Thinking About Trading Stocks on Volatility? Think Again «

Thinking About Trading Stocks on Volatility? Think Again



When the stock market is bouncing around like a flea on a hot tin plate, it’s tempting to cash in on the swings. All you need to do is buy when the stock is following the market down and sell when the market swings back up.

Unfortunately, it’s not that easy. In fact, most stock investors will ultimately lose money attempting this trading strategy, often referred to as swing trading.

Do some stock investors make money swing trading? Of course they do, however they are in the minority. The key to their success is a lot of hard work and a willingness to make risky trades.

Many of the stock investors who are successful in any type of trading could be considered professional traders.

They spend hours watching the market and using sophisticated technical analysis tools.

However, many stock investors attempt to cash in on volatility based on not much more than hunches or intuition. Soon or later, this type of trading leads to disaster.

If you find the temptation too strong to resist, risk only money you can afford to lose (because you probably will lose it) and risk no more than 5% of your investment capital.

Anyone can guess correctly a few times (just like anyone can win a few dollars at a casino), however the odds are very much against you.

A better strategy is paying attention to significant long-term trends in the stock market and making buy and sell decisions based on those directions, not the day-by-day, hour-by-hour, minute-by-minute, (and, yes) second-by-second stock price swings.

 

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