Day Trader Versus Long-Term Investments - Figure Out Which Is Better For You

The day trader's primary objective would be to trade expensive and unpredictable stocks on the NASDAQ and NYSE markets in the amounts of 1000 shares or more, and profit from the smaller intra-day price movement.

The day trader might make lots of trades in a single day, holding onto stocks for only a couple of minutes (or hours), and almost never overnight. Day traders are short-term value speculators. They are not investors, and they are not gamblers.

Day trading is not investing. The day trader's time frame of analysis is rather brief: one day. Their only intent is to exploit the stock's intra-day value swings or daily price volatility. In contrast to stock investors, day traders don't seek long-term value appreciation.

Stock volatility is usually a rule of the market instead of an exception. Most stock prices move up or down in any given day due to many different external factors.

Even when the market is comparatively calm, there are often stocks that are volatile. Day traders seek to identify a stock that has a trend and then go with that trend. "Trend is really a friend" is a common motto amongst day traders.

Day traders seek to pick up a relatively smaller stock movement, 1/8 or more on that stock. If day traders are trading a sizable block of shares (that's, 1000 shares per trade), then day traders may profit $125 from a 1/8 price movement.

On the other hand, if a day trader acquired 1000 shares and the trader was wrong, which also occurs, then the day trader will lose $125 from a 1/8 price movement. Volatility is often a double-edged sword.

For expensive stocks that trade for $100 or more, a 1/8 or 13 cents movement is such a tiny relative price change that it happens all the time. Consequently there are plenty of day trading opportunities.

It is not common to see a day trader performing many, sometimes as many as 100, trades in a day. Alternatively, an investor's time frame is much longer. Investors seek a much larger price movement than 1/8 to earn the ideal rate of return. That takes time.

In short, day traders seek to extract an income from intra-day price volatility by trading the stock often, whilst the investors seek a long-term capital appreciation.

If you are in need of instant business capital and are interested in putting your funds into the stock market, success does not occur overnight.

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