When it comes to investing, would you rather be a wallflower, sitting at a table in the same club all night, or a party animal, bouncing from club to club and always out on the dance floor? In other words, do you want to be a long-term investor or a swing trader?
There are many different types of investing, including swing trading, scalp trading, day trading, and long-term investing, but your preferred method will depend on how you like to play the game. Do you want to stick with the same trade for years or even decades at a time? Or would you prefer to bounce from trade to trade, profiting from smaller swings in the market? How much time are you willing to devote to investing? Are you patient or restless? Do you like the “slow and steady” method or would you rather have quick and volatile relationships with your stocks? Today we’re focusing on just two methods, comparing swing trading vs. long-term investing, so that you can decide how you want to trade.
Swing Trading vs. Long-Term Investing
To start, let’s look at what swing trading and long-term investing are and how they differ.
Swing trading involves holding an asset for at least one day (but up to several days), hoping to profit from price swings. The timeframe is longer than a day trader but shorter than a long-term investor, so a fair amount of patience is necessary for success.
Long-term investing, on the other hand, involves sitting still and being incredibly patient. You might hold a stock for five years, twenty years, or until the end of your life! Instead of panicking when you see short-term price movements, you have to think about the big picture and the overall quality of your investments.
The biggest difference between these two methods is, of course, the time involved. Swing trades are shorter and therefore require more participation. Your gains are made on short-term swings in the market, so you’ll be making more trades and they’ll happen in quick bursts. Long-term trades are held for many years, so the investor can sit back and watch from the sidelines. You won’t be very active in the market, but you will hopefully profit from a slow and steady rise in prices.
Of course, there’s no need to choose between these two investing methods. If you’re interested in both, consider holding some trades for the long-term while also participating in swing trading. Be both the tortoise and the hare—you’ll get the best of both worlds! But if you’re determined to choose, consider your level of patience, the amount of time you want to devote to investing, and whether you’re more interested in short-term swings or long-term movements.
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