Day Trading Vs. Buy and Hold

When you enter the stock market, it should be with some goals. Whether these goals are immediate and aggressive or long term and fanciful, you should always know for how long you plan to stay in and what your trading strategy will be. Leading in, this information will affect all manner of your decisions; from which brokerage firm you choose to where you get your information from, so you should make the decision early. Moreover if you've found that you went into the game wanting to be a long term investor but have found your style more suited to active day trading, don't be afraid to reevaluate and re-jigger your approach.

Day Trading - Plusses and Minuses: If you are the type who does a lot of research, learns as much as you can, and ends up falling in love with the product and being a stalwart ally of this product, even in the face of conflicting information, you probably should not be a day trader. However if you're quick to the punch, rely heavily on instinct, and more often than not go with your gut, perhaps being a day trader would be more suitable for you.

One thing you need to be aware of about day trading is that to be considered a "day-trader" you need to make a lot of trades. Like thousands. You need to move quickly, you need to trade daily, and you need to choose a brokerage firm that is going to be suited to that style of investing. If you're paying 29.95 per trade, then you're probably not going to be a day trader for too long. Also remember if you are the "fall in love" type, then day trading probably isn't for you. Make a quick buck, sell it; lose money, sell it (before you've lost a lot, preferably). Being a day trader doesn't have as much to do with time you hold stocks as it does with the volume of stocks you trade.

Buy and Hold - Plusses and Minuses: Buy and Hold is a little bit more of a time tested strategy for stock traders. One thing you don't want to do when you are trading any type of stock is to "chase the market." If you've seen a stock shoot up from 2 to 10 and you buy at 11, just before the stocks had begun its return to 1, that's not a wise idea. However no one can know when a stock will do what it does or why. You just need to be patient. A stock like the example I used that's had so much movement is probably not a good buy and hold stock because you could end up holding a long time before you see your money back. But then, there are always exceptions to the rule. Before you invest in a stock, you need to know why you are investing at that price, why the stock is where it is, and what the stock is anticipated to do. In business, like in life, nothing is certain but having some guidance along the way will really help you from getting hurt.

Long term buy and hold investment is what the best of the best have done. However you shouldn't hold on to a stock just because you've lost some. If you're left holding the bag on a bad stock, you could lose it all. At the same time, if you're a long term, buy and hold investor and if you've done the proper research and follow-up, then you can't be spooked by the daily movements in prices of stocks. Stocks will do what they do; you need to know your exit price, have faith in your knowledge, and adjust your strategy when necessary.

The biggest hurdle in investing is getting started. So do your research, figure your strategy, then get the lead out. Whether you're an active trader and are making a small amount of money on fast moves or you are a more conservative investor who employs the buy and hold strategy, you need to know what you're investing in, why you are investing at the price you are, and when you plan to execute your sale of this stock.