Disclaimer: I’m still a rookie when it comes to the stock market and I’m just explaining to you what I’ve learned as a rookie investor. This post is mainly for informational purposes. 😃
Even after three years, I still label myself a rookie when it comes to the stock market. I’ve tried day trading, swing trading, and of course, investing in stocks in the long term. Being a single mother of three, I realized that day trading alone wasn’t for me because you’re constantly looking at a computer screen or screens analyzing data – CONSTANTLY.
The New York Stock Exchange opens at 9:30 am EST which means that if you’re a trader from the west coast, you’ll be waking up extra early (I used to wake up at 4:00 am) to skim through your phone for any relevant news, look through all your charts, plan out your trades, or whatever strategy you had mapped out the night before . It’s a lot of work. I was on family medical leave at the time and spent almost seven days a week in a hospital chair analyzing and trading stocks. For those that who have no clue what a share is (I’m sure you do otherwise you wouldn’t be reading this post), basically when you buy a share, you are buying a piece of the company. Which means, you are technically part owner of that major corporation. If that still doesn’t make sense, it’s totally okay. I used to be on the same boat.
There are many platforms where you can buy stocks. If you plan on investing a small amount of money, I recommend an app called Robinhood.
Moving forward, if you’re a newbie to the whole stock market world, here’s what I’ve learned about the differences between day trading, swing trading, and long term buying:
Day traders normally capitalize on a small movement of a stock. They basically buy shares of a company and if that specific stock goes up, even if it’s for a few cents, they sell, and that’s how they make their profit. Most day traders buy and sell a stock within seconds or even minutes.
Swing trading is a trading style where an investor purchases the stock, holds the stock for the short term, then sells the stock hoping to make a profit. A swing trader can hold a stock for a period of a few days or a week to a few months. Here’s an example: Let’s say “ABC Corporation” is coming out with a new product. This specific product is all over the media, consumers are anticipating the release of the product and people are talking about it all over social media. A swing trader will purchase a stock from this company during the hype and hope to catch a chunk of the price move once the product releases. Once the stock goes up, the swing trader sells then moves forward onto the next.
Long Term Buying
This is when you purchase stocks and hold it for the long term. And when I say “long term” I’m speaking several years because in my mind, I’m thinking about how the company will do in 3-5 years. Some investors will even hold a stock for up to 10 years. In my opinion, I think 10 years is too long. I mean, how can you think about the future of a company that far ahead? Generally speaking, if you plan on purchasing stocks in the long term, try diversifying your portfolio by purchasing a stock that pays dividends; I explain how dividends work later.
So there you go. If investing in stocks is something you’re interested in, this was just a sneak peak. It took me about a year to understand the lingo, learn how to read charts, and hours of reading. One thing I do want you to know is that you’re never obligated to hold onto a stock. You can sell your shares at anytime. But most importantly, always pay yourself first!