If you are new to the markets, it is imperative that you work hard to educate yourself before risking any money. The lure for people to invest in the markets is usually started by learning of others successes rather than failures. People are not apt to share in the major disasters they have had, and often exaggerate the profits and underestimate the losses when speaking about what they have done. It is very common to not want to relive a painful moment when speaking to others about your investment decisions. So, before you decide to take the plunge, you will have to figure out what exactly it is that you are trying to accomplish.
In order to start down your path, you will need to recognize the three methods to get involved with the markets: short term (minutes to days), swing trade (days to weeks) and long term investing (weeks to years). Simply discovering which type of trading suits you might seem like an easy task, but it is most likely the most important decision you will make. To make the most of it, you will need to match up the trading style with your level of risk and type of personality you have.
Short term trading is also known as day trading and can strictly be intra-day only or it can entail holding positions overnight as well. Day trading is probably the riskiest type of trading for most people, and really requires almost a full time effort. If you have a full time job when the markets are open, this is probably not for you, or only in small batches. Some people who engage in day trading use a day trading robot to help them find ideas during the day.
Swing trading is much more manageable than trying to learn day trading for most people, but still requires constant monitoring during the day. With swing trading the amount of time and concentration required is far less than with day trading, but it will still require you to monitor your positions each evening, and if something is close to a price target or stop area, monitor during the day as well. Swing trading tries to capture a bigger move in a stock, such as a 5% or 10% or more move in a single direction with limited risk. Because you are holding for bigger gains and a longer period of time to reach those gains, the amount of actual trading activity is far less than with day trading. Anyone looking to swing trade should keep in mind that its far less risky than day trading, but still entails betting on the short term direction in the price of a stock.
Long term investing is what most people are familiar with – buy and hold. The main thing that has differentiated over the last ten or so years is the economic climate, which makes it a riskier proposition to just buy something and forget about it. Countless people have made this mistake only to have stocks with significant gains turn into a major loss. One thing every investor must do is to have a cutoff point even on a long term position where they are out no matter what.