Should I Trade Or Invest?

Please understand that in this context trade means swing trade. So the real question is should I swing trade or invest?

Obviously, one that is swing trading successfully will stick to it. Similarly, a profitable investor will resist swing trading.
Though those are spontaneous answers, one will make a better decision after reading in full this article.
Let's get started.

Swing Trading Goal

The goal of swing trading is to take advantage of medium term financial markets opportunities without being dragged into a long term risk.

Though, it is always great to harvest medium term profits in comparison to waiting for a long time, one is also susceptible to be taken out of positions within days or weeks.

For example, a swing trader can accumulate a large loss within months because of the lack of time to hang on to positions as a swing trader. The disadvantage of trading is the lack of time to allow for short and medium term price fluctuations that are in fact corrections in a bullish trend.

One also can run out of trading capital if the stop losses are activated on regular basis because of short and medium term corrections.

Consequently, one is caught in a losing roller coaster that is depleting new funds as they are added to the trading account.

Really, It is similar to using a credit card that one is only paying the minimum monthly charge while increasing the credit limit every time one reaches the ceiling.

At the same time, monthly interest charges are growing to the point where one will fall into a credit default.

So the more active a swing trader is, the more he or she can lose from short term to medium term.

Also a swing trader does not get dividends.

Please understand that all swing traders are effectively working for long term investors. Similarly a day trader is working for swing traders.
A swing trader can lose one thousand dollars or more within a month.

A swing trader who often fails to align the short, medium and long term trends is pruned to enter swing trades at the wrong time. He or she may be correct in the long term, but he or she will lose real money because of short and medium term price-action.

For a swing trader, he or she must constantly make accurate decisions in short to medium term or he or she will only take loses.

There is no dividend payment and time to hang on until a motive wave pops out.
Truly, it is like trade well, and get paid or lose within days or weeks or when stops are hit.

Another swing trading challenge apart from the accurate market timing is setting the best stop loss. Many times, a swing trade will time the market like a pro, but will lose just because the stop loss is inappropriate or set incorrectly.

In that instance, I will recommend to that swing trader to switch to investing as soon as possible because his market timing is excellent, but the stop loss setting is causing him or her to lose. And I mean it.

Investors' Goal

Generally, the investors are not in a rush like traders. Usually, they deploy an intelligent investment strategy and that is it. They let the time and market environment take care of the rest like a farmer who sows a good seed onto a fertile land in a right season.

A sophisticated investors invest in companies that pay dividend. Sometimes, they combine growth and income investing strategies to create a kind of money machine through a dividend reinvestment plan (DRIP).

Contrary to an excellent swing trader that is still losing because of the inappropriate stop losses, an investor can afford to hang on to those paper losses before they turn into profit. Also, a swing trader who is under pressure (because of the price-action is coming near the stop losses) may be forced to cut losses before all is gone in a split of second.

An smart investor is usually compensated with juicy dividends.
Note that some companies do pay dividend every quarter. That is really good for income investors.

Imagine that a company that regularly pays dividend finds its stock decline from $40 to $10. After, a thorough investigation, one realises that the decline was unjustified because of the fundamentals and market cycles.

So one purchases 1000 shares at $10 each using a commission free investing platform like trading 212.

Now close your eyes and take a deep breath. Good! If the company kept paying 20 cents dividend per share each quarter, how much annual dividend is that? If your eyes pop out that is alright. Yes, that is $200 each quarter. Without lifting a finger or doing any more hard lifting, one gets $200 at the end of every quarter.

Now I get your attention. Yes or no?

So we are talking about $800 annual dividend before taxes. Imagine one more time without closing your eyes this time that you just hold on to those creme de la creme 1000 shares for five years. That will be $800 times five with a total of $4000 before taxes. I can see you smiling, but do not get carried away.

Obviously, things does not always work well all the times, but one that keeps learning will surely improve. The danger will be to start gambling and refusing to learn, practise and gain better skills and experience.

Warning

My intention is not to excite traders and investors, but present them with facts about trading versus investing.

Now, I have a question for you.

Have you got what it takes to become an intelligent investor?
Do you know how to become a better investor?

Is trading instead for you ?

The truth is that, many will make the same old mistake. That mistake is to set the wrong goal. That wrong goal is to have. Take is from me, one never has anything in life unless one is. In my opinion, the correct goal is to be. Yes, to be or not to be that is the ultimate question.

First set the goal to be a better investor, and work on it until you reach it.

To set a goal is about making an important decision in a lifetime.

Obviously, some will fail, but do no call yourself a failure too soon, because life may be calling you for better things. If one is destined for other things better than investing then investing is not for one. Am I speaking too much again?

At the same time, others are multi talented beings who can play every game at the highest level. I do not know about you, but I believe I am the temple of the true God, therefore I am bigger than any challenge.

Final Thought About Should I Trade Or Invest

When I was younger, I day and swing trade without sleep. I set short term goals and live day by day. Today, I am wiser than before because I understand that the financial markets reward those that are more patient and do everything to control the risks.

A competent trader needs a bigger trading account that many retail traders lack.

Also a trader can be easily squeezed out positions while an intelligent investor gets paid at the end of the financial markets turbulence. In my opinion trading prepares one to become a highly sophisticated investor. A competent trader who does not switch to investing in the end is leaving too much money on the table.

I would say that the road to the advanced investing is trading. A fully fledged technical trader who also masters investing is a formidable market investor.

Therefore, I will trade and invest. An investor can lose in a short term but be rewarded at the end of the long term. However, a trader must take or cut losses in the short term without blinking. A competent trader with a bigger trading account who combines markets and risk control can exponentially multiply gains.

Now the question still remains. Should one trade or invest? The correct answer is to become a better trader who turns into an intelligent investor.

As you can see, I talk a lot. Please stay tuned because I will be back soon with another investing strategy article. I hope you gain something from it. If yes then bookmark and share it. Also please say few good words about us in various trading and investing forums. I will really appreciate that.

That is it folks. Thank you for visiting Stochastic-macd.com. Whatever you face in life, just look it right in the eyes and say: I am from above therefore I am above that.

Any questions or comments post them at 24stocktrader YouTube channel and in due course I will.post a video to clarify relevant questions.

Happy Investing To All

This article is written by George Beaulieu
Founder Of Stochastic-macd.com

Stochastic, MACD, Bollinger Bands Plus Day And Swing Traders

Learn How To Day And Swing Trade Using Stochastic, MACD, Bollinger Bands Like A Pro