Investing in the stock market is a financial tool one should consider going into to maximize wealth. Historical data reveals that it has consistently been going up since inception, with an average ten-year performance of 9.2% in the past 140 years. Although certain economic factors are currently at play due to the worldwide pandemic, the plunges and deep dives can be windows of opportunity to enter the market during these times.
Trading is not an easy feat. It takes time to master the ins and outs of this activity. It is not something one does out of whim because that could wipe out all investments. Nevertheless, everyone can learn to do it, even people who have a 9 to 5 job.
The basics of trading
Stock investors, especially beginners, would best benefit from diversified portfolios for long term keeping. However, if one desires a more dynamic and higher fund yield, active trading is the way to go. That involves capitalizing on short-term market movements to buy and sell stocks. Buy low, sell high. That is the basic idea when going into trading.
Different kinds of trading
There are different kinds of trading strategies one can subscribe to when entering the market.
It is the most short-term among all the forms of trading. Traders hold their position for seconds, at most a minute, targeting small intraday movements in the market. The main goal is to make fast trades, even with just a little profit. Gains accumulate as more trades are made during the day.
It is another short-term form of trading, but unlike scalping, traders hold their position for longer minutes or even hours but will exit as the market closes. It requires more analysis of the daily performance of the market. It also relies on small profits that add up based on the number of entry and exit during the day’s activity.
Swing trading can be a short-term or medium-term way of trading. Stock positions are maintained from days to weeks. Market analysis can spread out for a more extended period, removing the pressure of monitoring it as closely as scalpers or day traders do.
Traders who do position trading rely on long-term term price movements for maximum returns. The trade can span for extended periods, from weeks or months to years. The focus is on significant changes in the market trends rather than on minor fluctuations and price pullbacks.
Why swing trading works best for working professionals
Riding the stock market is highly profitable but only with the right mechanism. Not all the above trading practices work for everyone, especially those who have regular 9 to 5 jobs. For this, swing trading is the best option.
A regular job can restrict trading activities. It is not always possible to be online to execute a trade in front of a computer. It is also challenging to conduct a thorough analysis of what is currently going on in the market.
Swing trading gives more time to do market analysis without the stress of quickly acting on it for fear of market volatility. Since the focus is on medium to long term gains, there is no pressure to keep checking the stock performance once the stocks are in position. That makes it possible for trading to be enjoyed while doing a day job.
Swing traders can earn higher since the focus is on more massive profits for a more extended period. An average of 5% to 10% can be achieved during the trading window. However, this gain is accumulated over days or years. Proper timing in entering or buying and selling stocks will play a big part in how well one will profit from this activity.
Relaxed learning curve
Technical know-how is crucial when getting into trading. Going in without it is like going in a war without battle gears. However, it is not a big deal with swing trading if one does not know the most technical details at the onset, especially in terms of short term fluctuations.
More general knowledge of stock performance can be a good starting point to enter the market as a swing trader since the focus is on stock performance over an extended period. It will provide more time to analyze and study the stock being considered.
A working professional may not have the time to absorb all ideas at once, so it is the right choice because it allows more time to immerse in the technicalities and market analysis.
The different types of trading pose varying risks to traders. However, one cannot be strictly labelled as riskier than the others because it would still be highly dependent on the trader’s behaviour. However, it is easier to manage the risks involved in swing trading because of its slower pace. There is a better chance of recovering losses since there is no pressure to sell quickly, allowing time to redeem stocks’ value.
Lower capital requirement
Day traders require more capital since there is a need to keep buying to acquire small but many gains during the day. The legal starting amount set for these types of traders is $25000. It is a decent starting point to gain considerable profits.
Swing traders may also begin with the same amount if preferred, but there are no legal standards set as a minimum. Thus, it is highly attractive to those who are not ready to trade in high amounts. It allows young professionals to enter the market faster without being restrained by a lack of capital.
Trading is a very profitable investment mechanism. Everyone can get in on it and take advantage of the worldwide economy’s current status, even working professionals. Having a day job should not be a hindrance to getting into the action.
Swing trading is a mechanism that can help maintain a portfolio without hampering regular activities. It can easily fit daily timetables, give high profit, allow time to study further, manage risks better, and require lower capital. All of these make it the best trading approach for working professionals.