Long Term Trading - The 5 Essentials For Success
Long Term Trading - The 5 Essentials For Success
Whether you're an experienced trader, or a brand new investor, you've probably wondered whether short term trading or long term trading is the best strategy. The answer is that both can be an effective method to trade stocks. However, all things being equal, my opinion is that long term trading should be given top consideration. There are many reasons for my conclusion, which I now share with you:
1. The Smoothing Out Of Price Fluctuations
Volatility can be a painful fact of life for all traders, but especially so for the short term investor. It's a fact that the market will eventually smooth out the factors that provoke these drastic, short term fluctuations, given enough time. Therefore, anyone experienced with long term trading can find decent profits from stocks that were previously liquidated (usually at a loss) by others. Over the long haul, good stocks abandoned by the short-termers out of panic, often will prove to be winners, and eventually will pay better than average returns. Here's the bottom line: Long-term trading practitioners, particularly those who invest in a diversified portfolio, can survive, and eventually prosper from down markets without dramatically affecting their ability to reach their goals.
2. Compounding
You've heard the old adage that time is the investor's best friend. Well, it's true! The passage of time allows for compounding to work its magic. Compounding is the mathematical process where interest is added to your investment, which in turn earns interest and is added to your principal.
3. Dividends
Let me state the obvious: Only investors following long term trading strategies will receive dividends. Short-termers never hang on to a stock long enough to take advantage of this revenue source. Here's another aspect to consider: some companies allow the long term trading investor to reinvest dividends for additional share purchases. This, of course, offers another path to increasing the overall value of your investment.
4. Reduced Time Spent To Monitor Stocks
Day traders seem to spend their entire day poring over their investments and monitoring daily, or even hourly results. This has to be done in order to capitalize on intraday volatility. We who are involved in long term trading, on the other hand, can be effective with a weekly monitoring system. The weekly approach is far less stressful to the average investor.
5. Market Corrections
The reality of trading in the stock market is that there will be times when your investments earn less and other times when you make more. You can count on days, weeks, or even months when you'll lose money But rest assured that you will earn good returns over time, as long as you employ the long term trading perspective, and have invested in quality stocks. Of course there are occasions when some quality stocks do not perform as well as expected. A savvy investor will put a time line on their investments, and relinquish those that fall short of expectations after a given period of time.
Here's the bottom line: With a long term trading perspective, and assuming you've acquired quality stocks, it is easier to realize higher returns as compared to our highly-stressed, day trader acquaintances.
Lopez is passionate about the world of Real Estate. He has written many article on his favorite subject. And he has a website devoted to all topics that concern real estate aficionados, which offers literally thousands of articles, videos, etc. It can be found here: http://www.lopezwilliams.com/ Make The Most Out Of Your CFD Trading Account What Are The Benefits Of CFD Trading? Dealing With Day Trading CFD: Pros And Cons Your Search For A Reliable Wholesaler Starts Here Where To Get Wholesale K Cups Enter The Day Trading World Cold Sore Freedom In 3 Days Rapidshare Farmville Secrets Guide Rapidshare Quantitative Easing and Binary Trading Combat The Fat Rapidshare Wholesale Glass Jars Leapfrog Leapster Explorer Learning Game System - Get These Handheld application at Affordable Costs from Web based Retailers Trading is now open to small investors too