By Corinne Speckert, TradeDecider.com
With an erratic stock market, long-term trading is not only appealing, but in the long run it can be more profitable than short-term trading because the time that accompanies long-term buying and selling allows traders to take advantage of the market rebounds and superior returns that aren't present in other methods.
Long-term trading has a much slower and steadier pace than that of day or swing trading, where traders hope to cash in on multiple stocks within a short period of time. In contrast, a long-term trade shoots for one larger gain over a longer period of time — decreasing the amount of risk as your stock becomes more stable.
One of the most tempting aspects of long-term trading is that it doesn't require the amount of dedication that short-term does. Short-term traders are often confined to their computers, watching the live market throughout the duration of a trade, whereas long-term traders have the luxury of time. The time to make thought-out decisions, to look for new opportunities and information and the time for other obligations, such as full-time jobs and families.
Going the long-term trading route can also help stabilize your mood, because you're not as vulnerable to the stock market's volatility as day and swing traders are. Sitting in front of a computer, watching as stock prices continually fluctuate between your stop-loss and exit-limit, can take a toll on your emotions and ultimately, can negatively impact your trading strategy.
Furthermore, the focus required to manage the order of entries, exits and stop-losses present in short-term trades can consequently cause traders to miss out on new opportunities found in other stocks. Fortunately, long-term traders don’t need to worry about missing potential opportunities because they have the time to carefully watch for new ones, which helps them avoid making hasty decisions. In addition, long-term traders have the benefits of diversification and portfolio management, which help to reduce risk.
Although, there are many benefits associated with trading in the long-term, there are a couple downsides to this method, such as you can't expect to make money as fast as you would with short-term trading and you may also lose some control over your money as it matures.
While you may lose some control over your money in the beginning, on the flip side, as a long-term trader you have room to actively manage a position for several months because you're not restricted to the buy-and-sell method of your short-term counterparts.
Despite the differences between short-term and long-term trading, there is one inescapable similarity - you need to have a trading plan. Unfortunately, finding that perfect strategy that meets all your needs can be a lengthy task to take on.
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Note: Because of my lack of experience with financial writing, Phillip Pham, the CEO of TradeDecider, Inc., did not credit my name for these writings. Should anyone have questions regarding the authorship of these writings, please contact Phillip Pham at (408) 693-9358 or through e-mail at dtprophet@yahoo.com and philip4av@gmail.com
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