Updated: Apr 27, 2020
The most popular trading methods are day, swing, and buy & hold. Below we'll give a brief overview of each.
Here you'll learn the difference between Day, Swing, and Buy & Hold Trading
We recommend Buy & Hold Trading
Buy & Hold Trading is beneficial if you don't want to monitor your investments closely and would like to review your portfolio on a yearly basis to re-allocate your asset mix.
Here at Biddles Investment Group, LLC we trade on our own account and like the swing trading strategy. This strategy enables us to not have to monitor investments as closely as a day trader. Below we'll review each type of strategy.
Buy & Hold Trading
With Buy & Hold trading you can select the investments you have researched with fundamental and technical analysis. Fundamental analysis is ensuring your company is financially sound. Great companies will have the following characteristics:
Earnings show a smooth upward trend
Consistent return on equity (ROE) greater than 20%
Consistent Return on total capital (ROTC) greater than 15%
Long-term debt less than 4 times earnings
Pays a dividend and/or buys back stock
If you have a company in mind send it to us and we'll let you know if it meets the criteria above. Once you've selected the great companies that will make up your portfolio you can either buy them at the market rate, on a down day, or if you've performed technical analysis you may have figured out a price entry point. If you've done the latter you create a watchlist and set an alert on many platforms such as Marketwatch.com and when your desired price is hit go ahead and execute a buy order.
Once your investments are selected you can perform a bi-annual review to check if they are performing as expected. Determine during your bi-annual review what you want to remove and start to determine what you'll invest in when you re-allocate your portfolio. Buy & Hold investing over time has produced the greatest investment return.
Day Trading is for those that enjoy the emotional ups and downs that the market gives on a daily basis. To perform best you must keep emotions in check, stick to your trading plan, and have a great risk management strategy
Day Trading is trading in the market everyday. Watching the market move in intervals such as 1, 5, and 15 minutes, hourly, or half day. Day traders follow the momentum of buyers and or sellers if shorting a stock (betting the stock will decrease in value) and watch various charts for patterns and setups. The Japanese candlesticks and corresponding patterns that emerge are one type of methodology used.
Swing Trading is trading with the momentum of the stock market weather buying or selling short over a period of 2-6 weeks
With swing trading you don't have to monitor the market everyday, these are setups that are expected to increase over time. A good pattern to start with swing trading is to recognize a cup and handle which happens over time. When a cup with handle forms it provides an opportunity to obtain gains if betting the stock will go up in value. Investor's Business Daily is a great resource and follows this method. There are various swing trading strategies you can use however and you'll want to do what works for you. If you want more information on swing trading which we do here at BIG let us know and if you want an article we'll write it because this is all for you.
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