Why do people trade stocks instead of just buying stocks and holding them? People who learn to trade stocks can make more money that buy and hold investors. Take a look at a chart of Microsoft (MSFT). This tech giant is a mature stock with a good dividend and not a lot of room to grow. But in just the last year Microsoft has fallen as low as $40.47 a share and risen as high as $56.46. It recently traded for $48.43 and closed today at $56.85. The point is that there has been a lot more profit to be made by successfully predicting the ups and downs of Microsoft this last year than buy purchasing and holding the stock. In fact if you had purchased Microsoft or almost any tech stock before the burst of the dot com bubble you would have lost half your money! Learn to trade stocks and make money on the ups and downs of the market.
Contrarians and Swing Trading
When the market is going up investors get excited and keep buying until the market crashes. When the market is going down investors sell just before the bottom both losing whatever gains they had accrued and missing the chance for an upswing. Contrarians are traders who are eternally and often profitably skeptical of the market. They stake out positions in losing stocks which they believe will turn around. And they short stocks that are rising too fast and too far in expectation of a correction. A couple of years back when Chinese stocks were all the rage we wrote about swing trading Chinese stocks. In the case of the Chinese market contrarians made money both on the way up and the way down.
Past Predicts Future Again and Again
Centuries ago rice traders in Japan realized that certain price patterns were commonly followed by predictable price movement of the market. The time honored Candlestick Trading method was one of the first instances of technical analysis. This is the bread and butter approach of day traders. Throughout the trading day prices rise and fall, the same happens day by day and week by week. Statistical analysis of price movement can predict where the market is going next. If you want to learn to trade stocks using this approach you need a computerized trade station and powerful software that both predicts price movement and has data of real trades with which to practice.
Trading purely based on technical analysis occurs during the trading day. Traders enter trades any time after the market opens and are sure to exit all trades before it closes. Learn to trade stocks by this method by simulation trading. You will work with real data for real stocks, options, Forex or futures. You will learn how to enter trades and set your stops. These are important. Because the market can move quickly an unexpectedly traders enter buy and sell orders for their trade which will execute automatically if the stock moves up or down to the chosen prices. Day traders do not cheer for their stocks. They simply read price movement and follow a disciplined approach to making money.