one morning and discover the management of the corporation whom you decided to invest in, quit listening to their customers, or perhaps failed to remain competitive in their technology, and their customers went to their competition, immediately devaluing your investment.
To a Buy & Holder, it may be a long wait to see your investment pay off again, if ever!
Medical Company 5 Year Chart
Medical Company 5 Year Chart
Whoops! You go to bed thinking, that FDA approval of a new product you've invested in a corporation for, will finally be approved tomorrow, and you sleep soundly.
But before the market opens, the word is out, "No Approval".
Imagine what it would feel like to have lost $15 per share before the market opens and you can't get out of your position. And the next day, it drops even further.
The Buy & Holder has a lot of holding to do, possibly forever..
But a Day Trader or Short Term Trader, looks for stocks that continually go up and down (which is natural) $1 or more a day, or every few days if "Swing Trading", and jumps on board, either at the perceived top or perceived bottom, buys a 1,000 shares, and when they see their pre-determined goal met for the day or the period, sells their position, puts the money in their account, and waits for the next opportunity.
No surprises!
Here are 4 examples of the type of stock you look for as a Day Trader.
Medical Company 3 Month Chart
This medical stock consistently goes up and down every few days, averaging over a $1 move per day.
To a Day Trader following this stock up and down, they will wait on the perceived high or perceived low, to occur, buy a 1,000 shares, and when the $1 per share is reached, sell their position, put the money in the bank, and wait for the next opportunity to occur, which will be very soon, if the Trader has an established basket of 10 to 20 stocks they monitor constantly.
Just count the number of times during this 3 month period that a trader could take $.50 or $1 off the table and deposit it in their cash drawer.
Day Traders have a basket of 10-20 stocks that they follow every day, and when the odds are in their favor and indicate that a stock is going to move up or down, get in, take their profit, and quickly get out of the trade.
And they do it over and over again.
If you don't get greedy, you can do it over and over again, forever.
Technical Company 3 Month Chart
Example #2 This Tech stock is continually moving up and down in price, every day, every week, and every month.
The Day Trader will have stocks representing several different sectors that they follow daily.
When the trend moves from one sector, for example, Medical Stocks, to Tech Stocks, the Day Trader moves into the present hot sector, and with the stock they've selected to represent their interests in that particular sector, they buy in, and quickly sell their position, when their pre-determined financial goal has been met.
The Day Trader studies constantly and knows that it is not necessary to trade everyday, and they will only trade when the odds are in their favor, but if they are following 10 to 20 stocks constantly, and the market is in their favor, they can usually find an opportunity to earn $.25, $.50, or $1 per share per day, without being greedy.
1,000 shares of stock times $.25 a day, is $60,000 a year, and they can sleep at night. Just imagine if they were able to find stocks that they could earn $.50 a day per share.
Oil Service Company 1 Month Chart
Example #3
This Oil Service Company is constantly on the move, up and down, and as you can see on this 1 month chart, the opportunity to take $.25 - $.50 a day is provided on a regular basis, if you have this in your basket of stocks.
By following sectors and have a few select stocks in each sector, representing your basket, you can move with the market. If it's excited about medical stocks one day, but the next day it's switched to tech stocks, and the next day it once again switches, this time to oil or oil service stocks, the opportunities constantly present themselves to a trader.
Medical Company 1 Month Chart With Technical Indicators
Example #4
Another medical company which almost every day, and certainly every week, provides the trader an opportunity to take $.25 - $1.00 per share, off the table.
An active trader will have 10 -20 stocks in their basket of "Stocks To Follow Daily", which regularly move up and down $1 every day or week, over and over again.
By buying and selling 1000 shares of one of the stocks in a trader's basket, just once a week, for $1 profit, based on a 52 week year, the return would be worth $52,000 a year!
But if a trader, starting with 1000 shares per trade, builds his trading bank gradually and deliberately, to a point that 2000 shares can be traded each trade, for the same $1, the return would be $104,000 a year, etc., etc., etc.!
