What is better long term trading or short term?
I want to do Short Term Trading right now, but eventually do long term. My friend says I’m doing it in reverse. Usually people start long term then go short. He says that short term is risky compared to long term. Plus long term stocks with dividends are guaranteed money. However it takes years to make profit. I don’t want to wait that long. I’m not afraid to long money either. I know I will lose money in the beginning but I will get better. What are some pros and cons to short term versus long term trading? And what do you think is best for me? Thanks.
April 22nd, 2010 at 8:07 pm
Short term trading is not much less risky than gambling in Vegas. If you expect to make money, you’re pretty much saying that your smarter than the market–i.e., people who do this for a living.
In the late 90’s, everyobody was a day trader, and since the market was going up, they were all making money, and so they all thought they were brilliant. Then came the market downturn of 2000-2003, and they all lost their shirts.
You may get lucky trading short term, but to me that’s a curse more than a blessing, because you’ll think you’re good at it, which will lead you to take more risk.
If you do try your hand at day trading, I recommend this strategy: for every stock you buy, put in a stop order for a price that’s 10-12% below your purchase price. That way, at least you limit your losses.
As "boring" as it is, the only proven, sure-fire way to make money in the market is regular investments (like with every paycheck) over the long term. I used to be a Series 7-licensed investment advisor, and my money’s in mutual funds – low maintenance, professional management, diversification.
I hope that helps. Good luck!