Stock Picks: Day Trading or Swing Trading

http://money-maker2008.blogspot.com/2008/05/stock-picks-day-trading-or-swing.html




Trading stock picks is a great way to make a lucrative living, but trading is never a no-brainer. In the trading fast lane there are always trade-offs. In particular, there are trade-offs between day trading and swing trading. Each has pros and cons.

How do you decide whether to day trade or swing trade? When day trading, your position will always close, no matter how high or low it is, when the stock market closes at the end of the day. This means there's a greater potential for profit, you can use higher leverage, and you can make your money work harder. Your finger had better always be on the pulse of the market with day trading.

In a swing trading situation, your trade won't be completed the same day. It will probably close over the course of a few days. In other words, your trading finger doesn't have to stay quite as close to the market as it would in day trading. You can think of the swing trade as having a much broader scope than the day trade.

Day traders spend a lot of time very close to their stock. They have to pay unflagging attention to their positions, staying focused, and keeping their minds alert and plastered to the stock chart. If the position starts to fall rapidly, day traders must be ready to react in time.

This means you can't manage lots of positions at once. Do you have the margin to hold a position overnight? This margin can be as much as four to one in one day, but it can only be two to one overnight.

In addition, if the trade goes against you, the brokerage may force you to sell your position or even give you a margin call if you go right up against your margin limit. So, day traders can make a larger profit, which is incentive enough for most. Swing traders don't have to glue their eyes to the position. They have a larger time frame in which to sell their stocks if they should happen to lose value. And, of course, they can handle more positions due to not having to pay such close attention to each.

The most important thing to watch out for if you opt for swing trading is the threat of the "position trade". If it does come to a "position trade", you should realize you're eating up your margins. As mentioned before, in swing trades, overnight margin requirements don't allow you to work your money as hard.

Your choice about whether to day trade or swing trade will depend on where you find the most success. You will naturally lean toward one or the other. Just remember to minimize the risk and maximize the profit. Happy trading!

Article written by Douglas Newberry

Article Source: http://www.freeforallarticles.com

Stock Picks - Day Trade - stock picks - 1dayhold



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