Foreword
Which trading strategy should you choose for stock trading? Day trading?Swing trading? Long-term investment? In this article, I will walk you through their upsides and downsides so that you could make your decision wisely.
Recap
Day trade: Buying and selling stocks within a single trading day (Technical analysis)
Swing trade: Buying and holding stocks over a short period (Fundamental & Technical analysis)
Long investment: Buying and holding stocks over a long period (Fundamental analysis)
Pros and Cons
Day trading
As previously mentioned, day trading is buying and selling stocks (or other securities) within a trading day. The practice of day trading brings numerous advantages and disadvantages to traders.
The Pros and Cons are as follows:
| Pro✅ | Cons❌ |
|---|---|
| 1️⃣ Shorten the time of risk exposure | 1️⃣ Could make tremendous losses in a short period |
| 2️⃣ Quick Reward (Usually small gains) | 2️⃣ Need to be fully concentrated |
| 3️⃣ Applicable in various price range (Above or $1.5) | 3️⃣ Pay multiple Transactions Fees & Commission (Entry + Exit) |
Swing trading
As previously mentioned, swing trading is to buy and hold stocks (or other securities) over a short period, few days to several weeks. The practice of swing trading brings numerous advantages and disadvantages to traders.
The Pros and Cons are as follows:
| Pro✅ | Cons❌ |
|---|---|
| 1️⃣ Big gain, especially in low-priced stocks | 1️⃣ Do a lot of research for making prediction |
| 2️⃣ Quick Reward | 2️⃣ Require patience |
| 3️⃣ Trade in various stock price range (From blue chips to low-priced stocks) | 3️⃣ Longer time of risk exposure |
| 4️⃣ Lower Transaction Fees & Commission compared to Day trading | 4️⃣ Consist of uncertainty |
| 5️⃣ Can be accomplished by a standard brokerage account (margin | cash) | 5️⃣ On call when still holding security |
Long-term investment
As previously mentioned, long-term investing is the practice of buying and holding securities for a long time, often more than a month. This practice brings numerous advantages and disadvantages to investors.
The Pros and Cons are as follows:
| Pro✅ | Cons❌ |
|---|---|
| 1️⃣ Huge gains (stock price growth + dividend) | 1️⃣ Do a lot of research for making prediction |
| 2️⃣ Transaction fee & Commission is low | 2️⃣ Require patience |
| 3️⃣ Less risky compared to short-term trading | 3️⃣ Longer time of risk exposure |
| 4️⃣ Lower Capital Gain Tax rate | 4️⃣ Consist of uncertainty |
| 5️⃣ Need to evaluate the growth potential of the sector or company regularly to maximize your profit. |
Final Thought
There are upsides and downsides when investing with these strategies. And none of them are the best. You should understand what you are doing before you put real money into the stock market. DO NOT FOLLOW OTHERS coz you can’t suffer a loss, but others can. Make sure you manage your risk and make your plan before you start investing or trading.
[Next Lesson: Simple and Must-know terms in stock trading ]
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