What is Swing Trading? Is it better than day trading? // Swing trader strategies, swing trading stocks, investing 101 all right well this is once again looking at the markets with
David Moadel and today we're going to talk about why i am a swing trader and
not a day trader or a buy-and-hold investor
well let's get through a few definitions first day trader as i define it is
someone who generally closes all trades
by the end of the trading day so they don't hold for more than a day
a swing trader on the other hand maintains trades for days or weeks
before closing those trades and a buy-and-hold investor holds onto their
investments for months years or even decades now I hold on to my positions
for days or weeks
I'm willing to hold on to them for a few months even if necessary
although i don't prefer that if i buy options with six months until expiration
for example
that's only because i don't want time decay or theta to be a major factor
I still hope to sell the options for a profit within a few weeks or maybe a
couple of months at most
now i will admit that day trading has one big advantage drawdowns in each
trade tend to be limited especially for day traders who use small position sizes
and faithfully adhere to their stop losses
still it is entirely possible to lose a lot of money as a day trader in fact
yeah it happens all the time
now here are some disadvantages of day trading
perhaps the biggest one is the commissions and fees yet these fees and
commissions can add up for all those trades very quickly
also there are some restrictions on pattern day trading these pattern day
trading rules can hamper your ability to make these kinds of trades
also if you have a busy life and i'm sure many of us do work full time or
have kids or go to school or or all of these things spending hours watching the
markets every weekday might not be feasible and even if you have the time
to day trade
yeah maybe you don't want to perhaps you don't have a desire to spend hours doing
this every day and the biggest in my opinion disadvantage of day trading is
that there is no way to predict accurately and I mean consistently and
reliably what is going to happen in the markets in the next few minutes for the
next few hours if anyone tells you that he or she can do this
I'm telling you don't believe it now that's just my opinion of course some
day traders would disagree with me on this
and I'm sure that there are many profitable day traders out there and if
that works for them than hey that's great
as for me I would rather not attempt to predict what's going to happen or where
the markets are going in the next few minutes or hours
in fact I find it a relief not to have to guess where stock prices are headed
today i have the luxury of letting my trades work themselves out over the
coming weeks
in fact i've gotten I've actually gotten to the point where I expect my trades to
go against me
during the first few days it's no big deal because my time horizon is longer
than that and sometimes my trades don't go against me in the first couple of
days and a that's a bonus
even better but if they do no big deal
I don't mind waiting because i'm a swing trader so i expect to wait for weeks or
even maybe a couple months at most
now buy and hold investors on the other hand have an even longer time frame then
swing traders and definitely longer than day traders and if they're doing it
correctly if they're sticking to the buy-and-hold philosophy like they should
then they'll have a more relaxed attitude when their investments go
against them
still not everyone has decades long time horizons to ride out those rough patches
like we saw in the years 2000 2002 2008-2009 etc
just to give an example of retirees or people who are close to retirement
they may not be able to just write out those those tough years
besides the good old days of eight to ten percent per year for the typical buy
and hold investor and I'm thinking about the S&P 500 or something - something
similar to that those days might well be might very well be behind us
it's not 2009 anymore and we're nowhere near the bottom of the market in 2015
for example of the S&P 500 ended the ended the year
a little bit below where it started
so
for that entire year if you bought and held the S&P 500 you would have actually
lost a little bit of money
so for me swing trading isn't right or wrong it's just a preference
so with the right mix of patients and proactiveness swing trading just might
work for you too
and if you need more help with this or with investing or trading in general
feel free to contact me David Modell at David Modell @ gmail.com thanks a lot
for listening
talk to you again next time