| As many people contemplate getting into the stock | | | | markets. |
| markets, most of them tend to concern themselves | | | | The second style in the middle of the trading |
| primarily with what stocks to buy. This is very | | | | spectrum is the swing trader. These traders look to |
| common among people unfamiliar with the markets. | | | | profit from the swings that stocks make over a few |
| They are all looking for that $12 stock that is going | | | | days or even weeks. They will hold positions over a |
| to go to $200. They will take stock tips from almost | | | | month or more, but not very often. They jump into |
| anyone such as their gardeners, taxi drivers, or even | | | | positions that they expect to profit right away. |
| co-workers. | | | | And when they see a profit, they lock it in with a |
| The problem with this is that there are many things | | | | trailing stop. Often times, swing traders will sell half of |
| that they are not considering. One is their own | | | | their position to lock in a nice profit and let the other |
| personal psyche. The fact is if we all got the stock | | | | half run. Swing traders generally have a winning |
| recommendation from someone like Warren Buffet, | | | | percentage at around 45-60% and are notoriously |
| we would all make different levels of profit from that | | | | for cutting losing positions very quickly. To be |
| same stock. This is because some of us would jump | | | | successful, the amount earned from winners must be |
| right into the investment; some of us think about it | | | | about twice as much as what they lose from their |
| for awhile, and some of would get in way too late. In | | | | losing trades. Swing traders have to have clear |
| addition, we would all sell the position at different | | | | concise trading rules before they take any positions. |
| times. Some of us would take a small but quick | | | | They have to be disciplined as this trading style is |
| profit, others would hold out for a bigger profit, | | | | mentally harder than long term trading. One benefit |
| some of us would hold out until the profit turned into | | | | they have is that swing traders can profit from rising |
| a loss. | | | | or falling stocks. |
| What this indicates is that we all have our own | | | | The final style is the other end of the trading |
| personal stock trading style that is most suitable for | | | | spectrum is the day trader. These traders look to |
| our personality. Let us look at some of the three | | | | scalp small profits from positions that they buy and |
| traditional trading profiles. | | | | sell each day. They usually close the trading day |
| The first style at one end of the spectrum is the | | | | without holding any positions overnight. Day traders |
| long term investor. These traders are looking for the | | | | have to have a very high winning percentage of |
| one stock that will earn them a huge profit. They | | | | around 85-90% to be profitable. They have to be |
| trade with the long term trend. They give each | | | | very aware of commissions and slippage costs |
| position a fairly wide berth and usually set a wider | | | | associated with their trades. |
| stop loss than most traders. The characteristic of the | | | | Their trading rules must be well tested and well |
| long term trader or trend rider is that their winning | | | | defined as one bad trade could wipe out an entire |
| trade percentage is usually very low at around | | | | month of profits. Needless to say, day traders have |
| 20-35%, but they expect that the one or two | | | | to be mentally strong as this trading style is by far |
| winning stocks that they discover each year will earn | | | | the most stressful. They can profit from both rising |
| more than enough to make up for all those losers. | | | | and falling markets and their biggest benefit is that |
| Long term investors have to be very patient and | | | | they limit their exposure by not holding positions |
| persistent generally only take long positions in bull | | | | overnight. |