So you want to make some serious money in the stock market?
Maybe you think you need to find a few great companies and hold those shares for months or even years. Or perhaps you read that you should create a diversified portfolio containing a range of different stocks that will weather recessions and market downturns.
Sadly all these little bits of common wisdom are actually dead wrong when it comes to making real money in the stock market.
To make money in the stock market you need to trade, which means buying and selling shares over a short time frame. With a solid trading strategy and some self-discipline you can be printing money like it was a job.
Let’s look at the 3 ways that people just like you are trading their way to riches in the stock market.
Scalping is the fastest form of trading, with scalpers making dozens or even hundreds of trades in a day, some of them lasting as little as a few seconds. Scalpers aim to make a whole bunch of small profitable trades each day by playing off small changes in the bid/ask spread for shares. These traders are focused on technical factors to the exclusion of all else, and will carefully watch the depth of market and trading volumes of a stock to identify good trading opportunities.
Day trading also focuses on technical factors, but are generally looking at bigger picture price moves that can last as long as one trading session. Day traders have a huge range of tools and established strategies to draw upon, and each one will usually develop their own unique system in the end that is a direct product of their personal experience with the market. Day traders can trade on fundamentals, technical indicators, news and more, but they are generally trying to capture medium-sized price moves that last anywhere from a few minutes to one day.
Swing traders take an even longer view than day traders, generally looking at trades that last for a few days up to a few weeks. Swing traders are looking at the ebb and flow of a stock’s long term price action, trying to take profits from the natural ups and downs that occur as a stock’s price moves on its long term trend.
This can just as easily mean selling a stock that is climbing too fast as it could buying an upward trending stock that took a short pause or dip in its price.
3 Trading Styles, One Thing in Common
All 3 of these popular trading styles have one thing in common: they are looking to take advantage of the price action that investors create as they take long-term positions in the market. In this sense, traders are taking the free money that investors leave on the table, as the long-term view of investors often ignores the smaller ups and downs that occur in a stock’s price.
Traders who can learn to read the price movements that investors leave behind can make a comfortable life for themselves by taking advantage of any inefficiencies.