Day Trading Or Investor - Figure Out What's Better For You
The day trader's primary objective is to trade expensive and volatile stocks on the NASDAQ and NYSE markets in units of 1000 shares or more, and make money from the small intra-day price movement.
The day trader may make a lot of trades in a single day, holding onto stocks for only a couple of minutes (or hours), and almost never overnight. Day traders are short-term price speculators. They are not investors, and they're not gamblers.
Day trading is not investing. The day trader's time period of analysis is rather short: one day. Their only intent is to exploit the stock's intra-day cost swings or daily price volatility. In contrast to stock investors, day traders do not seek long-term value appreciation.
Stock volatility is generally a rule of the market as opposed to an exception. Most stock prices move up or down in any given day on account of many different external factors.
Even when the market is comparatively calm, there are always stocks that are volatile. Day traders seek to identify a stock that seems to have a trend and then go with that trend. "Trend is really a friend" is a popular motto among day traders.
Day traders seek to pick up a relatively smaller stock movement, 1/8 or more on that stock. If day traders are trading a sizable block of shares (that is, 1000 shares per trade), then day traders will profit $125 from a 1/8 price movement.
Alternatively, if a day trader acquired 1000 shares and the trader was incorrect, which also happens, then the day trader will lose $125 from a 1/8 price movement. Volatility is actually a double-edged sword.
For expensive stocks that trade for $100 or more, a 1/8 or 13 cents movement is such a small relative price change that it occurs all the time. Consequently there are plenty of day trading opportunities.
It isn't common to see a day trader executing many, sometimes as many as 100, trades in a single day. However, an investor's time frame is much longer. Investors seek a much larger price movement than 1/8 to earn the desired rate of return. That takes time.
In brief, day traders seek to extract an income from intra-day price tag volatility by trading the stock often, whilst the investors seek a long-term capital appreciation.
If you are in need of instant business capital and are interested in putting your funds into the stock market, success doesn't happen overnight.
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